DoorDash Now Offers Merchant Cash Advances
DoorDash has made its way into the small business financing game. DoorDash Capital, as the financing arm is so named, claims to provide merchant cash advances to DoorDash partners against future sales orders placed through the DoorDash app.
The DoorDash website explains the product in detail.
“There is no interest rate because a merchant cash advance is not a loan,” the website says. “There is a fixed fee stated up front which will be collected together with the capital advance. Your fee will never change after you have accepted the offer.”
All of these deals are processed through Parafin, a Silicon Valley-based funder who was started by former Robinhood data scientists and engineers. They spoke to the Wall Street Journal in September about their launch and the onboarding of their first customer, Mindbody.
As a software provider with a financing arm of their business, Mindbody reportedly uses Parafin’s funds to provide financing through Mindbody Capital. When speaking to the Journal, Parafin’s Chief Executive Sahill Poddar said that Mindbody customers would pay fees between 6%-15%.
“We are categorically distinct from online lenders,” Poddar told the Journal.“We only get paid back when the [small business] makes sales.”
It’s still unclear the amount of DoorDash merchants getting financing from DoorDash Capital. From the looks of it, the program is still in its infancy.
When deBanked reached out to DoorDash for a progress report on the program, the company declined to speak. “No comment at this time,” said a DoorDash representative when asked about the progress, usage, and ideas behind DoorDash Capital.
“Our goal is to provide our partners with fair, fast and convenient financing,” the DoorDash website says. “To help partners gain access to additional capital, we partnered with Parafin, a business financing provider, to offer cash advances that you pay back automatically with your DoorDash sales. You can use the capital for inventory, payroll, rent, marketing or for your cash flow needs.”Last modified: January 19, 2022
Adam Zaki was a Reporter at deBanked.