Kabbage Working Capital Review: The Best Loan Provider for Small to Mid-size business
So you've already decided to go for it – to expand and grow your business. But are you ready? Mentally, Physically, and Financially speaking? Do you have enough workforce? Are you prepared to take on more projects and clients? Can your business fund all the developments that you are planning?
Growing a business is a huge challenge, especially for small to mid-sized companies since all funding comes directly from their business funds, if not from personal pocket. As a business owner, you always want to increase your working capital, hire more people, or even acquire more inventory and assets. The main problem with that is not every business owner has enough funding to make it happen. And almost instantly, once an entrepreneur faces this issue, the thought of getting a business loan creeps in.
While getting a business loan might be the easy way out of your financial issues, you should be watchful on the mortgages that banks are offering you. If not careful, you might end up getting a high-risk loan with terms that are difficult to follow. We all know that some mortgages can turn bad almost instantly that may even lead to repossession, or worse, bankruptcy.
However, when done right, getting a business loan can put your business in a stronger position financially. While many institutions offer business loans, it's essential to study each option carefully, so you're sure to pick the best mortgage that suits your objectives.
In this blog, we'll introduce you to Kabbage, an online financial technology brand specializing in providing loans to small businesses and individuals. Let's dive deep into what Kabbage has to offer and decide if it's the right choice for your business.
Kabbage is an online lending company that provides funding to small businesses and individuals through its platform. The company offers financing of up to $250,000 with lending terms of up to 18 months. Since starting in 2008 in Atlanta, Georgia, Kabbage was able to issue over $9 billion in funding for small businesses.
Is Kabbage legit?
Kabbage serves the type of customers that banks typically reject. These are individuals who don't have an excellent credit rating and need cash immediately. From afar, Kabbage seems to be too good to be true, that is probably the reason why many people are skeptical about trying its services. However, Kabbage is 100% legitimate and has been around for over a decade. Kabbage also demonstrates its credibility through its A+ rating with the Better Business Bureau since 2014.
Kabbage Small Business Loans
As mentioned above, Kabbage specializes in funding small businesses and individuals. As such, the credit line ranges from $2,000 to $250,000, with APR ranging from 20% up to 80%. Kabbage's APR is on the higher end than other lending institutions since the company takes in a more significant risk by instantly releasing funds to individuals even with unpleasant credit standing.
Kabbage collects loan payments every month. Fees typically range from 1.5% to 10% and have no origination and prepayment charges. Kabbage offers its users a shorter repayment period. You can choose between six, 12, and 18 months.
Getting a business loan with Kabbage is simple; no need to dig up years of financial statements. However, you should first meet the following eligibility criteria:
- Business must be operating for at least one year (3 years for higher loan amounts)
- Annual revenue of at least $50,000 to qualify for $100,000 line credit
Unlike traditional lending institutions, applying for a loan with Kabbage is simple and straightforward without the need to file tons of paperwork. In applying for Kabbage's small-business loans, owners need to connect a business checking account, bookkeeping application, or payment platform like PayPal. Kabbage will also check your business' banking, social media, and vendor accounts to identify which loan bracket you qualify.
Upon assessment, Kabbage will reject or approve your application depending on the health of your business. If approved, you can quickly connect your social media accounts to increase your credit line. On the other hand, if Kabbage rejects your application, you can still get a chance in the future since Kabbage will continuously monitor your business status.
Once you get approved for a line of credit, funds will be available almost instantly. You decide how much you'll withdraw, when, and how often – you only need to pay for what you borrow.
Take note that Kabbage will not require you to submit a collateral. However, Kabbage will need a personal guarantee. A personal guarantee implies that Kabbage can take over your assets in cases wherein your business is not able to repay the loan anymore.
Who will benefit the most?
As mentioned earlier, Kabbage is perfect for borrowers who don't have an outstanding credit score since Kabbage does not have a minimum credit score requirement. This policy is because Kabbage puts more focus on your business revenue, cash flow, and potential. Thus, the chances are high that you'll get approved if your business has a high income even if you have a bad credit standing.
Kabbage is also the right choice for those who need cash urgently with its quick funding service. This kind of loan gives you access to your credit within the same business day or up to three business days.
Lastly, for those who prefer a shorter lending term, Kabbage might also be a good option. The company only offers short-term loans with terms of six, 12, or 18 months.
Kabbage fee structure
Kabbage offers a simple monthly payment whenever you use funds – pay for what you spend. Kabbage requires its borrowers to pay a certain percentage of the amount borrowed per month. Monthly payment with Kabbage is a combination of the principal and interest, depending on the type of loan you have. A six-month loan term will typically require you to pay a fee of 1.5-10% of the loan amount for the first two months and 1% for the following months. For a 12-month loan term, you'll have to pay 1.5-10% for the first six months and 1% for the remaining months.
If you're expecting to get huge discounts on paying early, you'll be disappointed to know that there's only little incentive for early payments. Kabbage doesn't pay much attention to rewarding its borrowers who pay earlier than the due date since you pay a massive chunk of the borrowed amount in the first few months.
Late payments can be stressful. The good thing is that Kabbage is willing to work with you as much as possible to fix arrangements on your account that will keep you in good standing.
What I like about Kabbage
The thing I like most about Kabbage is its accessibility and ease of use. Kabbage makes it extremely easy for individuals to get funding without the need to maintain a high credit score. It also helps business owners get money without going through all the filing and queueing process that comes with tons of paperwork requirements. It's fast processing & approvals is also commendable, perfect for those who need funds urgently.
What I don't like about Kabbage
While Kabbage proves to be an excellent choice if you need access to cash quickly, it comes with a hefty price – which is hiding beneath its APRs. Kabbage features high APRs (higher than most lending companies) to compensate for its risk in dealing with below-average borrowers, and convenience - especially with quick loans.
If you're looking for bigger loans with longer payment terms and higher value, this is not for you. Kabbage's maximum loan amount is only $250,000, and the most extended payment term is only 18 months. While this is not exactly a downside, it would be nice if Kabbage will expand its services to include bigger loans.
Alternative to Kabbage: LendingTree
If you think Kabbage is not the perfect fit for your needs and objectives, you might want to check other alternatives, for instance, LendingTree. Since Kabbage only specializes in small business loans, it might not be the perfect choice if you're going to invest in more significant assets and go through massive expansions. LendingTree might be a good option for borrowers with a more significant loan requirement and lower APRs. It can offer you an excellent way to get the best deal for your loan requirements. With LendingTree's services, you'll quickly receive bids from multiple lenders so you can easily pick the best loan agreement that works for you.
Should you go with Kabbage?
If you're tired of going through the tedious process of loan applications and would like to opt for a quick fix, Kabbage will surely help you. However, it comes at the cost of higher APR, which frankly makes sense with everything else that it offers. While Kabbage loans are more expensive than other lenders, what's great about it is that it comes with flexibility, accessibility, and convenience that most people prefer.
Overall, I recommend Kabbage for small business owners and individuals looking for a short-term credit line to grow their business.
What do you think of Kabbage? Let us know in the comment section below!
eCommerce Paradise was created by Trevor Fenner of Seattle, Washington in 2015 to help you, the entrepreneur, to start and scale your own eCommerce business. Trevor owns multiple 7-figure eCommerce stores and is a digital nomad, traveling the world while working remotely with the help of his team of virtual assistants from around the world. Trevor is currently located in Bali, Indonesia, and is a passionate skateboarder, surfer, scuba diver, photographer, environmentalist, outdoorsman, fitness and tattoo enthusiast.
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