- Borrower qualifications are lower than when going through banks
- No credit score requirements
- No extra fees
- The application process is fast and easy
- Website advertising is clear and informative
- Not available to businesses in some industries
- Rates can be expensive
- No long-term financing options available
Founded in 2009, Kabbage is a lender that offers lines of credit and payment services to eligible businesses.
It would be difficult to find a lender that’s more convenient than Kabbage. 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 fees that can reach up to 10% of your borrowing amount each month, this lender provides some of the more expensive loans you’re going to come across. And while Kabbage doesn’t have a prepayment penalty, some merchants don’t like that the loans are front-loaded, which means you might not be able to save very much money by repaying early.
Despite the potentially high cost, there’s a lot to like about Kabbage. The application is fast and easy, repayments are made monthly (as opposed to daily or weekly), and the line-of-credit-style loan offers an easy-to-access financial safety net. In fact, Kabbage’s line of credit is the easiest to access on the market. In addition to being able to request funds via desktop or mobile app, Kabbage offers a spending card so that you can pay for the exact amount right from your credit line.
Final Verdict: Kabbage lines of credit are fast, convenient, and accessible to small businesses, even if you don’t have a perfect credit score. Because Kabbage loans can be expensive, we advise applicants to make sure they fully understand the cost before accepting a financing offer.
Table of Contents
Kabbage offers the following services:
- Business Lines Of Credit: The lender extends credit to a borrower. The borrower can draw upon that credit at will up to a credit limit. Interest is paid on the amount used.
- Payment Services: This suite of services encompasses invoice processing, custom payment URLs, and card processing.
To qualify for a loan from Kabbage, here’s what you’ll need:
|Time In Business:||12 months|
|Business Revenue:||$50,000 per year (or at least $4,200 for the last 3 months)|
|Personal Credit Score:||N/A|
Kabbage does not have a required minimum FICO score; however, you will need to consent to a credit check during the application process. This is a one-time hard inquiry, and it allows Kabbage to review the information within your report when considering approval. Applicants in fair to excellent categories are more likely to qualify.
Terms & Fees
These are the terms and fees stated on Kabbage’s website:
|Borrowing Amount:||Up to $250,000|
|Draw Term Length:||6, 12, or 18 months|
|Borrowing Fee:||1.25%-10% of the borrowing amount per month|
Kabbage loans have a term length of either six, 12, or 18 months. Each month you repay 1/6th, 1/12th, or 1/18th 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, the first six months of a 12-month loan, or the first nine months of an 18-month loan, your fee will be somewhere between 1.25% and 10% of the original principal per month. For the remaining months of your loan, your fee will be 1% of the principal. If you feel confused, Kabbage has a very nice loan calculator on its website, which may help you understand how the fees work.
Be aware that, due to the way the fees are issued, Kabbage loans do not technically carry an APR. However, the estimated APRs range from about 24% to 99%. Payments are made monthly.
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.
Before you get your loan, Kabbage will send you a SMART Box that will disclose everything you need to know to make an informed borrowing decision, including the total loan fee and the effective APR.
The application process is completed 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 Amazon, PayPal, and QuickBooks). Kabbage uses the information provided to determine your monthly fee and maximum credit line.
Kabbage will perform a hard pull on your credit during the application stage. Although the lender does not state a minimum cutoff, it will use your credit history to help verify your identity and determine risk.
An algorithm decides your rates and fees. It generally only takes a few minutes for the system to decide whether to approve or deny your application. However, if Kabbage has trouble verifying information, the process might take longer. Kabbage might also request additional info to grant you a larger credit line.
Once approved, you can begin requesting funds. You can also request a Kabbage Card free of charge to pay for goods and services right from your credit line.
Sales & Advertising Transparency
Kabbage fully discloses all numbers, fees, application procedures, and terms of service on its website. I’m particularly fond of its help center, which answers common questions, and the loan calculator, which can help you understand Kabbage’s unusual fee structure. There is also an ROI calculator to help you know whether the cost of the loan is worthwhile in the long run.
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 average monthly payment, and the cents-on-the-dollar cost for easy comparison.
Customer Service & Technical Support
If you can’t find the answers to your questions in Kabbage’s help center, support is available via phone or email. The lender also has a fairly active presence on social media sites, including Twitter and Facebook.
Negative Reviews & Complaints
Kabbage has an A+ rating with the Better Business Bureau, with 796 complaints in the last three years. The company also has a presence on Sitejabber and Trustpilot.
Here are the most common complaints regarding Kabbage’s service:
- Rejections: Unfortunately, Kabbage cannot extend credit lines to all applicants. Even if you meet the company’s minimum stated requirements, you might not be eligible based on other information it finds during the application process.
- Expensive Fees: With fees that have an equivalent APR between 24% and 99%, Kabbage loans can be pricey. If you are worried about cost, I’d recommend shopping around a bit before settling on a line of credit. Check out our list of the best business lines of credit for small businesses to see some other options you might be eligible for.
- Front-Loaded Fees: Kabbage has been criticized for its fee structure because the bulk of its fees have to be paid in the early part of the repayment term. Although Kabbage technically doesn’t have a prepayment penalty, the front-loaded fees can make it difficult to save a significant amount of money by repaying early.
- Sudden Loan Limit Cut: Kabbage keeps an eye on your cash flow, so if your business is starting to go sour, it 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 have.
Positive Reviews & Testimonials
Kabbage also has a rating of 4.2/5 stars on Trustpilot based on over 6,600 reviews as well as a few testimonials on its website. Overall, merchants are happiest with:
- The Speed & Ease Of The Application Process: Many customers appreciate how easy it is to apply for funding from Kabbage.
- Fast Access To Cash: Customers appreciated the ability to draw on their lines of credit whenever needed.
- The Customer Service: Customers were generally pleased with the care they received from Kabbage.
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 the system, Kabbage capital is always there if and when you need it.
There are a lot of things to like about Kabbage. Many businesses will be eligible for the service, the application process is fast and painless, the capital is always accessible, and it doesn’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.
However, Kabbage’s fees can get expensive. Before settling on Kabbage (or any other lender), I’d encourage you to shop around. Curious about what else is out there? Take a look at some of Kabbage’s competitors or a comparison of our favorite lines of credit.