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How a gift certificate is helping small businesses crushed by the coronavirus

Key Points
  • On Wednesday online small business lender Kabbage launched a platform that allows consumers to buy gift certificates to support local small businesses during the coronavirus crisis.
  • The gift certificates, which range in value from $15 to $500, can be redeemed at any time; small businesses receive the revenue within one business day of purchase.
  • The online lending start-up had a staff of 100 who built the platform in three days while working with fintech start-ups Lendio, Finix and Fundera.
Rob Frohwein, CEO of Kabbage
Adam Jeffery | CNBC

Consumers concerned about the survival of their local businesses amid the coronavirus outbreak can now help, through new technology-enabled platforms that allow shoppers to buy for a better future. 

On Wednesday, online small business lender Kabbage launched a service that allows any business to sign up and sell gift certificates to consumers for future use at their retail locations. Small businesses on the platform can sell gift certificates ranging from $15 to $500. Revenue is then received by the small business within one business day of purchase.

"The impact of COVID-19 on small businesses requires the support of a nation," said Kabbage co-founder and CEO Rob Frohwein. "If there is a local small business that you love, they need your patronage now more than ever. Many businesses are closing, and others are seeing reduced demand. The site is a means for the millions of small businesses that employ more than half of all employees in America to continue making sales and to feel your commitment to their long-term success."

Frohwein says the platform was created by 100 Kabbage employees who came together over the past three days to prepare it for launch Wednesday. In doing so, the company has partnered with other fintech companies, like Finix, Lendio and Fundera, that have helped get the site up and running in such a short period of time.

"I'm intimately familiar with the speed at which Silicon Valley operates, but what Kabbage did is unbelievable," said Finix co-founder and CEO Richie Serna. "We firmly stand by Kabbage's crucial mission to help small businesses. We have waived all Finix fees to support them and call upon the rest of the payments ecosystem and technology community to do the same."

Facebook announced a $100 million program to help small businesses impacted by COVID-19 earlier this week. Other big companies have announced similar initiatives, including Citi, which promised waivers for monthly service fees and more for small business-owner clients.

Sen. Marco Rubio explains his plan to help small businesses hit by coronavirus
Sen. Marco Rubio explains his plan to help small businesses hit by coronavirus

Florida Republican Sen. Marco Rubio, who introduced on Wednesday afternoon a $300 billion small business financial-support legislative package, appeared on CNBC's "Squawk Box" earlier in the morning, outlining his plan to use a network of lenders like Kabbage for an existing program to help small business employers and employees throughout the coronavirus crisis. The Florida senator said that lenders across the nation, including big banks and hundreds of community banks and credit unions, could deliver "what would be initially considered a loan to the full amount of the payroll."

"We need to start thinking about not just small business, obviously, but the people who work for them," said Rubio, who also chairs the Senate Committee on Small Business and Entrepreneurship. "We are trying to figure out the most effective way to get cash into the hands of small businesses so that they can maintain payroll for at least a six-week period."

Frohwein says that much of the platform's early adoption has resulted from a swell of support from institutions like the U.S. Chamber of Commerce, which shared the news from Kabbage via Twitter on Wednesday, and correspondence to more than 200,000 businesses with which the company works.

U.S. Chamber tweet

Certificates purchased through Kabbage's platform can be redeemed by consumers at any time. After each gift certificate purchase, Kabbage will hold up to 10% of the settlement funds in reserve until the gift certificate has been redeemed.

But there is a risk. If the intention today is to help a small business make ends meet, the gift certificate buyer knows they are supporting the company in a difficult period. If the small business does not survive, the gift certificate cannot be redeemed or refunded. 

Kabbage ranked No. 14 on the 2019 CNBC Disruptor 50 list.