American Exchange in Talks to buy Kabbage

American Express is on the verge of taking its business ambitions to the next step as it plans to buy online lender Kabbage, a person familiar with the matter said.

The deal would be an all-cash deal worth as much as $850 million. Agreements on the deal are most likely to be finalized this month, according to a Bloomberg publication. However, spokespersons for both American Express and Kabbage decline to respond to the matter.

A person familiar with the matter who asked to remain anonymous said the deal would include retention payments and an agreement could be announced as soon as this month, although, there were still some possibilities of not reaching an agreement.

If agreements are finalized on favorable conditions to both parties, the deal would expand AmEx’s reach to mom and pop shops. The card giant is giving more attention to small businesses as they were the “most resilient” amid the COVID-19 pandemic compared to other businesses on AmEx’s card portfolio, according to Chief Executive Steve Squeri last month.

“Ninety days on now, we actually feel really good about the small-business portfolio.” CFO Jeff Campbell said last month.

During the COVID-19 crisis, Kabbage provided funding worth $5.8 million in loans to more than 200,000 small businesses. Its funding was done through the Paycheck Protection Program. In the early days of the COVID-19 pandemic, the small business lender furloughed hundreds of employees and suspended customer credit lines as a way of cutting down costs.

American Express also played an important role during the pandemic by helping small businesses that have been hit hard by the lockdown measures. As part of its move to support small businesses, AmEx recently launched credits for customers who patronize small businesses.

Amex has invested years in growing its small business card portfolio, forming stronger partnerships with businesses like Amazon. Last month the bank stated that though it plans to expand its small business reach to places like nail salons and restaurants, it is more interested in getting professional services on its card portfolio.

“Only 3% of our small-business customers are actually restaurants,” Squeri said. “The concentration of our small-business portfolio is professional services: legal, finance, insurance, real estate is about 14%, construction is about 10% and health care is about 5%.”

Kabbage is backed by SoftBank Group’s Vision Fund and Reverence Capital Partners, among a few other investors. The company was recently valued at more than $1 billion after SoftBank invested $250 million in 2017.

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