Kabbage, an Atlanta-based online lender, provides revolving lines of credit to business owners who need ongoing access to small amounts of funding.
Eligible borrowers can use financing from a Kabbage line of credit to cover nearly any business expense, such as purchasing inventory, hiring more staff, upgrading equipment and more. Kabbage is a good fit for business owners who may have trouble qualifying elsewhere — however, the tradeoff of no minimum required credit score is hefty fees, even when compared to other online lenders.
|Amount||Terms||Monthly Fee||Time to Funding|
|Line of credit||$1,000 to $250,000||6, 12 or 18 months||1.25% to 10.00%||One to three business days|
Business lines of credit between $1,000 and $250,000 are available from Kabbage. Borrowers can withdraw money from their credit line as needed, starting at $500 up to their limit. After making a withdrawal from your Kabbage dashboard on your computer or phone, funds would be deposited in your bank account in one to three days, and even faster if you set up a PayPal account as your primary account. Kabbage also offers a credit card and an app for iOS and Android as additional ways to make withdrawals.
Every time you draw from your line of credit, Kabbage creates a new loan agreement. Each withdrawal amount has its own repayment terms and fees; that way, you only pay fees for what you borrow, not your entire credit line. In addition, you aren’t limited to a certain amount of loan agreements, only by the amount of your line of credit.
Since Kabbage’s line of credit is revolving, the full credit amount would become available as soon as you repay your debt.
Withdrawals must be repaid on a 6-, 12- or 18-month schedule. Kabbage charges a monthly fee ranging from 1.25% to 10.00%. Each month, you would owe an equal portion of your principal amount plus a monthly fee.
Six- and 12-month terms require borrowers to pay a fee each month you have a balance. For 18-month terms, fees are accrued at the start and borrowers must pay an equal portion of the fee and principal each month.
Each repayment term requires a minimum withdrawal amount:
Kabbage allows early payoff for the six- and 12-month schedules, but not for 18-month terms. The rate also changes when you’re on a six- or 12-month term. For a six-month term, you would pay the full fee rate — which is based on your business details, such as revenue and credit profile — for the first two months. Then, the fee rate would drop to 1.25% for the remaining four months. For a 12-month term, you would pay the full fee rate for the first six months, then pay 1.25% for the remaining six.
Here’s an example of the fee amount you would pay if you made a $10,000 withdrawal from your line of credit and received a 4% fee rate and a six-month repayment term:
|Months||Rate||Principal Balance||Monthly Fee|
|1 – 2||4%||X||$10,000||=||$400||$800|
|3 – 6||1.25%||X||$10,000||=||$125||$500|
Based on the example, taking out $10,000 from your credit line would ultimately cost you $1,300 in fees. You would repay a portion of your principal each month, plus the monthly fee. But that same $10,000 withdrawal could cost you as much as $2,500 in fees if you received the highest monthly rate of 10%. Effective APRs for borrowing through Kabbage can be quite expensive, especially for larger amounts — as high as 80%.
|Time in business||Min. credit score||Revenue|
|Line of credit||1 year||None||$50,000 annually or $4,200 monthly in the last three months|
Kabbage requires just one year in operation to be eligible for a line of credit. Businesses must also generate at least $50,000 in annual revenue or $4,200 in monthly revenue in the most recent three months.
Kabbage does review applicants’ credit, but there is no minimum credit score required to be eligible. Instead of focusing on credit history, Kabbage reviews many aspects of your business, such as your business checking account, payment processors and accounting platforms, to determine its overall financial health.
To share more information with Kabbage, you could connect business services to your application, including:
Kabbage asks applicants for basic business information, such as name and address, but you may need to provide additional documentation:
Kabbage does not issue lines of credit to businesses in several industries:
Based on Kabbage’s minimum requirements, startups or businesses that do not consistently generate revenue also would not qualify for a line of credit.
Does Kabbage offer small business loans? Kabbage offers a line of credit, even though its website may refer to its product as Kabbage loans. A line of credit allows you to draw money as needed from a set amount, while a loan provides a lump sum of money all at once. Kabbage treats each withdrawal from your credit line as an individual loan and creates a new loan agreement every time. Each withdrawal amount has its own repayment terms and fees. You could read more about the differences between a business line of credit and a loan.
Is Kabbage a direct lender? No, Kabbage does not directly lend to business owners. Celtic Bank, a Utah-chartered bank, funds Kabbage lines of credit.
Can I return funds? You can return unused funds within 24 hours of making a withdrawal. If you wait more than 24 hours to contact Kabbage, you would be responsible for repaying the full principal amount plus the first set of fees applied to your account.
Does Kabbage require a personal guarantee? Yes, business owners must provide a personal guarantee when signing a loan agreement. Signing a personal guarantee would make you personally liable to repay debt if your business defaults. In some instances, Kabbage may place a general lien on your business assets to secure the line of credit. That would give Kabbage the ability to seize those assets if the business defaults on payments.