Kabbage Review: Accessible Financing With Ease & Speed

Kabbage disrupted the small business lending sector by offering operating capital to entrepreneurs with no credit history. Taking over the fintech space, it quickly built a reputation for ease and speed. Best of all, a low credit score doesn’t automatically disqualify your application. Fast approval for a Kabbage line of credit can help you meet your financial objectives and goals.

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    Financially Reviewed by Thomas J. Brock

    Kabbage offers its clients a wide array of small business loans even if they don’t have an ideal credit score. Their products include secured and unsecured loans, industry specific loans, and minority loans.

    American Express acquired Kabbage on October 16, 2020. Currently, Kabbage is not accepting any new loan applications from existing or new clients. All existing loans are managed through a separate company called K Servicing.

    Information and descriptions in this review related to loans and funding cover the available features prior to their termination in October 2020.

    What Is Kabbage?

    Founded in 2008, Kabbage is a startup backed and funded by Thomvest Ventures, SoftBank Capital, Reverence Capital Partners, BlueRun Ventures, and Mohr Davidow Ventures. Launched in 2011, it provides access to lines of payment services and credit to eligible businesses. Kabbage connects borrowers with over $1 billion in working capital funds to small businesses each year.

    Kabbage funding is convenient, as you can apply, get a decision on its fees and rates, and receive funds within a few minutes in most cases. Historically, loans through Kabbage have been quite expensive, as their fees are front-loaded. Each month you will pay the principal plus a fee between 1.00%-10.00% of the loan. However, there are no prepayment penalties.

    In addition to loans, Kabbage provides payment services and online checking accounts.

    Advantages And Disadvantages Of Kabbage Loans

    As with any service provider, Kabbage funding too has its advantages and disadvantages:

    Kabbage Advantages

    • Fast access to cash – If your business needs immediate funding to cover cash flow shortfalls or an unexpected expense, Kabbage is a good choice. You can apply for and receive hundreds of thousands of dollars of business funding on the same day, something few other providers can match.
    • Great for borrowers with low credit – Kabbage does not stipulate that borrowers need to have a minimum FICO score before applying. Applicants with lower scores who would otherwise not qualify for funds can through Kabbage. This makes them a great option for those looking to recover from a rough patch. 
    • Debit card – Kabbage provides its own debit card to access funds. This will make it easier to use your loan for your business needs without having to transfer cash between accounts endlessly. 
    • Easy application process – Borrowers using Kabbage do not need much paperwork to complete a loan application.
    • Customer service – Kabbage provides friendly staff members available seven days a week to answer any of your questions.
    • Low credit scores – Borrowers with lower credit scores can often qualify for funding with Kabbage when they wouldn’t otherwise.
    • PayPal access – Kabbage can link and send funds to your PayPal account.

    Kabbage Disadvantages

    • High rates – While Kabbage services a wider range of credit scores, their fees and rates are often much higher than comparable lenders’ APRs.
    • Complicated fee system – The fee structure isn’t straightforward, making it difficult to figure out how much you should be putting aside to meet your repayment obligations. 
    • No prepay incentive – There is no incentive to repay your loans early, unlike offers from similar lenders.

    Kabbage Loan Features

    As noted earlier, Kabbage no longer offers loans. The features listed below give details about their loan products prior to them being discontinued.

    Kabbage small business loans come in three types: secured, unsecured, industry-specific, and minority.

    Business Line of Credit

    As an unsecured loan, business lines of credit provide borrowers with a set limit of funds to draw against as needed. You pay interest only on the open balance and there are no prepayment penalties. Lines of credit provide cash quickly and are typically paid back within a year.

    Loan Type

    Line of credit

    Term Length

    6, 12, or 18 months

    Repayment Period

    Monthly

    Apr Range

    24.00% to 99.00%

    Min-max Amount

    $1,000 to $150,000

    Payment Services

    Payment services are business financial activities and operations provided by Kabbage. These include credit card payment and invoice processing. 

    Loan Type

    Payment services

    Term Length

    N/A

    Repayment Period

    N/A

    Apr Range

    N/A

    Min-max Amount

    N/A

    Kabbage Loan Interest Rates And Fees

    The term length of Kabbage small business loans is 6, 12, or 18 months. Every month you’ll need to repay 1/6th, 1/12th, or 1/18th of the principal plus a fee. Kabbage doesn’t charge any additional costs besides the monthly borrowing fee.

    You won’t be charged any prepayment penalty, unused line fees, draw fees, or maintenance and service fees.

    Business Lines Of Credit

    Loan Type

    Business line of credit

    Origination Fees

    None

    Prepayment Fees

    None

    Late Payment Fees

    A $10 fee for balances less than $100, a $35 fee on balances between $100 and $5,000, and a $100 fee for balances over $5,000

    Maintenance Fees

    1.25%-10.00% of your original principal per month

    Interest Rate

    1.50% to 10.00%

     Payment Services

    Loan Type

    Payment services

    Origination Fees

    None

    Prepayment Fees

    None

    Late Payment Fees

    None

    Maintenance Fees

    None

    Interest Rate

    2.25% per card not present transaction

     

    How To Qualify For A Kabbage Loan

    Kabbage loan products do not require a minimum FICO score. However, a credit check will be run as part of the application process. Unlike other lenders, this is a hard credit check, and it will affect your credit score.

    Business Lines Of Credit

    Criteria

    Less than $100,000

    More than $100,000

    Minimum Credit Score

    None

    None

    Minimum Annual Revenue

    $50,000 or $4,200 monthly revenue over the last three months

    $50,000 or $4,200 monthly revenue over the last three months

    Minimum Time In Business

    12 months

    12 months

    The Kabbage Loan Application Process

    You will need to apply for Kabbage small business loans through its website. The application usually takes less than 10 minutes of your time. In this online process, you will be asked to provide information about your business and yourself, such as a business plan, credit scores, cash flow statements, and profit and loss statements. 

    Next, you will scroll to the "Instant Business Review" section. Here, you will provide the lender with access to your booking software or online payment platform such as PayPal. You can also choose to provide Kabbage with access to other business accounts such as Amazon, eBay, and Etsy.

    How Does Kabbage Determine Loan Amount?

    Firstly, during the application stage, the representatives at Kabbage perform a hard pull on your credit. The lenders usually never state a minimum cutoff, but they will examine your credit history to determine the risk and verify your identity. Kabbage has an algorithm that decides your fees and rates.

    So, it will probably only take a few minutes for Kabbage’s system to deny or approve your application. However, this process can take longer if the system faces issues with verifying your information. As mentioned earlier, Kabbage might also ask for additional information to offer you a more significant credit line. Kabbage will examine your transaction volume, monthly revenue, and credit score to determine whether you qualify for a loan and how much should be sanctioned to you. It also considers the loan term you’re applying for.

    So, your chances of approval also depend on whether the term lasts for 6, 12, or 18 months. 6-month loans are the most common, and the rates vary depending on the month. If approved, you can request financing and a Kabbage card to pay for services and goods, free of charge, directly from your credit line.

    Kabbage Customer Support

    Kabbage customer service has a help center on their website to answer many of your questions. However, since American Express’s acquisition, many of their help pages related to loans no longer work.

    Current customers can reach K Service representatives through email and telephone. 

     Kabbage Loan Reviews

    Trustpilot gave Kabbage an overall rating of 4.2 out of 5 stars based on over 7,000 reviews. Merchant Maverick rated Kabbage 4 out 5 stars. On the Better Business Bearue website, Kabbage received 3.52 stars out of 5 and did not have a rating.

    Their website also contains several testimonials. Positive Kabbage reviews often highlight the following:

    • The application process is quick and easy to get through. Many customers relay how they were able to complete the application within 10 minutes.
    • Customers appreciated the option to draw on their lines of credit whenever they needed it.
    • Reviews praised the support and service team, answering questions and walking them through the application process.
    • The Kabbage Debit Card is also highly revered among clients.
    • People find the website easy to navigate with useful tools like the payment calculator.

    Negative reviews centered on several common issues, including:

    • Customers complained about being rejected for a loan or line of credit.
    • Fees and rates were high.
    • The front-loaded fee structure meant payments were initially higher during the life of the loan.
    • A few complaints discussed a sudden loan limit cut. 

    Final Thoughts

    Kabbage fits a unique role by providing funding to low credit score applicants who would be rejected otherwise. To offset the risk, interest rates and fees are higher than similar lenders. 

    American Express has signaled an intent to fold Kabbage into their network going forward. They hope to leverage Kabbage’s platform and technology to add a suite of small business financing products to their portfolio soon.