Kabbage is an online lending company based in Atlanta, Georgia and has developed an online algorithm that simplified the financing process for small businesses. They are unique in the business loan industry because they use data from business checking accounts, payment processing, shipping data, and other e-commerce sites to reach small businesses that are looking for loans. Kabbage boasts a high success rate: Over 80 percent of all Kabbage transactions come from repeat users.
For borrowers looking for a small business loan from Kabbage, having a low credit score won't necessarily knock them out of the running. Kabbage looks primarily at current revenue (they want to see more than $50k/year) and the amount of time in business (needs to exceed one year). Typical Kabbage borrowers also have a good social media presence and high amounts of inventory. Small business loans from Kabbage are typically used for inventory purchases, system upgrades, and marketing.
- Short-Term Loans
- Transparent Application Requirements
- Repeat Users
Loans from Kabbage are almost like a cash advance with lower interest - they are perfect for businesses that need a little bit of cash and can pay it back in a short amount of time. Loan amounts range from $2,000 to $150,000. Kabbage also has a unique borrowing model that allows the borrowers to only use what they need. Even if a loan is approved for $150,000, the borrowers only pay for what they take.
Business advances from Kabbage are set up on a short-term, manageable payment platform. The term of the loan is either 6 or 12 months, depending on your preference.
Additional advantages of Kabbage Small Business Loans:
- Loans are scalable and manageable
- Instant approval and fast access to funds
- Low rates and short terms
Transparent Application Requirements
Kabbage provides a great deal of information online without having to apply first. Their website includes the following helpful information:
- Companies need to be in business for one year before applying
- Companies need to be making a minimum of $50k annually
- No pre-payment penalties
- No closing fees
- No origination fees
- 1.5-10 percent interest rates
- Good resources
- No minimum credit score needed
Kabbage has a "Resources" tab on their website which connects to a blog. This site houses a good amount of content that businesses can access for free, including business news, webinars, eBooks, tips, and more. Under Kabbage's "How It Works" tab, there is a calculator that gives potential borrowers an estimation of their total payment based on the amount they plan to borrow and the length of the term. Typically, the longer the term of the loan, the higher the amount owed.
The average Kabbage customer utilizes the line of credit four times a year. This indicates that many businesses are using Kabbage's service and that the payment scale is affordable and sustainable. Additionally, the high number of repeat users indicates that Kabbage's application and approval process is streamlined for small businesses. You simply need your financial documents and a quality credit score. If you qualify, there is an instant approval, rather than an extended waiting period.
Check rates with Kabbage
- Short-Term Solutions
- Low Amounts of Capital
- Personal Guarantee
As mentioned earlier, Kabbage's loaning paradigm is based on the line-of-credit industry. When you apply for a loan with Kabbage, it is a short-term solution. Most Kabbage clients use their funds for short-term needs, such as equipment upgrades, purchasing inventory, or funding payroll. Kabbage does not offer traditional loans, large loans for bigger businesses, or other types of conventional funding. Another factor to consider is that Kabbage does not offer a SBA (Small Business Administration) service. Therefore, the borrower is not included in some key SBA programs. Other limitations include:
Low Amounts of Capital
Kabbage only lends a maximum of $150,000. This amount makes sense if there are only 12 months to pay back the loan, but it's not a large enough sum for many businesses.
When you take out a loan with Kabbage, they state that "you personally guarantee that you will pay back your loan, but you do not have to put up any real estate or personal collateral." In many cases, a personal guarantee requires the borrower to put up personal collateral. This confusing language makes it difficult to know what collateral you are really promising to Kabbage when you take out a loan.
The Bottom Line
Kabbage is a great way to secure short-term financing for a business. Borrowers should consider Kabbage as a lender if they need small amounts for immediate short-term needs, such as new inventory purchases or payroll. If you don't mind waiting a few days for funding and you feel confident in your ability to pay back the loan (and don't mind having a personal guarantee attached to the loan), we recommend using Kabbage.