Kabbage Review

All businesses need funding to stay afloat in the beginning, and small businesses arguably need it most of all. This is doubly true when a business hits a rough quarter or two, like practically everyone during the economic hardship brought about by the COVID-19 pandemic.

Yet anyone who’s clawed their way from a bad credit score to something approaching decent knows that securing business funding without a good credit score is next to impossible. While there are plenty of bad credit loans for personal needs, similar loans for small businesses are few and far between.

Kabbage is one of those few lending institutions that provide a path away from bankruptcy or insolvency, especially during a (hopefully) short-term crisis like the Coronavirus. They offer small business lines of credit without demanding a certain credit score threshold.

Sound too good to be true? Let’s find out in this detailed Kabbage review.

Kabbage is a short-term (and short-notice) small business loan provider. They offer loans of up to $250,000 without requiring a specific credit score. It’s primarily valuable to small business owners who don’t have great credit and who can’t get a fast cash infusion from other lenders.

Fast Facts

• Requirements: 1-year business + $50,000 in revenue
• APR: 20%-80% APR + fees each month
• Terms: 6-18 months
• Best For: Short-term bad credit business loans 
• Highlight: No credit score necessary for loan application

Ratings

• Loan Terms: 7/10
• Costs and Fees: 5/10
• Ease of Use: 8/10
• Funding Speed: 9/10
• Customer Service: 8/10
• Overall: 7/10

Visit Kabbage on Kabbage’s website

What is Kabbage?

Kabbage is an online small business lender that provides lines of credit and payment services to businesses without requiring minimum credit scores. More recently, they’ve offered nearly 130,000 PPP loans to help Americans impacted by the COVID-19 pandemic.

They offer short-term loans of up to $250,000 and take a detailed look at a business’s accounts and spending habits to determine loan eligibility. In exchange for their relative ease-of-application, Kabbage’s lines of credit come with hefty APRs and additional fees.

A Brief History of Kabbage

Based in Atlanta, Georgia, Kabbage is an automated online lending platform funded by a plethora of big-name financial institutions like Capital Partners, SoftBank Capital, UPS Strategic Enterprise Fund, and more. They were founded in 2009 but have since expanded to other North American cities and even international locations, including the UK.

They’re known for being at the forefront of fintech development and data-collection initiatives, and have partnered with high-profile market research firms like Bredin.

Who Owns Kabbage?

Kabbage is a privately held company and was cofounded by Rob Frohwein, Marc Gorlin, and Kathryn Petralia, all of whom still serve in executive positions within the organization.

How Many Employees Does Kabbage Have?

Kabbage reportedly has around 600 employees at the time of this writing.

How Does Kabbage Work?

As a small business lender first and foremost, Kabbage operates by taking applications from small business owners and evaluating them on a case-by-case basis.

They then determine who to give loans to, set up a repayment plan and term limit, and distribute funding through a variety of venues (i.e. PayPal, business bank accounts, etc.).

They primarily give out lines of credit to qualifying small businesses, but also offer ancillary services.

Is Kabbage a Direct Lender or a Networker?

Kabbage is a direct lender, with the exception of its PPP loans (detailed below), in which case it partners with banks to provide the available capital. 

Is Kabbage SBA-Approved?

Yes. Kabbage is approved by the US Small Business Administration, meaning they’re qualified to hand out PPP loans. This also results in expedited loan processing or faster loan decision-making for these loans.

How Does Kabbage Make Money?

Like most other lending institutions, Kabbage makes money by the accrued interest for its loans and the fees incurred every month.

Kabbage Compared

General

Estimated APR

20 - 80%

Varies (but known to be low)

Minimum credit score

560

Good to excellent

Loan term

6 - 18 months

Varies

Loan amount

up to $250,000

$5,000 - $100,000

Best for

Short-term bad credit business loans

Borrowers with good to excellent credit

Visit Kabbage on Kabbage's website

Visit LightStream on LightStream's website

General

Estimated APR

Varies (but known to be low)

• Term Loans: 7 - 30%
• Startup Loans: 7.9 - 19.9%

Minimum credit score

Good to excellent

550

Loan term

Varies

1 - 5 years

Loan amount

$5,000 - $100,000

$5,000 - $500,000

Best for

Borrowers with good to excellent credit

Small business loans

Visit LightStream on LightStream's website

Visit Fundera on Fundera's website

General

Estimated APR

20 - 80%

Varies (but known to be low)

• Term Loans: 7 - 30%
• Startup Loans: 7.9 - 19.9%

Minimum credit score

560

Good to excellent

550

Loan term

6 - 18 months

Varies

1 - 5 years

Loan amount

up to $250,000

$5,000 - $100,000

$5,000 - $500,000

Best for

Short-term bad credit business loans

Borrowers with good to excellent credit

Small business loans

Visit Kabbage on Kabbage's website

Visit LightStream on LightStream's website

Visit Fundera on Fundera's website

What Does Kabbage Offer?

Kabbage is known for two primary services: business loans and payment services. However, they’ve also begun offering additional loan opportunities in light of the COVID-19 pandemic. They don’t offer personal loans.

Small Business Loans/Lines of Credit

As mentioned, Kabbage is primarily known for its small business loans. Because Kabbage doesn’t demand particularly high credit scores or a lengthy review period, their small business loans can be excellent options for those who can’t find loans elsewhere or who need cash ASAP.

Kabbage doesn’t demand a minimum credit score to apply (though we’re sure that they have general credit score thresholds for determining APR and the like internally). Instead, applicants qualify for small business lines of credit by:

• being in business for one year
• having post annual revenue of $50,000

Having both of the above qualifications allows you to apply for a loan of up to $100,000. However, you can get small business loans of up to $250,000 with additional requirements. If your business is:

• at least three years old
• brings in over $500,000 in annual revenue

You might qualify for the upper loan limit. Kabbage ultimately determines what loan to offer you based on the above qualifications plus an evaluation of your business’ online accounts. 

Regardless, we appreciate that Kabbage almost always gets funding to its borrowers quickly – in many cases, you might even receive your loan within the same day.

This can be a lifesaver for small businesses that need a quick cash injection to avoid business-ending calamities, like eviction, licensure revocation, or other catastrophes.

You can get your money through PayPal if you want it ASAP, or you can link a business bank account. However, keep in mind that the latter option will result in it taking up to three business days to receive your funding.

What are the Interest Rates for Kabbage’s Loans?

The interest rates are definitely the biggest downside to Kabbage’s small business loans, though this is something of an expected trade-off given that they don’t require a minimum credit score for application.

On average, APRs vary between 20% at the low point and 80% at the high point, although Kabbage themselves put it a bit higher than average – 24%-99% to be precise. Obviously, these APRs are significantly higher than most other small business lenders out there.

It’s expensive to get a small business loan through Kabbage, no matter how attractive they might seem if you can’t get another loan elsewhere. This doesn’t even account for the additional fee policy (more on that below).

Furthermore, all of Kabbage’s small business loans are explicitly short-term lines of credit. These aren’t multi-year agreements to keep you funded over the long term. Terms are offered as 6, 12, or 18-month timeframes.

In this way, Kabbage’s small business loans can be valuable but are quite limited in their applicability to some thanks to their high costs and short timeframes.

PPP Loans with Kabbage

COVID-19 has thrown every aspect of the economy for a loop. The US federal government recently passed the CARES (Coronavirus Air, Relief, and Economic Security) Act to stimulate the economy and provide vital financial cushioning for many of its citizens.

But Kabbage has started its own Coronavirus relief efforts. They now offer Paycheck Protection Program, or PPP, loans through the US Small Business Administration.

As they’re SBA-approved, Kabbage is qualified to take loan applications for up to $2 million thanks to partnerships with banks. All of this is an effort to help small businesses make it through the economic hurdles they’re currently facing across the country.

There are PPP loan providers who can offer up to $10 million, however, so larger businesses often look elsewhere. The bright side? If you’re a smaller than average business and $2 million would definitely fit the bill, you might have fewer loan competitors going after Kabbage’s PPP loans.

These loans are much larger than the regular small business lines of credit Kabbage offers. Specifically:

• You can apply for loan amounts up to 2.5x your business’ average monthly payroll for the year preceding your application for the loan. So if you were to apply this year, you’d have to calculate your average monthly payroll for 2019
• Loan terms are offered over a two-year term, unless you meet loan forgiveness criteria
• APR rates are fixed at 1% or even lower depending on if you meet loan forgiveness criteria

These PPP loans don’t come with any other associated fees, and most small businesses or nonprofit organizations qualify for application. You can have up to 500 employees, be self-employed, or be an independent contractor.

What’s loan forgiveness? There are standard eligibility requirements for all PPP loans that could absolve you of repayment or of paying within the two-year timeframe. In a nutshell:

• 75% or more of the loan proceeds have to cover the payroll costs for your eligible employees over the first eight weeks after receiving the loan funding
• your employee counts and the compensation levels for those employees have to stay the same
• payroll costs are limited to $100,000 per year per employee

These loans are pretty tightly regulated, too, and for good reason. If your business doesn’t use the loan proceeds as required, your loan payments get deferred for six months and interest continues to accrue. Fortunately, though, there’s no penalty for prepayment – this makes Kabbage’s and other PPP loans great two-year cushions to help get your small business out of the current rut.

Kabbage Payment Services

Kabbage also offers services for businesses like invoice processing, card processing, and the creation of custom payment URLs for modern stores.

You pay 2.25% per credit card transaction at the time of this writing, which is pretty decent when you consider the ancillary features that come with these services.

For instance, Kabbage allows you to send professional invoices or use a custom pay link. This is a great feature for online businesses, as it allows owners to accept credit card payments instantaneously. Custom URLs will let customers purchase digital gift certificates between $15 and $500.

Furthermore, Kabbage ensures that you’ll get “next-day” deposits, so that money gets in your account faster. They even offer automated payment reminders.

In short, it’s a nice little secondary service. We think it’s something to consider if you do take out a line of credit with Kabbage, as it might be into and easier to organize if you have multiple payment functions connected to the same company instead of being split between multiple organizations.

Are Kabbage Loans Worth It?

Honestly, we’re a bit torn. There’s no doubt that there’s a lot of value in being able to request quite a significant line of credit for your small business even if you don’t have a great credit score. Small digital or self-run businesses can get a lot of assistance through these offers.

However, we’d strongly recommend considering how well you’ll be able to pay back the loan in the future. The costs are not cheap, and if your business is in a death spiral there might be better options for long-term recovery.

As with practically all lenders, Kabbage’s loans can be good… depending on how you use them.

How You Can Get Approved for a Kabbage Loan?

As with virtually every online lender these days, you can complete the application process entirely digitally. You will be asked to provide several key pieces of information relating to your identity and your business.

More specifically, you’ll need to give Kabbage read-only access to your business’s bank accounts. The more accounts you give them access to, the better your likelihood of receiving a larger loan if you need it.

You can link many of your different business bank accounts together, including your Amazon account, PayPal account, QuickBooks accounts, and more. Supposedly, all of Kabbage’s loan experts review all your information to determine your business’ worthiness for one of their higher loans.

Also like most other online lenders, an algorithm ultimately determines the loan you end up qualifying for. The entire application process generally only takes a few minutes, even with linking your various business accounts together.

Furthermore, if there are any discrepancies or questions, Kabbage’s customer service representatives will contact you for more information.

What Credit Score Do You Need for Kabbage?

As mentioned, you don’t actually need a minimum credit score for one of Kabbage’s small business loans. However, if your credit is less than perfect, keep in mind the top credit repair companies can usually repair credit relatively quickly.

Does Kabbage Do a Hard Credit Check?

Yes. Although Kabbage doesn’t demand a particular credit score, they do perform a hard credit check, so your credit score will take a slight hit during the application process. This is all to help Kabbage identify whether your business is worth the risk of a loan.

Kabbage PPP Loan Application

Applying for a Kabbage PPP loan can be done online and is largely similar to the regular small business line of credit application. You need to provide some more documentation for your business, including:

• a color copy of your government-issued ID for your business
• W-2s
• payroll statements if your business is seasonal
• organizational documents
• tax forms
• etc.

More details can be found right on Kabbage’s main website. There are a few differences based on what type of business you have.

Kabbage Costs and Fees

As mentioned above, the APRs you get with Kabbage’s small business loans are exorbitant, to say the least. But there are additional costs on top of these to consider.

Do Kabbage’s Loans Have Monthly Fees?

Yes, and you won’t save much money by paying your loan off early since Kabbage uses a monthly fee rate. The actual rate is determined based on your loan agreement, but this “borrowing fee” (called as such by Kabbage themselves) can be between 1.25% and 10% of your borrowing amount per month.

Basically, you get charged an extra fee based on the monthly amount of your total loan remaining. This does mean that the fees become more manageable as you theoretically get closer to the end of your loan and progressively pay it off. Still, this means that paying off your loans early won’t save you as much money as you might think.

Here’s an example:

• You borrow $100,000 from Kabbage with a six-month term
• You get saddled with a 10% fee each month
• The first month, you’ll have to pay another $10,000 in fees
• The second month, you’ll need to pay around $8000, and so on

Most of Kabbage’s loans are “front-loaded” for their fees. This means that you pay the majority of the associated fees for the first six months of your loan term, then pay 1% of the principal for any remaining months. This obviously only kicks in for longer loans like the 12-month or 18-month loans you might be offered.

As you can imagine, all those costs can quickly add up and make Kabbage even more expensive than it already often is.

The only bright side of all this (if it really counts) is that Kabbage doesn’t charge any additional fees, including draw fees, prepayment penalties, maintenance fees, and the like. They also offer a loan calculator on their website.

What We Like About Kabbage

There’s certainly a lot to like about Kabbage. Their easy application process and willingness to look at small businesses, even those without great credit scores, are admirable and necessary mobility tools for those looking to improve their lives one step at a time.

We’re also impressed at their willingness to take on PPP loans, which have certainly already helped hundreds of thousands or millions of Americans over the course of the COVID-19 pandemic.

That Kabbage is usually quite quick when it comes to funding its borrowers is also a nice touch to their services. Sometimes you need cash fast and that’s not a problem with Kabbage’s lines of credit.

One other bonus we like about Kabbage’s service is the Kabbage Card. You can request one of these free of charge whenever you set up a loan with Kabbage, and it acts as a credit card you can use to pay for things right from your credit line.

This makes it easy to spend the money you get from Kabbage ASAP for goods, equipment, or services for your small business instead of having to do the busywork of getting Kabbage’s money into your account, paying for your stuff from there, then repaying the loan over time.

When combined with the Kabbage checking account, it makes running your business and handling your Kabbage loan together much easier.

Where Kabbage Could Improve

While Kabbage does plenty of things well, it’s clear there are many places where it could improve as well.

For starters, its fee system is difficult to understand at best and outright expensive at worst. Expensive loans or repayment plans are bread-and-butter for bad credit loans or lines of credit, but there are definitely lenders that have better offers when all is said and done (like MoneyMutual).

What’s worse is that the fee system removes the incentive to repay your loan early. If you’re responsible and get your business back on its feet, it’s practically useless to knock on your loan ahead of time because of how costly those extra fees are, especially since they are front-loaded toward the first six months of your term.

We also think that the hard credit check is, while perhaps necessary from their point of view, not great for the credit score’s owner. If you already have bad credit, Kabbage knocking your score down another few points won’t help matters, even if it does net you a hefty loan in the end.

Lastly, Kabbage could be a little more agreeable if it offered longer terms for its loans (not counting PPP loans). Overall, though, we think Kabbage does have a place in the lender sphere. With the right payment discipline, and if your business can definitely recover with a cash injection, they might just be right for your needs.

Summary

All in all, Kabbage offers some of the easiest-to-access small business loans. They may be a worthwhile option if your small business is struggling and you need a loan, but don’t have the credit score to secure funding elsewhere.

Kabbage and the Competition

See how Kabbage compares to the top lending platforms by reading one of the reviews below.

• Payoff Review
• Prosper Loans Review
• LightStream Review
• MoneyMutual Review
• Fundera Review
• SoFi Lending Review

About the author

Tim Fries

LinkedIn Email

Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.