FinTech is aimed at small and medium-sized companies in need of cash advances
A trio of former Robinhood employees have launched a new FinTech geared towards smaller businesses, the Wall Street Journal reported on Wednesday (Sept. 29).
A new company based in San Francisco, Paraffinwill offer online cash advances that can be paid off as a percentage of the company’s daily sales, the report said.
Managing director of paraffin Sahill Poddar he was once Robinhood’s chief of machine learning. He has worked with Ralph Furman, the president of a startup who was a data analyst in a brokerage application, and Vineet Goel, a product director, previously head of risk engineering and fraud at Robinhood.
All three said they saw an opportunity to benefit from the experience in Robinhood’s FinTech infrastructure. They wanted to apply this to small businesses that saw conflict and trouble during a pandemic as capital plunged.
Paraffin appealed to early Robinhood supporters for venture capital, and the WSJ reported that the start-up raised Series A for $ 30 million earlier this month. Last year they had a seed round for $ 4 million.
Part of the Paraffin plan is also to offer small businesses other financial products, such as bank accounts and insurance.
Companies have recently tried to add financial services to get new revenue streams, and companies like Shopify and others have created tools to help with this.
Cash loans have a high acceptance rate – but it has long been known that online loans come with risks.
Poddar said Parafin is unlike any other online lender.
“We are categorically different from internet lenders,” he said. “We only get paid when [small business] makes a sale ”.
He added that Parafin can boast of low, transparent fees. He said the company was able to keep fees low because it offers financing through its partners without having to spend as much marketing directly to small businesses.
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