How To Use Your Kabbage Line Of Credit
As a business owner, you always have to be prepared for the unexpected. An emergency arises, a bill needs to get paid, you’re running out of inventory…you get the picture.
Have you ever found yourself in a situation where you knew you didn’t have enough funds to cover the expense comfortably? Have you struggled to deal with that knot in your stomach and a constant feeling of dread from wondering how you’ll get the capital you need? You’re not alone.
Or maybe you’re facing an entirely different challenge: business expansion. You’re ready to grow your business, but unfortunately, all of your funds are tied up in operational costs and other expenses. How can you expand your business and boost your revenue if you don’t have the capital you need?
Fortunately, there’s a solution for when you need cash quickly: a small business line of credit. With a line of credit from an online lender such as Kabbage, you don’t have to worry about waiting for days (or even weeks) for loan approval.
Kabbage specializes in small business lines of credit of up to $250,000. You can use your line of credit for any business expense, from buying supplies and inventory to paying a utility bill or covering payroll expenses. Kabbage’s flexible lines of credit can be used for emergency expenses or to expand your business.
In this article, we’ll do a deep dive into Kabbage’s lines of credit. From the application process to withdrawing funds, we’ll cover it at all to help you determine if your business should explore this financial path.
Table of Contents
Check If You Meet The Minimum Borrowing Requirements
The lending market is pretty screwy. How many other businesses interview you to see if they want you as a customer? Nevertheless, that’s how it works.
Luckily, Kabbage’s borrowing requirements aren’t too daunting. If you have credit challenges, it’s no problem — Kabbage looks at the performance of your business when issuing approvals. Once you’re approved, you can immediately make draws from your line of credit, getting the money you need as soon as the next business day. To be eligible, you must meet two minimum requirements:
- Be in business for at least 12 months
- Have at least $50,000 in annual revenue or at least $4,200 per month over the last three months
Because Kabbage issues lines of credit based on the performance of a business, there are no minimum personal credit scores required to qualify. However, Kabbage does perform a hard pull on personal credit during the application process. So while your credit is unlikely to determine if you can borrow money from Kabbage, it will influence what your rates turn out to be.
Note that meeting these minimums isn’t a guarantee that you will qualify, only that you’ll at least be considered.
Apply For A Kabbage Line Of Credit
Once you’ve figured out whether or not you can meet Kabbage’s requirements, you’ll want to gather the information you’ll need to make your application process go smoothly. You can start the online application, which takes just minutes to complete.
Step 1: Business Information
To get started, the application requests information about your business, including:
- Business name
- Business address
- Business phone number
You will also enter your email address and set a password in this first step. This will be your login information for accessing your account on Kabbage’s website or mobile app.
Next, you will provide more information about your business. This information includes:
- Industry type
- Company structure
- Date established
- Tax ID number
- Annual revenue
You will be asked if you own at least 75% of equity interest and have significant responsibility in managing the business.
Step 2: Connect Accounts
Next, you will connect to your bank account or business services so that Kabbage can review your transactions to see if you’re eligible for a line of credit. In this step, you add the bank or service with the most revenue transactions. You can add additional accounts and services later.
Kabbage can connect directly with multiple banks, including Chase, Wells Fargo, Bank of America, BB&T, Capital One, and SunTrust, just to name a few. You can also connect business services, including but not limited to PayPal, Stripe, Sage, Square, eBay, Amazon, and QuickBooks.
Step 3: Personal Information
Once you’ve connected your account, it’s time to provide personal information to Kabbage. This information includes:
- Date of birth
- Social Security number
- Phone number
Once you input this information and hit “Submit,” Kabbage will perform a hard pull on your credit. Remember, though, Kabbage focuses on the performance of your business — not your credit score.
Once Kabbage’s system analyzes your credit history and your account transactions, an approval decision will be made. Within minutes, you’ll be able to see if you’ve been approved for a line of credit. Once approved, you’ll have access to the Kabbage Dashboard, which features your full credit limit and options for withdrawing funds. You can withdraw the full amount, or you can select the amount and terms that work for you.
One last thing to note is that Kabbage can automatically approve you for up to $150,000. Higher credit limits of up to $250,000 require a manual review.
Review Your Rate & Borrowing Terms
|Borrowing Amount:||Up to $250,000|
|Draw Term Length:||6, 12, or 18 months|
|Borrowing Fee:||1.5%-10% of the borrowing amount per month|
|Effective APR:||24%-99% |
Once approved for a Kabbage line of credit, you can use the Dashboard to initiate draws, view information about previous loans, see account details, and view or add linked accounts. Account details show the percentage of funds utilized, your next statement date, your next due date, and the minimum amount due.
To review your rates and terms, select an amount to borrow as if you were initiating a draw. If you’re borrowing $10,000 or more, you can select from 12-month or six-month terms. In some cases, it may be possible to get an 18-month term, subject to underwriting criteria. Loans less than $10,000 can only be taken with six-month terms. Note that Kabbage can approve credit lines of up to $200,000 automatically in a matter of minutes. Credit lines larger than that will be subject to manual review, which can take a few business days.
Once you’ve selected the amount and terms, Kabbage will provide a breakdown of your payment schedule. This schedule shows the date of each payment, the principal amount that will be paid, the rate charged for that payment, the fee amount, and the total amount due for each month. Below your monthly schedule, you’ll find the new loan amount, the total amount of fees you will pay, and the total cost of the loan, including the principal plus fees.
Kabbage also has a loan calculator on its website if you haven’t yet applied. While you won’t know the specific fees, credit limit, and other details until you apply, this can give you an idea of whether or not this financial product is an option that will work for your business.
Kabbage provides you with a summary of your fees when you initiate a draw, but how is this calculated? The lender charges a monthly fee each month that you have a balance. Fees range from 1.25% to 10% and are based on the performance of your business. This monthly fee gets added to your principal balance, which is divided evenly across your term length.
As you pay down your balance, your fees will be reduced. For example, you may pay 3% for the first six months of your loan, then pay just 1.25% for the last six months. There are no prepayment penalties, so you can pay off early and save.
Kabbage is very transparent about its fees and your total cost of borrowing. On each loan agreement you make with Kabbage, you will find a SMART Box. The SMART Box provides important information, including:
- Disbursement amount
- Repayment amount
- The total cost of capital
- Annual percentage rate (APR)
- Average monthly payment
This gives you an overview of all of the details of your loan, so there’s never any question on how much you are paying to draw from your Kabbage line of credit.
Optional: Request A Kabbage Card
One of the things that make Kabbage stand out from other lenders is its Kabbage Card. When you make traditional draws using the Kabbage website or app, funds are transferred immediately to your bank account, but this process may take one to three business days. What happens if you need instant access to cash?
With most lines of credit, you’re stuck waiting it out until the funds hit your business bank account. But with the Kabbage Card, you can immediately access your line of credit anywhere Visa cards are accepted. Essentially, it turns your Kabbage line of credit into a convenient credit card.
The Kabbage Card allows you to simply swipe to make your purchases. Once you’ve made a purchase with your card, a new six-month loan will be created. This loan will have the same rates and terms as traditional draws from your line of credit. Kabbage does not charge additional fees to use the Kabbage Card, and your credit will not be affected.
All Kabbage account holders are eligible to receive the Kabbage Card and can receive it by simply logging into their account and requesting the card. Once received, the card is activated through the Kabbage Dashboard and can be put into use immediately to purchase inventory, supplies, pay a bill, or cover emergency expenses. You must apply for a Kabbage line of credit to be eligible to receive the Kabbage Card.
Withdraw Funds & Repay Your Loan
Once you’ve opened your Kabbage line of credit, you’re eligible to take draws immediately. Through the Kabbage Dashboard, you can make a draw on your line of credit in just a few easy steps.
Select the amount you’d like to withdraw up to and including your total credit limit. If you select an amount of $10,000 or more, you’ll be able to choose between six-month and 12-month terms. If the amount falls under $10,000, only six-month terms are available.
Once you’ve selected your loan amount and terms, you’ll be able to view your repayment schedule. If you approve of the repayment schedule, you can continue to review the loan. The next step will include reviewing the details of your loan and the linked bank account information; if everything looks good, e-sign the agreement and submit. You should then expect to see the funds in your checking account within one to three business days.
Kabbage makes it easy to repay your loan by using your linked checking account for ACH withdrawals on your due date. You’ll receive a statement each month approximately two weeks before your due date. On your Kabbage Dashboard, you’ll be able to view the date of your next statement, your next due date, and the minimum amount due. This amount will be automatically withdrawn from your business checking account on your due date.
You also have the option to make a manual payment to your account through the Dashboard. You can select the minimum monthly payment, the entire amount, or another amount. Making a manual payment is an option you can use if you would like to pay down your balance or pay your loan off early.
If you have more than one loan, you will still just have one monthly payment. You can learn more about each loan through the “Details by loan” tab in your Kabbage Dashboard. This provides you with an overview of each loan you’ve taken, including the date it was drawn, the original loan amount, and remaining balances.
Remember that technically you have no obligation to take funds offered to you. While that might sound like it defeats the purpose of having a line of credit (rainy day fund security notwithstanding), don’t feel pressured to draw on your line unless you need to.
Kabbage’s lines of credit are ideal for business owners who want quick access to cash without a lengthy and difficult application process.
However, it is important to note that these lines of credit do come at a cost. Monthly fees added onto your principal balance are steep when compared to low-interest, long-term financing options.
That said, if you need business capital quickly and without hassles, the return-on-investment may be worth the additional costs. Check out our full Kabbage review to learn more about this lender and its lines of credit.