Kabbage was founded in 2008 and started lending to small businesses in 2010. According to its site, it has funded over $550 million to small businesses over the years, and it offers personal loans as well.
Kabbage offers small businesses a line of credit, rather than a traditional installment loan (paid over the course of a set period of time). This offers you more flexibility, and you only pay for what you borrow.
Additionally, Kabbage has optimized its application process so you can apply and get a decision on approval in minutes. Let’s take a look at the details.
Kabbage Small Business Loan Details
Kabbage’s revolving line of credit ranges from $2,000 to $100,000, and you can draw upon it any time you need the cash – as often as once per day. The length of the loan is 6 months.
Kabbage doesn’t charge you interest on the loan. Instead, you’ll be assessed a fee of 1% to 12% of your selected loan amount for the first two months of your loan. Each month thereafter, you’ll pay 1% of your selected loan amount.
As for the actual repayment amount, you be paying back 1/6th of the total loan amount each month, plus the fee you’re assessed.
A payment example might make it easier to understand (and Kabbage has a detailed repayment calculator you can use for your own estimates). If you borrow $55,000 on a 6 month term, you’ll pay a total of $61,600, as the fees total $6,600 ($2,200 for the first two months, and $550 for the remaining four months).
This results in a monthly payment of $11,366.67 for the first two months, and $9,716.67 for the remaining four months.
However, you can pay your loan off early without penalty and save on the cost of the loan.
The Pros and Cons of a Kabbage Small Business Loan
Pro: Since the loan is a line of credit, it’s extremely flexible for business owners. If you ever need more money, you can take it out, and if you don’t, then you can simply borrow the least amount possible and pay it back.
Con: Lines of credit aren’t for everyone, and Kabbage’s repayment process is a little confusing. Having an installment loan might be easier for your business to manage. You’ll likely be paying the most during the first two months of the loan, so you should make sure your business can handle the higher payments when you apply.
Pro: The application process is very quick. You can link your various business accounts to your Kabbage account, and it will pull the information directly from those accounts so you don’t need to send in any paperwork. In some situations, you can get funded the same day you apply.
Con: You must repay your line of credit in six months, which isn’t a lot of time, especially if you’re borrowing close to the $100,000 limit. There are other lenders who have longer repayment terms for six-figure amounts.
Pro: Kabbage has “perks” available through partnerships, so you can get discounts on certain services your business may benefit from. You also receive a $200 gift card when you refer a small business to Kabbage.
What Businesses Are Eligible For a Loan With Kabbage?
To be eligible for a loan with Kabbage, your business must have at least one year in operating history, and must have generated at least $2,000 in monthly revenue in the past 3 months.
Like most small business loan lenders, Kabbage doesn’t just take credit score into account (there’s no minimum specified). It looks at your time in business, average monthly revenue, transaction volume, and even customer reviews.
It says it works with “all small businesses” – brick-and-mortar, online, and service providers – and doesn’t specify any industries it doesn’t work with.
Application Process and Documents Needed
Kabbage’s application and funding process are very quick. If you submit all the information needed, and your bank information doesn’t need to be verified, you might even be able to get funded the same day you apply.
The application process is paperless if you want to link up all your business accounts to your Kabbage account. It offers support for QuickBooks, Sage, PayPal, Amazon, Etsy, Shopify, ebay, Authorize.net, and Yahoo.
Kabbage will directly deposit your funds into your bank or your PayPal account. PayPal is instantaneous, while it can take up to 3 business days for the funds to be deposited to your bank. In case you’re wondering, there are no fees for using PayPal. Kabbage states, “When you request a loan, you receive exactly that amount in your account.”
Applying for a small business loan with Kabbage won’t harm your credit score initially – it uses a soft pull when you apply. However, if you go on to accept the loan a hard pull will be used.
The Fine Print
There’s no penalty for paying your loan off early and no hidden fees associated with the loan.
As mentioned, there are fees assessed that you must pay each month in place of being charged interest. You should compare Kabbage’s loan against other lenders to see which one is more expensive.
If you draw on your line of credit, you won’t have a different due date each time. Your payments will all be rolled together.
Additionally, you won’t encounter fees with PayPal if you use it with Kabbage.
Which Businesses Benefit the Most from a Loan With Kabbage?
Due to Kabbage’s focus on technology during the application process, online businesses can benefit the most from a loan with Kabbage. The ability to link up any online store accounts you have is great, as you don’t need to worry about submitting statements for each.
Overall, just about any business can benefit from a loan with Kabbage, as its eligibility requirements are fairly simple to meet.
Other Alternative Small Business Lenders
Kabbage is one of the few online small business lenders offering lines of credit as opposed to an installment loan. When compared with the other line of credit offerings out there, Kabbage looks to be one of the best choices.
OnDeck offers a revolving line of credit option in addition to an installment loan. You can only borrow up to $20,000, and the APR ranges from 29.99% to 49.00%. There’s also a $20 monthly maintenance fee (waived for the first 6 months if you draw $5,000 or more in your first week of opening the account), and you have to make weekly payments over the course of 6 months.
To qualify, your business must have at least one year in operating history, $200,000 in annual revenue, and one business owner with a 600+ credit score.
Another alternative, if it’s close by, is the Wells Fargo BusinessLine Line of Credit. You must apply in person, but you can get approved for $10,000 up to $100,000, and it’s a revolving line of credit. Your business must have at least 2 years in operating history to qualify. The rates are between the prime rate + 1.75% and prime rate + 9.75%. As of this writing, that’s 5% – 13%.
It’s an unsecured loan, though there is a $150 opening fee ($250 for lines over $25,000), and an annual fee of $150 after your first year.
Always Shop Around
While Kabbage doesn’t charge interest, the fees assessed can equal around 27% – 40% APR. Small business loans from online lenders are quite expensive because of the convenience. It’s up to you to shop around to get the best (and cheapest) loan available to you. That might mean going with an installment loan over a line of credit. Always run the numbers to make sure the loan you’re taking on will benefit your business.