SAN FRANCISCO, Oct 01 — Today, Parafin announced it has reached an agreement to be acquired by Stripe. Together, the companies plan to make it faster and easier for small and medium-sized businesses to get the financing they need to thrive.
Parafin was started in 2020 with a simple observation: the businesses powering the economy, such as restaurants, auto shops, salons, and contractors, are the ones the traditional financial system has the most trouble serving. Businesses can finance their growth in one of three ways: reinvesting their earnings, selling equity, or borrowing. The earnings option alone limits the rate of growth. The equity option is available to a minor and increasingly shrinking percentage of businesses. This leaves credit as the realistic option for almost everyone else. Banks underwrite SMBs with processes designed for large companies and often require personal credit scores. The result is that the average SMB spends weeks applying for financing, commingling personal and business liability, and is more likely than not to be turned away. Not because it isn’t creditworthy, but because the system to assess it is broken.
Parafin’s insight was that the software platforms these businesses run on, such as their point-of-sale, their delivery marketplace, their booking software or their payroll provider, see what banks don’t. This data helps assess a business’s health in a way a personal credit score could not.
So, Parafin built the infrastructure to let any platform embed financing directly into its product with just one integration. Businesses on that platform get a pre-approved offer, funded in as little as a day, and with repayments that flex with their sales. No personal guarantees, no compounding interest, no lengthy processes. Financing that shows up on the platform the SMB already trusts.
