New FinTech Parafin Targets SMBs in Need of Cash Advances

A trio of former Robinhood employees have founded a new FinTech geared to smaller businesses, The Wall Street Journal reported Wednesday (Sept. 29).

The new San Francisco-based firm, Parafin, will be offering online cash advances, which can be repaid as a percentage of a business’s daily sales, the report says.

Parafin Chief Executive Sahill Poddar was once Robinhood’s head of machine learning. He teamed with Ralph Furman, president of the startup, who was a data scientist at the brokerage app, and Vineet Goel, chief product officer, formerly head of risk and fraud engineering with Robinhood.

The three said they saw an opportunity to build on the experience in FinTech infrastructure at Robinhood. They wanted to apply that to small businesses, which have seen strife and trouble through the pandemic as capital fell.

Parafin turned to early Robinhood backers for venture capital, with WSJ reporting that the startup raised a Series A for $30 million earlier this month. Last year, they had a seed round for $4 million.

Part of Parafin’s plan also includes a way to offer other financial products to small businesses, like bank accounts and insurance.

Businesses have sought recently to add financial services to make for new revenue streams, and companies like Shopify and others have built tools to help that happen.

And cash advances have a high rate of approval — but online loans have historically been known to introduce risks.

Poddar said Parafin is not like other online lenders.

“We are categorically distinct from online lenders,” he said. “We only get paid back when the [small business] makes sales.”

He added that Parafin boasts low, transparent fees. And he said the company was able to keep its fees low because it offers financing through its partners, not needing to spend as much on marketing directly to small businesses.

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