Are Kabbage Loans Too Good to be True?
(Read Time: 2-3 Minutes)
Kabbage Loans Spotlight:
- Time to Qualifying: 10 Minutes
- Loan Terms: 6 or 12 Months
- Minimum Borrowing Amt.: $2,000
- Maximum Borrowing Amt.: $250,000
- Fully Automated Application
Visit our Kabbage reviews page to see how we scored the lender in various categories.
Kabbage is one of the fastest-growing, online lending platforms for small businesses. Since their founding in 2011, Kabbage has facilitated over $4.5 billion in funding for approximately 140,000 small businesses.
Kabbage facilitates short term loans to businesses that don’t qualify for traditional financing due to limited operating history, lack of profitability or bad credit.
There is no shortage of bad credit business loans out there. With Kabbage, having poor credit or even no credit is a factor, but it’s not the only factor. Most businesses with subpar credit ratings still can access funding through unsecured business loans. The associated credit risk will be reflected in the monthly fee borrowers pay.
Kabbage also offers secured business loans. These are typically cheaper than unsecured, because of the added security and inherent credit quality. These small business funding options include invoice factoring, business cash advances, SBA loans and equipment loans.
Unlike most online lenders, Kabbage can arrange accounts receivable factoring services for small businesses with substantial credit sales.
Businesses can borrow as little as $2,000 or as much as $250,000. Kabbage loans are structured as either 6-month or 12 month installment loans.
Kabbage offers rates as low as 6% for 6-month loans and 12% for their 12-month loans.1
Kabbage finances a variety of small businesses such as:
- Beauty Salons
- Online Retail Stores
- Dental Practices
- Pawn Shops
- Restaurant Loans
- Construction Loans
Kabbage Quick Business Loans
Kabbage has done a fantastic job of speeding up small business financing and has become, arguably, the fastest at it. This is one of the reasons we rate them so high in our Kabbage reviews page.
A small business applies directly through Kabbage’s website. The online lender’s proprietary algorithm does the rest, scouring the data from your business bank statements and/or accounting software.
Kabbage provides a lending decision in 10 minutes-faster than any actual banker could and likely more accurate.
Kabbage’s platform is compatible with the following:
- PayPal Working Capital
- Amazon Lending
Through financial technology, names like Ondeck Capital and Bluevine can also provide financing decisions almost immediately. As an industry, online lending is on the cusp of instantaneous or real time funding.
But is immediate access to capital really that important? Many businesses think so. Cash flow crunches at small businesses require funding in hours or days, not weeks or months like traditional lenders who aren’t wired for such speedy decisions.
Small businesses are willing to pay up for this service, since the rates or fees are higher with online lenders or factoring companies than at banks.
Here are a few details about Kabbage loans that we should mention. First, the interest rate on Kabbage loans is not readily separated out. Rather it’s built into the quoted monthly fee alongside other factors including credit risk and term.
Second, the economy is entering a rising interest rate environment, by most accounts. And the short term nature of Kabbage loans (6 or 12 months) lends itself to interest rate risk.
As funds are repaid, each new draw is considered a separate installment loan, with a new, possibly higher, interest rate. So you won’t be locking in a low, fixed rate for many years as some lenders will allow.
Still, due to their short term nature, there are no variable interest rates to worry about, typical with most lines of credit.
Larger Kabbage Loans
Kabbage has been aggressively reducing funding times while increasing funding limits. Kabbage now offers a small business line of credit with a whopping $250,000 limit. Co-founder Kathryn Petralia hinted that a $500,000 limit might also be possible.2 Like other Kabbage loans, the lending decision for the $250,000 loan should also be fully automated and come in ten minutes (incredibly fast for a loan of this size).3
From the footnotes on Kabbage’s website, any credit limits above $150,000 require manual approval. The likelihood is the process is automated until the final step when the underwriter gives the final ‘yeah’ or ‘nay’.
The American Banker article hinted that Kabbage could leverage their customer information to offer a variety of add-on services and solutions-essentially providing a consultancy role going forward.4 So, obtaining a Kabbage loan now could lead to further partnering down the road.
Check out our Kabbage reviews to see how we scored the lender in a variety of categories.
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