Kabbage uses technology to analyze online merchants’ sales and credit history; customer traffic and reviews; and prices and inventory compared to competitors. Via PayPal’s Adaptive Payments API, Kabbage will make cash advances available to eBay and other online marketplace sellers fairly quickly (Kabbage says that many transactions take as little has ten minutes).

Kabbage makes money off of fees charged to merchants for the working capital. Fees depend on how long the online merchant keeps the capital (6 month maximum) and the customer’s repayment risk. Rates range from 6 percent to 16 percent of the original advance amount.

While the startup only supports eBay for now, Kabbage, which has raised $2 million in funding, plans to extend its services to Amazon and Etsy sellers in the near future. It actually seems like a pretty good idea, that is, as long as sellers continue to pay Kabbage back.

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Authors: Leena Rao

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