- Lines of credit
- Monthly repayments
- Quick application time
- Quick access to cash
- No extra fees
- 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.
It would be difficult to find a lender that’s more convenient than Kabbage. Most business owners can apply, get a decision, and start withdrawing 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 have the potential to range between 18% and 102%, 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 fee structure, this company has a few other few problems regarding advertising transparency and customer communication. However, you could do a lot worse than Kabbage. I like how repayments are made monthly (as opposed to weekly or daily), 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 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|
Terms and Fees
These are the terms and fees stated on Kabbage’s website:
|Borrowing amount:||$2K – $100K|
|Draw term length:||6 or 12 months|
|Interest rate:||1.5% – 12% per month|
|APR:||Approx. 18% – 102%|
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 the 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 12% of the original principal per month (Kabbage’s website also claims that their partners occasionally charge an additional 1.5%). For the remaining months, your fee will be 1% of the draw fee.
Assuming you don’t repay early, that adds up to an APR somewhere between 18% and 102%. In terms of dollar-for-dollar cost, for every $1K borrowed, you’re looking at fees between $70 and $280 for a 6-month loan, and fees between $130 and $780 for a 12-month loan.
Kabbage has a nice example payments schedule on their website, which should clear up any confusion regarding their payments structure. Keep in mind that your rates will probably be higher than what’s represented in their example.
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, and Amazon).
Kabbage uses information from your data channels and your business’s online presence 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 credit, 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. In the case of your identity, Kabbage might ask for more documentation such as your driver’s license or passport. In the case of your bank account, the process might simply take them a few extra days, or they might have to send micro-transactions to make sure they’re getting the right account.
A good credit score is not necessary to obtain a Kabbage loan. However, they may turn you down for other reasons. Kabbage is more concerned with your business’s profitability than your credit score and uses the information they collect from you and the internet to determine whether your business has a healthy enough cash flow to be eligible for a loan (and, if so, how much they’re willing to give you).
Sales and Advertising Transparency
For the most part, 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. It goes beyond your regular help center by including “Helpful Videos” which walk you through how to use their service (how to navigate your dashboard, connect to your accounts, take out a loan, and make payments, etc.). You can peruse the questions and view these videos to get a good idea of how the whole process works before you make an account.
The only thing I wish Kabbage would be more transparent with is their repayment policy. If you are delinquent in repaying your loan, Kabbage will take that money right out of your bank account. They are 100% within their rights to do this because of the loan agreement you sign before taking out a loan. I think it’s great that Kabbage gives the merchant leniency regarding when to pay back the loan during the month, but I wish that they would be a bit more up-front regarding what happens if you don’t.
Customer Service and Technical Support
Kabbage throws most of their support energy into phone hotlines. If you can’t find the answer to your question(s) in Kabbage’s help center, your best bet is to just call them up. You can try contacting them by email, but it might take up to 24 hours to get a response.
The company has racked up a few complaints (see the next section), but reception to customer service has been largely positive.
A few customers have complained that Kabbage does not assign a single representative to each client like some loan service providers; 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.
Negative Reviews and Complaints
Aside from the expected misunderstandings regarding payment dates, these are the most common complaints:
- Expensive capital: To put it bluntly, Kabbage loans are expensive. I can’t blame them too much for this because you’re essentially paying for the convenience, though it is certainly not ideal. Hop down to the Final Verdict section to learn about similar loan products with lower fees that your business might be eligible for.
- 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, you can’t save a whole lot 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.
- Unexpected withdrawals from your bank account: If you are delinquent on your payments, Kabbage is allowed to pull the money out of your accounts without notification. Should you encounter unexpected hardships, call up customer service; Kabbage might be willing to work out an alternate payment schedule or deferment.
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.
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.
Before you make any decisions, take a look at some of Kabbage’s competitors (here).
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 is a fine product. Just be aware of the cost of borrowing.