Article by Myles Leva, Last update at November 10, 2020
Kabbage is an alternative business financing provider that services small businesses. The company offers a flagship line of credit product that is highly regarded for its speed. If you need a loan fast but don’t have a great credit score, Kabbage offers its services with you in mind. Unlike most banks, Kabbage will work with small businesses and provide lines of credit, which offer more flexibility than other business financing options. While the APRs on Kabbage loans vary greatly, the amount of money they will lend you also varies. The arrangements they offer are not very suitable for start-ups, but they serve their small business clientele in a fast and simple manner.
Kabbage is one of the more expensive business loan providers. When you choose to use Kabbage, you are trading more money in exchange for faster service.
When you go through the lending process with Kabbage, you’ll face expensive fees. You’ll also be faced with potentially high APRs. The APRs on loans from Kabbage range from 20% to 99%. These are some of the highest rates in the business financing market.
The intelligent way to handle Kabbage is to use it when you need fast cash for a specific purpose. Due to the high APRs, it would be best to avoid using Kabbage for large purchases like renovations, expensive equipment, or hardware updates.
Kabbage has a low bar of entry, relative to other lenders. If you have bad credit, you’ll have an easier time dealing with Kabbage than you would if you were dealing with another lender.
There are two important things to note regarding Kabbage’s business loans. The first is that they offer a great deal of convenience, access, and speed, relative to their competition. To illustrate this point, consider that Kabbage is one of the very few business lenders that doesn’t have any credit score requirements for access to their lines of credit. This ease of access and speed comes at a serious cost, however.
We cannot overstate how risky some of Kabbage’s APRs can become. Because Kabbage doesn’t conduct serious background checks, their APRs are higher than average. In many cases, their APRs range from 20%-80%, and in some cases they go even higher. For comparison, Kabbage’s competitors often have APRs starting around 10%.
Even in the modern lending industry, where fast decisions are becoming increasingly common, Kabbage stands out for its speed. However, Kabbage puts an unusually high emphasis on speed.
Business loans from Kabbage are easy to get because they come with a low bar of entry. Kabbage will lend money to far more businesses than the average lender, but their service comes at a cost. While the starting APRs for their loans are often agreeable enough, we recommend extreme caution in drawing too much money at once.
Kabbage’s flagship loan product, their line of credit, is a flexible option. The best way to work with Kabbage is to go to them when you need fast access to funds but borrow in moderation. A line of credit can be used for a wide variety of business expenses. Despite that, it’s best to avoid using credit from Kabbage to pay for large, one-off expenses such as vehicle purchases, software updates, and major renovations. Because of their high APRs, you stand the risk of landing in a seemingly inescapable debt cycle should you fail to pay them back quickly. Their services are not well suited for startups. If you have more time to apply for a loan, you’d be better off looking elsewhere.
Kabbage only offers business lines of credit. Their simple offer makes dealing with them quite simple as well. There are certain things you can expect when you choose to apply for a loan from Kabbage.
Lax requirements: Getting a loan from Kabbage requires that you:
While you need to go through a credit check, there’s no minimum FICO credit score required to be approved for their line of credit. However, applicants with higher credit scores are more likely to be approved and can expect better terms on their loans, including lower APRs.
A decent line of credit: A line of credit from Kabbage can have a maximum draw limit of $250,000. The draw length on the loan can be 6, 12, or 18 months. This line of credit comes with a borrowing fee equal to about 1.5% to 10% of the borrowed amount each month. They have no draw fees, and APRs are very high at 20% to 80+%.
A streamlined application process: Kabbage’s line of credit application process is one of their strongest points. The application is easy to complete quickly, and you will be automatically approved or denied in a matter of minutes. There are cases where the application takes longer, such as when it’s difficult to verify the information you provide them with. These issues are minor and even when they come up, Kabbage is still a lightning-fast business lender.
Ridiculous APRs: Once your APR starts climbing over 20%, it becomes incredibly easy to dig yourself into a deep financial hole. Of course, this can be avoided by being careful with the amount of money you draw from the line of credit. All the same, if you accept a loan with a high APR, exercise more caution than you normally would when it comes to drawing.
There are many things to love about Kabbage. They are a transparent and fast business loan provider and their line of credit has several great features. As long as you can keep a close eye on your payments and make sure you don’t dig yourself into a hole of debt, Kabbage is a good business line of credit provider.