Kabbage is a specialized provider of financial solutions for small businesses. Its funding options consist of a business line of credit program, which offers revolving credit to qualified borrowers. Kabbage also features a varied suite of other services, including checking accounts, invoicing support, and payment processing solutions.
As of October 2020, Kabbage has temporarily suspended most of its financial services and lending programs and is not currently accepting new customers. Interested parties can sign up to join a waitlist and will be notified when loans and other services become available again.
The reason for the change is that Kabbage has pivoted to serve the emergency needs of small business customers hit hard by the COVID-19 pandemic. It is mainly focusing on its paycheck protection and payment processing programs at this time.
In the meantime, let’s look at what you can expect from Kabbage once things return to normal.
Kabbage’s Loan Types
During normal operations, Kabbage provides small businesses with access to lines of credit. These valuable financial instruments are ideal for companies that need agile, responsive, on-demand solutions for occasional borrowing needs.
With a line of credit, the borrower can access loan funding in increments, instead of all at once as they would when taking out a term loan. Interest or fees are applied to the funds drawn from the line of credit, but only to the amounts actually borrowed. With a term loan, interest is applied to the entire sum.
Lines of credit offer significant borrower advantages:
- They provide a flexible funding solution
- They are usually less expensive, since you will only accrue interest or fees on the sum you borrow
- They are a great vehicle for building up your business’s credit rating
The following specifics apply to Kabbage’s business lines of credit:
- Borrowers can access up to $250,000 in funding
- Charges are fee-based rather than interest-based, and are calculated on a monthly basis
- Borrowers can make withdrawals through the Kabbage app, a dedicated account access card, or online
Because Kabbage has temporarily suspended its line of credit operations, its website does not currently contain detailed information about fees, charges, and repayment structures. However, authoritative external sources updated in October 2020 report that Kabbage’s usual fees range from 1.5% to 10% of the borrowed sum, calculated monthly.
Reviewers also note that Kabbage’s fee structure is fairly complicated, and the exact details will depend on your credit profile, how much you plan to borrow, your business’s operational track record and revenue levels, and other factors.
Eligibility Standards and Borrower Requirements
External reviewers who published profiles of Kabbage prior to the COVID-19 shutdown state that Kabbage maintains only two firm standards with regard to borrower eligibility:
- Your company must have been in continuous operation for at least one year
- The business must have overall annual revenues of $50,000 per year or monthly revenues of at least $4,200 for the past three months (consecutively)
Kabbage does not impose minimum credit score requirements. However, borrowers with strong credit histories typically gain access to higher credit limits and more advantageous fees and terms.
The Kabbage Application and Approval Process
Under normal circumstances, Kabbage allows prospective borrowers to apply online or by phone. You will need the following pieces of documentation in support of your application:
- A valid business tax ID number
- Your most recent business tax return
- Your Social Security Number
- Government-issued proof of identity for the principal borrower/company owner
You may also be asked to provide personal or business bank statements and/or personal tax returns. In addition, Kabbage will verify your monthly revenues through your online business bank account or PayPal account when you apply, so you will need to link these details to your application.
Kabbage works with borrowers in a wide range of industries. However, businesses that operate in the following sectors will not be eligible for a Kabbage line of credit when they become available again:
- Registered charities and nonprofits
- Financial institutions
Beyond these restrictions, eligible businesses based anywhere in the United States are welcome to apply once Kabbage returns to normal operations.
Pros and cons of Kabbage
Here’s what reviewers like about the Kabbage business model:
- Borrower requirements are very accessible, making Kabbage a strong option for newer companies and companies with modest revenues
- Financing of up to $250,000 can be made available quickly (during normal operations)
- Kabbage works with borrowers who have low credit scores and other challenges related to their business or personal credit histories
On the down side, there are a few specific drawbacks to keep in mind:
- The fee structure is complex and not very transparent
- Many reviews and customers state that Kabbage is a relatively expensive lender to work with
- You must have an online checking account or PayPal account to apply
In general, it is a good idea to compare multiple lenders and borrowing options anytime you are seeking business financing. This remains true of entrepreneurs and business owners considering a Kabbage line of credit.
What Others Are Saying about Kabbage
Kabbage has been accredited by the Better Business Bureau (BBB) since 2014. As of October 2020, the company has earned an average rating of 3.69 out of 5 from the BBB, which is excellent. The Better Business Bureau is well-known for generating average scores that skew toward the lower end because the organization primarily fields consumer complaints.
On Trustpilot, Kabbage shows a similarly strong performance record. As of October 2020, Kabbage had more than 6,600 Trustpilot reviews, with scores averaging 4.2 out of 5. Of those reviews, 83% gave Kabbage 5 out of 5 and 92% rated it 4 out of 5 or higher.
The Bottom Line
Kabbage’s fees are higher than borrowers would pay at traditional banks, but the company works with credit-challenged customers and others who typically have a hard time securing standard loans and lines of credit. In this regard, Kabbage compares favorably to other specialized alternative lenders.
In general, Kabbage is the best match for customers facing credit challenges or other obstacles to securing funding elsewhere. When the company returns to normal operations in the post-COVID-19 world, it is well worth considering if you are having difficulty meeting your small business financing needs.