As both a direct lender and a marketplace with a trusted network of lending partners, Kapitus is able to provide small businesses the financing they need, when and how it is needed. Pulse 2.0 interviewed Kapitus CEO Andrew Reiser to learn more.
Andrew Reiser’s Background
Prior to founding Kapitus in 2006, Reiser served as the CEO of Arcavista Corporation, as Managing Director of Donald & Co. Securities, as EVP of Fidelco Capital Group, and as President of Windsor Group. And he began his career as a CPA with Coopers & Lybrand and Price Waterhouse. He holds a BS from Boston University’s Questrom School of Business.
Formation Of Kapitus
How did the idea for Kapitus come together? Reiser said:
“I was introduced to the industry around 2004 and recognized that there was little to no growth capital available to most small businesses, as banks generally do not extend credit to small companies with a limited operating history and less than pristine credit. At that time, non-bank small business finance companies were primarily serving restaurants and small retailers whose businesses had a high percentage of their revenue collected via credit cards. At that time, credit card processing brokers were referring small businesses seeking capital to a handful of small finance companies that were experimenting with his new product. I initially invested in a small player in the space and eventually acquired the platform, capitalized it, and began to take market share. Seventeen years later, having weathered the 2008 financial crisis and the 2020 global pandemic, Kapitus is one of the largest and strongest players in the small business finance space.”
Favorite Memory
What has been Reiser’s favorite memory working for Kapitus so far? Reiser reflected:
“For the first few months of the company’s life, we operated from shared workspace in Southern Manhattan. We had two rooms, with half the company sitting in one room and half in the other. As we grew, we needed permanent space, and we were able to secure a few thousand square feet of office space when an agent in the music industry defaulted on his lease. On moving day, the entire team pitched in to move us up to Midtown, and the next day, we opened our doors as a company with a permanent address. We opened the office with a celebratory company-wide meeting in high spirits, and that was the moment I knew we were going to be a success.”
Challenges Faced
What are some of the challenges you faced in building the company? Reiser acknowledged:
“There are so many challenges to building a strong company. Hiring the right people is the most important decision that you can make. Then building an environment that people are proud of and want to be part of for the long term is critical to creating success. Quality people with aligned interests build success, solve problems, and create well-designed strategic plans.”
Core Products
What are Kapitus’ core products and features? Reiser explained:
“Founded in 2006, Kapitus is one of the most experienced and trusted names in small business financing. Committed to helping the small business community through fast and efficient funding alternatives, Kapitus offers a variety of financing products to meet the unique needs of each individual company. As both a direct lender and a marketplace with an expansive network of financing partners offering a variety of products, Kapitus has provided over $5 billion in growth capital to over 50,000 small businesses. Kapitus, either directly or through trusted partners, offers products tailored to the need of every small business, including term loans, revenue-based financing, SBA loans, equipment finance, and revolving lines of credit.”
Evolution Of Kapitus’ Technology
How has Kapitus’ technology evolved since launching? Reiser noted:
“In 2006, there were no off-the-shelf technology solutions available to service small business finance companies, so we had to build our own. Our first operating “platform” was rolled out in 2009 and was a major improvement from the manual processes and Excel spreadsheets that had powered the company until that point. Technology is at the core of everything we do at Kapitus. It enables scalability and drives customer engagement. Today we have a large product and technology team working to meet the current needs of our customers while developing new products and processes to better serve them in the future.”
“In addition to building technology, Kapitus has placed tremendous value on its ability to capture, analyze and make decisions from the data it captures when analyzing the small business economy. This data has allowed Kapitus to build decisioning models which have allowed us to confidently offer more money at lower prices to a larger and more diverse pool of small businesses. Today we are able to offer capital in under two hours and fund within 24 hours of receiving an application. We fund over 1,000 small businesses each month and are growing rapidly as demand for our capital continues to grow.”
Significant Milestones
What have been some of Kapitus’ most significant milestones? Reiser cited:
1.) First $1 million origination month in December 2007; 2.) First $100 million origination month in February 2023; 3.) First Investment grade notes sold via securitization in June 2018;
4.) Received a $110 million line of equity commitment from the private equity firm Pine Brook Partners in 2014, which helped fuel the next phase of growth for the company.
Customer Success Story
Upon asking Reiser about a customer success story, he highlighted:
“One of my favorite memories in the industry was helping a restaurant owner pay off a state tax lien on the day the state was going to close him down. The owner cried and hugged me and my associate. Seventeen years later, the business is still open and has taken additional capital from us several times since.”
Funding
After asking Reiser about the company’s funding, he revealed:
“In April of this year, Kapitus announced the closings of a $100 million asset-backed securitization (ABS) and a $30 million investment-grade corporate note financing. These closings brought Kapitus’ total debt facilities to $540 million. The company plans to use the financing to increase its funding capacity for small businesses – providing a place where businesses can obtain much needed working capital in this volatile economic environment. In 2022, Kapitus increased its funding capacity by nearly $140 million, and the company is on track to outpace that growth this year.”
Total Addressable Market
What total addressable market (TAM) size is Kapitus pursuing? Reiser assessed:
“We view our addressable market as the $420 billion in small business loans (defined as under $1 million in size) currently outstanding in the United States.”
Differentiation From The Competition
What differentiates Kapitus from its competition? Reiser replied:
“Kapitus is differentiated by its flexible product offerings, proven credit models, scalable tech-driven platform, consultative sales professionals, superior customer service team, deeply experienced management team, and a track record of profitability.”
Future Company Goals
What are some of Kapitus’ future company goals? Reiser concluded:
“We are currently working to expand our product offering to provide additional financing options to small businesses, including products with longer terms and lower cost, as well as more flexible borrowing and repayment structures. We are also enhancing our technology platform to provide faster decisioning and greater transparency to our customers.”
“In addition, we are working to expand our capabilities beyond capital to connect small businesses to the services they need to help them grow at the best prices available in the market.”
