If you need quick cash to stock up on inventory, fix broken equipment or cover other short-term expenses, a small-business loan from Kabbage might be a good fit. The company, which was founded in 2009, approves lines of credit of up to $100, 000 for small-business owners based more on their accounting, banking and e-commerce data than on their credit scores. Kabbage’s online application takes minutes to complete, and borrowers can be approved and funded just as quickly, or within a few days at most. But the speed comes at a cost. Kabbage loans are some of the most expensive small-business loans on the market.
Kabbage is best for:
- Business owners with bad credit
- Businesses that need working capital fast
If you’re ready to get started, apply at Kabbage:Learn More
Kabbage’s minimum qualifications
Kabbage doesn’t require borrowers to back their loans with personal guarantees, and it doesn’t require a minimum credit score. However, they must have:
- Been in business for at least one year
- Annual revenue of at least $60, 000
- A business checking or PayPal account
Reasons to use Kabbage
Fast access to cash: Kabbage is a good option for business owners who need cash immediately and don’t mind paying higher rates for the speed. The application doesn’t require any paperwork — you’ll just link Kabbage to your business checking or PayPal account. You can give the company access to additional accounts, such as QuickBooks, Xero, Etsy, Amazon, eBay or Square. The more accounts you link, the more information Kabbage can use to evaluate your application.
Available to business owners with bad credit: Kabbage is also a good option for business owners who can’t get approved for a cheaper loan. Although the company does check your credit history, it doesn’t weigh your score as heavily as other factors or have a minimum credit score requirement. Kabbage primarily considers data from the accounts you link, your average monthly revenue and the number of years you’ve been in business to make an initial lending decision, determine your credit limit and set your fees.
Innovative underwriting techniques: Kabbage also bases its lending decisions on nontraditional metrics, such as your business’s activity on Facebook and Twitter. After you’re approved for a Kabbage line of credit, you can give the company access to data from your social media accounts. It can use that data when deciding whether to increase your credit limit. Find out more about how the application process works in our step-by-step guide.
Where Kabbage falls short
Fee structure: Kabbage’s fee structure is a bit complicated. Each month you’ll pay back a percentage of the amount you borrowed — the principal — plus a fee. For the first two months, you’ll pay a fee of 1% to 12% of the total amount you borrowed, depending on data from the accounts you link, your revenue, time in business and credit score. For the remaining four months, you’ll pay 1% of the total amount you borrowed.
Say you borrow $2, 000, and Kabbage sets your fee for the first two months at 6% of the total loan amount. You’ll pay $333.34 in principal each month, plus $120 during the first two months and $20 during the remaining four months.
Little incentive to repay early: As shown above, you pay the largest chunk of your fees to Kabbage within the first two months. Although the company doesn’t charge a prepayment penalty, you won’t benefit much by repaying early. In the previous example, if you repaid your loan in five months instead of six, you’d save $20 in fees; if you repaid in four months, you’d save $40. Saving even a little bit can make a difference, but repaying early saves you less than it would if Kabbage collected the same amount each month.
High rates: To make sense of Kabbage’s fee structure and compare its costs with the costs of other small-business loans, look at the annual percentage rate. Kabbage’s APR ranges from 20% to 113%, making it one of the more expensive small-business loans on the market.
Kabbage at a glance
|Loan types||Lines of credit|
|Cost of funding||32% – 108% APR|
|Approval time||A few minutes to several days|
|Loan amounts||$2, 000 – $100, 000|
|Loan terms||6 months|
The bottom line
Kabbage offers online small-business loans with an automated application. It’s a good option if you need short-term cash fast or have bad credit and can’t qualify for a less-expensive online term loan or bank loan. Avoid using Kabbage to cover the costs of large equipment purchases or renovations; you’ll want to finance those investments with a long-term, lower-cost loan.
Find and compare small-business loans
To compare Kabbage with other alternative lenders, use NerdWallet’s small-business loans page. We gauged lender trustworthiness, market scope and user experience, among other factors, and arranged them by categories that include your revenue and how long you’ve been in business so that you know which loans you might qualify for.
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