Introduction:
Kabbage is an online lending platform that provides working capital loans to small businesses. Founded in 2009, Kabbage leverages data and technology to provide fast and flexible access to financing. Kabbage loans have become an attractive option for small business owners looking to access capital quickly and easily. But how do Kabbage’s rates and terms compare to other small business lenders? This article will provide an in-depth look at Kabbage loans, including pros and cons, to help you determine if they are the right fit for your business.
Overview of Kabbage Loans
Kabbage provides lines of credit up to $250,000 for small businesses. Here are some key things to know about Kabbage business loans:
Loan Amounts
- Minimum loan amount is $2,000
- Maximum loan amount is $250,000
Loan Term Lengths
- 3 or 6 month terms
- Lines of credit are revolving, so you can draw down, repay, and redraw funds
Repayment Schedule
- Monthly payments
- Principal and interest paid monthly
- Pay early without penalties
Interest Rates and Fees
- Rates from 1.5% – 10% per month
- Origination fee of 2% – 10% deducted from loan proceeds
- No prepayment penalties
Funding Time
- Funding possible in as fast as a few minutes
- Loan decision made using business data
Qualifications
- Minimum credit score of 580
- Minimum annual revenue of $50,000
- In business for at least 1 year
Benefits of Kabbage Loans
Kabbage offers some advantages compared to other small business financing options:
Quick access to capital
The technology-driven application process allows for very fast lending decisions and funding. Businesses can get approved in minutes and funded on the same or next day. This makes Kabbage a good option for emergency funds or unexpected capital needs.
Credit score flexibility
Kabbage considers more than just personal credit scores in their approval process. This allows some business owners with less-than-perfect credit to still qualify.
Automated application
The online application is simple with minimal documents needed. You don’t need to gather tax returns, bank statements, etc. Kabbage syncs with accounting software, financial institutions, and online stores to gather data.
Repeated access to capital
The revolving line of credit allows you to withdraw and repay funds as needed up to your credit limit. This provides flexibility as your capital needs change over time.
No early repayment fees
Kabbage does not charge any early repayment fees for paying off your balance quickly. This helps cut down on overall interest costs.
Potential Drawbacks of Kabbage Loans
However, there are also some potential disadvantages to consider with Kabbage:
High interest rates
Kabbage offers convenience and quick funding but interest rates are higher than with traditional bank loans. Rates can range from 1.5% – 10% per month. This can add up quickly.
Origination and service fees
A 2% – 10% origination fee is deducted from the loan amount. There are also monthly and annual servicing fees. These fees reduce the actual loan proceeds you receive.
Short repayment terms
The 3 or 6 month repayment terms mean the loan comes due quickly. This timed repayment may not match up with all business needs or cash flow cycles.
Repeated borrowing can be expensive
While the revolving credit provides flexibility, it can also lead to a cycle of repeated borrowing that racks up interest charges over time.
Lack of fixed regular payments
There is no set monthly payment amount. You have discretion in how much you repay each month as long as the full balance is paid by the end of the term. This requires discipline to avoid interest accumulation.
Kabbage Rates and Fees
Kabbage is transparent about its rates and fees. Here are more details on what to expect:
Interest rates
- Ranges from 1.5% – 10% per month
- Rate offered based on individual eligibility and qualifications
- Interest compounds daily
Origination fee
- Ranges from 2% – 10%
- Deducted automatically from loan proceeds
- Lower fee offered to more qualified borrowers
Monthly servicing fee
- Ranges from 0% – 2% per month
- Added to monthly payment
Annual fee
- Ranges from 0% – 10% annually
- Only applies to lines of credit (not term loans)
- Annual fee percentage may be lowered over time
Prepayment penalties
- There are no prepayment penalties with Kabbage
Late fees
- 5% late fee applied if payment is more than 15 days late
- Additional $15 fee for each additional late payment
The fees and qualification requirements to receive the lowest rates can sometimes offset the convenience factor of getting funded quickly. But for many small businesses, rapid access to funds is worth the trade-off.
Comparing Kabbage to Alternative Lenders
How does Kabbage compare to other alternative lending platforms? Here is a look at some key competitors:
LendingClub
- Interest rates from 6.95% – 35.89%
- $1,000 – $500,000 loan amounts
- 3 or 5 year loan terms
- Strict credit requirements
OnDeck
- Rates from 9.99% – 99%
- $5,000 – $500,000 loan size
- 3 – 36 month terms
- Quick funding
PayPal
- Rates from 10% – 30%
- $5,000 – $500,000 loans
- 7 – 12 month terms
- For existing Paypay merchants
BlueVine
- Rates from 4.8% – 10.5% APR
- $5,000 – $5 million limits
- 3 – 12 month terms
- Lines of credit too
While there are lower rate options, they often have longer wait times for decisions and funding or stricter eligibility. The fast funding at Kabbage appeals to many pressed for quick capital even at higher rates.
Tips for Getting the Lowest Kabbage Rates
While your individual rates depend on your qualifications, there are some things you can do to improve your chances at the lowest rates:
- Maintain a personal credit score over 600
- Show consistent revenue deposits in your business bank account
- Provide multiple years of business tax returns
- Link accounting software and business accounts for easy data access
- Take out a shorter 3 month term loan
- Build a relationship with repeated on-time loan repayments
- Only borrow what you need rather than maxing out credit line
Building up your qualifications and borrowing history with Kabbage over time can lead to improved rate offers.
Is Kabbage Right for You?
Here are a few things to consider when determining if a Kabbage loan makes sense for your business:
- Do you need fast funding that traditional lenders cannot provide?
- Can you afford the higher interest rates and fees?
- Are you confident you can repay the balance within the short repayment term?
- Will the flexible line of credit provide utility to your business?
- Does growing with Kabbage over time appeal to you?
For many small businesses, the quick and easy access to funds is worth the tradeoffs. For businesses with stronger qualifications, traditional bank loans may provide cheaper long-term financing. Evaluate your specific situation to see if a Kabbage loan is the right solution.
The Bottom Line
Kabbage provides a unique value proposition for small businesses needing fast financing. Their technology-driven lending platform offers quick approvals, funding, and flexibility. However, you should weigh the higher interest rates and fees compared to other financing options. Kabbage is best for small businesses that need rapid short-term financing and are positioned to repay balances quickly. With responsible borrowing and payments, it can provide an ongoing line of credit for companies to tap into as needed