Parker has been super thoughtful in how they built their credit products. And I like that they have not been afraid to bring to market several offerings. I think this gives them more data and insight into building the best products, faster.
This is not a sponsored post and I am not receiving any compensation.
There’s a lot going on at Parker, so let me break it down. First, it’s important to remember that Parker is focused just on ecommerce. They have three families of products:
- Banking
- Credit
- Analytics
I am going to focus on their credit products as I suspect they are the most differentiated. They have eight (yes, 8!) flavors of their Credit products which are focused on working capital. These break down into two subsets:
- Bill Pay
- Charge Cards
A quick note that all terms and rates are current as of this post, but will obviously change over time. And which products you will have access to and rates you receive will depend on underwriting.
The Bill Pay products will be familiar to you and come in two flavors, 45 day repayment and 60 day repayment. Like other bill pay products, you upload an invoice and if/when accepted, Parker pays the vendor, adds a fee and then that fee plus the amount of the bill is what you owe in either 45 or 60 days.
The 45 day Bill Pay product currently charges between 2.4% and 2.6% and the 60 day Bill Pay product charges between 3.25% and 3.4%. Here’s a simple example:
- You owe vendor A $25,000 and you upload that to Parker.
- Let’s say your 45 day rate is 2.5% and your 60 day rate is 3.3%.
- If you choose the 45 day loan, your 45 day fee would be $625 and your total amount due in 45 days would be $25,625.
- If you choose the 60 day loan, your 60 day fee would be $825 and your total amount due in 60 days would be $25,825.
Super easy. Let’s look at the 6 cards:
- Rolling 30 days
- Rolling 45 days
- Rolling 60 days
- Rolling 15 with 1.75% cash back on ad spend
- Rolling 1 day with 2% cash back (banking customers only)
- 30/60/90
Depending on your underwriting, Parker will make one or more of these available to you.
30/60/90 (loom video)
30/60/90 should also feel familiar. With this product, Parker adds a fee to the charge (typically around 2%) and the charge plus the fee becomes what you owe. They divide this amount by 3 and then you make equal payments at Day 30, Day 60 and Day 90. Using the example above, you charge $25,000. Your fee would be $500 ($25,000 * 2%) and your total due would be $25,500. You then make payments of $8,500 each on Day 30, Day 60 and Day 90.
Rolling 30 & Rolling 45
So far, super straightforward. Now let’s tackle one of the most unique aspects of Parker - their true float. Before we do, we have to review the concept of float. As you know from using a credit card, statement balances are based on monthly statement periods. When you make a charge on the first day of the statement period, you get a full 30 days of float. But when you make a charge on the last day of the period, you get 1 day of float because the payment is due the next day.
If you aren’t really paying attention to this, you will average out around 15 days of float. If you are super clued into this, you will save up as many of your charges as you can for that first day of a new statement period and then won’t use the card again in order to get the full 30 days of float. Let’s say you average somewhere between 15 days and 30 days of float. Let’s say it’s 22 days.
What makes Parker so cool is that every charge gets the full amount of float. For each charge, you then get the full X amount of days of float. Your card with number of days of float depends on their underwriting of you, but will likely be either 30 days or 45 days. If you get 45 days, then for every charge, you will get a full 45 days to repay that amount.
This has three big benefits. One, we’ve all had that stomach churning look at a credit card statement. Maybe you weren’t paying attention to charges. Or maybe you were cranking Meta spend. While the emotional roller coaster is bad enough, big lumpy payments can play havoc with your cash planning. Maybe your credit card statement is due the same week as payroll and some big invoices from suppliers. Parker’s rolling terms smoothes out this lumpiness. You are simply paying whatever you charged 45 days ago.
The second benefit is reducing your Cash Conversion Cycle. I wrote about this here, so please check that out if you need a refresher with examples. If we could get the cash from our sales before we had to pay our invoices - a negative Cash Conversion Cycle (CCC) - we would dramatically lower or even eliminate our need to borrow or raise equity. But even if you can’t get to a negative CCC, and very few can, reducing your CCC is hugely helpful because you reduce the amount of capital needed to keep the business going while also bringing in that cash you need faster. It’s an incredible flywheel.
Third, the Rolling 30 and Rolling 45 day cards carry no fees. In effect, these products become interest free mini-revolvers.
Rolling 60 (loom video)
The Rolling 60 product works like the Rolling 30 and Rolling 45, but carries a fee of 1.25% to 1.5%. Like the other products, this fee is added to the charge and then the charge plus the fee is due in 60 days.
Rolling 15 Days with 1.75% cash back on ad spend
This product is usually reserved for brands with > $20 million in sales. While you reduce your float, you gain 1.75% cash back on ad spend charged through the card.
Parker does a 2% cash back card, but this is only for banking customers and carries 1 day of float.
Underwriting Criteria
Parker’s underwriting focuses on:
- Amount of time you have been in business
- Revenue
- Growth
- Profitability
- Liquidity - think Current Ratio / Quick Ratio or similar
- Working Capital
- Debt
- Capital Structure - are you keeping cash in the business or distributing it all to yourself, do other people care if you succeed or fail etc
Important Considerations
- Security typically is a function of revenue size. For businesses with > $20 million in sales, a UCC will usually be filed.
- For businesses with < $10 million in revenue, they often look for Personal Guarantees.
- Parker will typically review credit limits every 90 days. This is awesome for brands who are rapidly growing or have had significant improvements in the business such as margins, adding new channels etc. They are also open to reviewing and improving credit limits off cycle.
- Like other debt providers, you can make early payments and thus free up new credit off cycle.
- Banking customers can usually access more products and better terms. For example, if a DACA (Deposit Account Control Agreement) or lockbox is in place and/or your Shopify payments are deposited into your Parker bank account, you may get some combination of access to more products, longer payback periods, lower rates and higher credit limits.
- Because Parker has its own bill pay, they do not accept outside bill pay services such as bill.com, plastiq, melio, that allow you to use a card for wires/ACH. Parker believes their lower rates and longer payback periods make their bill pay superior.
- Check out this helpful Loom video from Zach Cohen at Parker explaining the benefits of the rolling card products.
Play with terms in this model
You can play with the products and check out Parker products versus alternatives with the Elephant Herd Short Term Lending Comparison Calculator
If you have questions, want help with optimizing credit or need to take your ecomm brand to the next level. Reach out!