Kabbage Small Business Loan Review

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Kabbage is an Atlanta-based online lender serving small businesses. Since launching in 2008, Kabbage has loaned more than $5.6 billion to more than 150,000 businesses.

For qualifying borrowers, Kabbage offers financing to cover business expenses from marketing costs to equipment purchases.

Loans come as a revolving line of credit, which means you can pull funds from your credit line at any point. You can borrow as much as you need as long as you don’t exceed the maximum amount, and you only pay back what you borrow.

It’s free to apply for Kabbage financing, and there’s no cost until you start using your funds. But before filling out the online application, find out if Kabbage is the right lender for your small business.

Kabbage financing details

Kabbage provides a line of credit from $2,000 to $250,000 for eligible businesses. You can access your line of credit whenever you need it and take out as much as you want. Repayment terms range from 6 to 18 months.

Each time you draw from your line of credit, Kabbage treats that amount as an individual term loan. Rather than charging interest, a fee is added to your loan amount. You must pay back the loan amount plus the fee in either 6 or 18 months.

Fee rates range from 1.5% to 10% of your principal. Kabbage requires you to pay back part of your total loan amount each month, plus the monthly fee. For a six-month loan, you’d owe one-sixth of your total amount each month. For a 12-month loan, you would pay one-twelfth of your full loan amount each month.

For the first two months of a six-month loan term, your full fee rate would apply. But for the remaining months, your rate drops down to 1.25%.

Here’s an example of the fee you’d pay for a $10,000 six-month loan with a 4% fee rate:

Based on this example, a $10,000 loan would ultimately cost $11,300, as the monthly fees add up to $1,300.

Here’s what you would pay for the same loan amount and fee rate on a 12-month repayment schedule:

On this schedule, the monthly fees add up to $3,150, so you would ultimately pay back $13,150.

Kabbage’s reasoning for the fee schedule is that it gives you simple, proportional monthly payments. Every month, you would pay back an equal portion of your loan principal plus a monthly fee. Kabbage doesn’t charge prepayment penalties, so you could pay off your loan early to save on monthly fees.

Six-month terms require a minimum loan of $500, while 12-months terms require a minimum loan amount of $10,000. Utah-based Celtic Bank funds Kabbage’s financing.

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What businesses are eligible?

Kabbage provides small business loans to business owners with a bit of experience under their belt. To be eligible, you should be in business for at least a year.

You also need to have a minimum of $50,000 in annual revenue or $4,200 in monthly revenue in the last three months. Kabbage analyzes your business performance as a whole when reviewing your application, so there is no minimum credit score requirement.

Because of the minimal requirements, nearly any business could qualify for financing from Kabbage. But Kabbage does not work with nonprofits.

A line of credit can be used to cover a variety of business costs, including payroll, inventory, cash-flow needs or new equipment or staff members. Kabbage tries to make approval decisions quickly, which would be helpful if you need money fast.

This would also be a good option for business owners with minimal funding needs since a loan amount can be as low as $500. If you need a bit of cash to get you through a financial pinch, Kabbage may provide an ideal solution.

The pros and cons

Pros

  • Revolving line of credit allows for flexibility in how you use the funds
  • Credit score not a determining factor in whether you’re approved
  • Fast time to funding

Cons

  • Repayment process and fee structure may be confusing for new borrowers
  • Short repayment terms could be difficult for some
  • Product offering limited to lines of credit

Application process and requirements

Kabbage’s application process is simple and can be completed from a phone or a computer. You would need to submit your revenue data as well as basic personal and business information. Kabbage could review your application immediately and let you know how much funding you qualify for based on your business performance.

Here’s what Kabbage needs:

  • Business checking account
  • Your name
  • Business name
  • Home and business address
  • Business tax ID
  • Social Security number

If your line of credit is smaller than $150,000, Kabbage may be able to automatically verify your business data and bank account and approve you in minutes. But applications for lines of credit exceeding $150,000 need to be manually reviewed and could take longer to be approved, meaning it could be several days before you receive your funding.

Upon approval, Kabbage would reveal your fee rate and loan terms. But you don’t have to start repaying until you borrow funds from your line of credit.

You can access your funds through the Kabbage mobile app or online dashboard page. To withdraw funds, you would input the amount you need and review the repayment schedule. Kabbage would then deposit the funds in your bank account in one to three business days. If Kabbage has a link to your PayPal business account, you could receive your funds in minutes.

The account where you choose to deposit your funds is also the account from which Kabbage will withdraw your payments. Kabbage automatically withdraws payments each month, unless you manually make a payment from your Kabbage dashboard.

You could also get a Kabbage Card, which allows you to access your line of credit like you would with a regular credit card. However, rather than having minimum payments as you would with a traditional credit card, using the Kabbage Card would create a structured repayment period.

Kabbage would need to mail the card to you to be activated before you can begin using it. The Kabbage Card is accepted anywhere Visa is accepted.

The fine print

Funding may not always be fast. Although Kabbage advertises fast time to funding, there are instances when it could take several days to receive funding. If there are errors during the sign-up process, funding may be delayed. Additionally, Kabbage may need to send you micro-deposits as a security precaution to confirm your bank account.

Be prepared for changes. The financing is subject to review and change. This could include reductions or increases in your line of credit or pricing, or the elimination of your credit line altogether.

Check your loan agreement. Each time you draw from your credit line, a separate loan is issued for the individual amounts. Each amount will have a separate loan agreement spelling out the repayment schedule for that particular withdrawal. Be sure to check the agreement each time you take out funds.

The bottom line

All types of small businesses can apply for Kabbage financing. And because Kabbage doesn’t have strict credit requirements, business owners with less-than-perfect financial history could be approved for funding. Kabbage’s application and approval process are also fast. If your business has immediate cash needs, this may be the right solution for you.

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Melissa Wylie
Melissa Wylie |

Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at [email protected]

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