Kabbage

The Good

• Works with small businesses that don’t qualify for bank loans
• Easier application process than at a bank
• Transparent with quick funds availability

Kabbage is one of several non-traditional business loan companies which have grown popular in recent years. The Atlanta-based company focuses on lending working capital to online businesses with average revenue between $500,000 and $1,000,000 per year.

Small business – step right up

One of the biggest advantages Kabbage offers is that they will work with companies that don’t generate enough revenue for traditional business loans from large lending institution or bank.  Businesses need to have at least $50,000 in annual income to apply.  But Kabbage will work with business owners who have just good, OK, or even bad credit, whereas a bank will typically decline these individuals.  The application process is completed through automated assessment of your banking and e-commerce records, rather than via paperwork like a typical loan application.

The other perk is that your money is typically available within anywhere from just a few minutes to three days. This fast turnaround can be critical for a smaller business with cash flow challenges, and is much less than the time frame offered from larger institutions.

The Bad

• Loans must be paid within one year
• Personal guarantees

Kabbage interest rates are set up differently than with a traditional loan. Instead of an APR, you pay a percentage of your principal in monthly fees. Depending upon your approval terms, you’ll pay between 1% and 10% plus a chunk of your principal for the first two months of a six-month term, or the first six months of a one-year term. You then pay one percent plus your principal payment for the remainder of the term.  While this may seem confusing to some, it is at least transparent.  There are not hidden fees.

The Kabbage loan repayment schedule is shorter than with most business loans – you may choose from six or twelve months, and apply to borrow between $2,000 and $150,000.

Personal Guarantee

Small business owners must also personally guarantee the loan, meaning, your personal assets are at risk if you do not pay it back.  For this reason, most borrowers think of Kabbage as a short-term solution.  Kabbage will supply the cash for working capital, equipment purchases, etc. but the goal is to pay it off fairly quickly.

The Summary

Kabbage is a good solution for smaller companies that need working capital quickly. It works particularly well for those who have an established business but may have a less than stellar personal credit history. The unique application process means your business operations speak for you, rather than relying only on a credit report to qualify for your loan.

While the interest rate may not be the as competitive as a bank can offer, there are no complicated hidden costs and is much easier to be approved.