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• Small businesses which struggle to get bank loans can receive the fund within one to two days
• This is part of DoorDash's efforts to expand their revenue streams
DoorDash Inc (NYSE: DASH), the U.S.’s largest food delivery service provider, is launching a financing arm where eligible restaurants can take loans through its app to fund daily operations.
With DoorDash Capital, businesses will be able to take loans for daily operations, including purchasing equipment, marketing costs, rent, hiring, payroll, the company said on Wednesday.
“As we continue to listen to our partners and adapt our services and offerings to meet their needs, one key area where they have asked for support is quick and easy access to capital,” Chief Revenue Officer Tom Pickett wrote in a blog post.
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DoorDash pointed out that small businesses often struggle to qualify for regular bank loans.
Shares of the food delivery service provider jumped over 7.5% on Wednesday in New York.
Terms for taking loans
The San Francisco-based company said restaurants that are existing DoorDash partners with a sustained sales history on the platform could get the fund within one to two business days.
Eligible merchants can receive the cash advance without any credit check or additional paperwork.
For repayments for DoorDash will automatically deduct a percentage of earnings from the sales through the app, though there is a one-time fee of up to 10% of the funding amount, which can be paid in increments.
The company is working with California-based technology company Parafin which provides the capital and assumes the risk for the companies.
New avenues for revenue
DoorDash, which commanded 58% of the market for meal-delivery in the U.S. as of December, is venturing into new sources to expand its revenue streams.
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In October, the company introduced sponsored listings to bolster its advertising business.
The financing business follows the paths of cloud-based restaurant-software company Toast Inc (NYSE: TOST), which launched a credit product in 2019.
Payment processing firms like PayPal Holdings Inc (NASDAQ: PYPL), Stripe Inc, and Block Inc (NYSE: SQ), formerly known as Square, also have financing arms of their own.
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