- Lines of credit
- Fast application process
- No draw fee
- No maintenance fees
- No prepayment penalty
- Monthly repayments
- Good customer service
Founded in 2009, Kabbage is an online lender that offers lines of credit to eligible businesses. Originally, the company only worked with online retailers, but they’ve expanded their reach to service brick-and-mortar businesses as well.
Finding a lender more convenient than Kabbage would be difficult. In most cases, business owners can apply, get a decision on their rates and fees, and start drawing funds within a few minutes. That’s really fast, even for an industry that’s known for coming to quick lending decisions.
The speed comes at a price, though. With APRs that potentially range between 18% and 106%, this lender provides some of the more expensive loans you’re going to come across. And while they don’t have a prepayment penalty, many merchants don’t like that Kabbage’s loans are front-loaded, which means you can’t save very much money by repaying early.
Aside from the fees, this company has a few issues regarding customer communication. However, you could do a lot worse than Kabbage. I like how repayments are made monthly (as opposed to similar lenders which generally require weekly or daily payments), and I like the peace of mind offered by having a credit line available should you ever need it.
Read on for the full review, or check out some of our favorite alternatives to Kabbage.
Kabbage offers business lines of credit.
To qualify for a loan from Kabbage, here’s what you’ll need:
|Time in business:||Minimum of 12 months|
|Revenue:||Minimum $50K annually, or $4.2K for the last 3 months|
Kabbage does not have a specific credit score requirement. However, this lender does pull your credit during the application process.
Terms and Fees
These are the terms and fees stated on Kabbage’s website:
|Borrowing amount:||$2K – $150K|
|Draw term length:||6 or 12 months|
|Interest rate:||1.5% – 10% per month|
|APR:||Approx. 20% – 106%|
Kabbage loans have a term length of either six or 12 months. Each month you repay 1/6th or 1/12th of the principal plus a fee.
This lender does not enforce a prepayment penalty, but keep in mind that Kabbage operates on a front loaded fee structure. For the first two months of a six-month loan, and the first six months of a 12-month loan, your fee will be somewhere between 1.5% and 10% of the original principal per month. For the remaining months, your fee will be 1% of the principal. Still confused? Kabbage has a very nice loan calculator on their website, which may be helpful for understanding the structure.
Assuming you don’t repay early, that adds up to an APR somewhere between 20% and 106%. In terms of dollar-for-dollar cost, for every $1K borrowed, you’re looking at fees between $70 and $240 for a 6-month loan, and fees between $150 and $660 for a 12-month loan.
Other than the monthly borrowing fee, Kabbage does not charge additional fees. For example, you will not be charged draw fees, maintenance or servicing fees, unused line fees, or a prepayment penalty. However, the lender does charge a late fee between $10 and $100, depending on the value of the late payment.
Before borrowing Kabbage will disclose information about your loan using a SMART Box, which will disclose everything you need to know to decide whether or not the loan is worth it. The lender has an example SMART Box on their website.
The application process is entirely online. Kabbage will ask for information about you and your business. You will also have to give the lender read-only access to your business bank account and any other data channels you use (such as eBay, Paypal, Etsy, Square, Authorize.Net, Amazon, and others).
Kabbage uses the information provided to determine your monthly fee and maximum credit line. They will also do a hard pull on your credit. Although Kabbage doesn’t have any minimum qualifications regarding your personal credit score, they do use your credit history to help verify identity and determine risk.
Your rates and fees are decided by an algorithm. In general, it only takes a few minutes for the system to decide whether to approve or deny your application.
The most likely holdup you might encounter is if Kabbage has trouble verifying your identity or bank account. If that’s the case, you may have to wait a few extra days for approval while Kabbage takes steps to verify the information.
Sales and Advertising Transparency
Kabbage fully discloses all numbers, fees, application procedures, and terms of service on their website. I’m particularly fond of their help center which answers common questions, and the loan calculator which can help you understand Kabbage’s unusual fee structure.
Before borrowing, Kabbage provides your loan details in a SMART Box, a standardized method of disclosing financial information so borrowers can easily compare offers. This box includes the total cost of capital, the APR, the monthly payment, and the cents-on-the-dollar cost for easy comparison.
Customer Service and Technical Support
If you can’t find the answer to your question(s) in Kabbage’s help center, Kabbage is available via phone or email. The lender also has a fairly active presence on social media sites including Twitter and Facebook.
A few customers have complained that Kabbage does not assign a single representative to each client; instead, they opt to have different sections of their customer service specialize in different things. So if you’re having a difficult problem, you might have to talk to several representatives before arriving at a solution. Otherwise, the responses to customer service have been largely positive.
Negative Reviews and Complaints
- Expensive capital: With APRs that range from about 20% – 106%, Kabbage loans can be expensive. I’d advise anybody interested in Kabbage to take a look at some other lines of credit before settling on a service, as you may be able to find better rates elsewhere.
- Front loaded fees: Kabbage gets a lot of criticism because the bulk of their fees have to be paid off up-front. Although they technically don’t have a prepayment penalty, the front loaded fees make it difficult to save a significant amount of money by repaying early.
- Slow ACH transfer: If Kabbage is transferring your capital via ACH, the process generally takes up to three days. Unfortunately, ACH transfers are largely outside of Kabbage’s control. If you need the funds quickly, transfers to PayPal are instantaneous and funds can be accessed right away with a PayPal business debit card.
- Sudden loan limit cut: Kabbage keeps an eye on your cash flow, so if business is starting to go sour, they might reduce your borrowing limit or cut off your credit line entirely. If this happens, you’ll still have to repay any outstanding debt you still have.
Positive Reviews and Testimonials
- The speed and ease of application
- Fast access to cash
- The customer service
Aside from reiterating what the TrustPilot reviewers said, the merchants in the testimonials seem to like the financial safety net that’s provided by the line of credit style structure. Once you get into their system, Kabbage capital is always there if and when you need it.
There are a lot of things to like about Kabbage. Most businesses will be eligible for their service, the application process is fast and painless, the capital is always there when you need it, and they don’t charge extra fees. In general, Kabbage is very transparent—you’ll know everything you need before borrowing money, and you shouldn’t come across any surprises.
Nonetheless, Kabbage would not be my first choice. Most of the appealing factors are simply characteristics of a line of credit type loan; although Kabbage might have been the only marketplace lender to offer lines of credit in the past, now there are a few companies that offer products with potentially better terms and fees.
However, if the convenience of a loan is more important to you than the high cost, or your credit score isn’t quite high enough to get another line of credit, Kabbage may be the line of credit for you.