Kabbage Review

Written By Jeff Hindenach
Last updated November 27, 2019

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August 10, 2016

Simple. Thrifty. Living.

Kabbage, one of the more popular loan services with small business owners, specializes in providing quick funds for new companies that lack the assets and annual revenue to qualify for traditional lending. Kabbage works like any other of the best online loans sites, except they don’t really give out loans, they approve your business for a line of credit that you can then borrow against, just like a business credit card.

Kabbage Review

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  • Price: Kabbage offers lines of credit at business loan rates between 1.5 and 10 percent.
  • Qualifications: Your business will need to be at least a year old and have at least $50,000 in annual revenue or $4,200 in revenue each month for the last three months to get a Kabbage loan.
  • Loan Amount: As a line of credit, there is no minimum amount, but the maximum is $150,000 per line of credit.
  • Application Process: Simply fill out the easy online application for Kabbage and you’ll have a response within minutes. Once you’re approved, there’s no obligation to actually use the line of credit.

How to get approved: The most interesting thing about Kabbage loans is their approval process, which can happen in minutes. (Click here to apply).To qualify, small businesses must have a one-year history of operation, $50,000 annual revenue and an active social media presence. Instead of filling out stacks of forms, the online application process requires granting Kabbage read-only access to bank accounts, QuickBooks and applicable e-commerce channels, such as eBay, Etsy, Amazon, Square and PayPal, by which the lender’s automatic software reviews your average monthly revenue, transaction volume and business activity. Monitoring these metrics — online sales and shipping history, customer interaction via social media, and accounting files — allows Kabbage to determine whether your business is a good credit risk. With less stringent requirements for loan approval, Kabbage loans makes it easier for startups and home-based businesses to be able to afford to grow their businesses.

Keep in mind that for business funding, most lenders will require a personal credit profile to be tied to the business loan. This means that your credit score will also help determine your eligibility. One of the best credit repair services can help you if your credit is not the best.

How much can you get: Loans amounts range from $500 to $100,000, although these are really lines of credit from Kabbage that you can borrow against. The amount of your line of credit is determined by a variety of factors, including your seller rating, time in business, transaction volume and average revenues. As you pay back smaller loans, you can get approved for more credit, which is a great incentive for those who need more money but can only get approved for smaller loans.

How long do you have to pay it back: This is another great part about Kabbage. The service gives you a piggy bank of capital which you can borrow against whenever you want. So if you get approved for $20,000, but only need $5,000 now to finish a project, you can borrow $5,000 and then have six months to pay it back. All loans are on a six-month basis. You pay 1/6 of the loan every month. As you borrow, your credit limit goes up, so $20,000 will not always be your limit.

How much is the interest: Another cool part about Kabbage is that interest rates (which they call fees) only fluctuate for the first two months from 1%-13.5%, depending on your credit, and then are only 1% for the four months after, so you aren’t paying a ton on interest.

How to get the money and make payments: Kabbage works through PayPal to fund your business account and help you make payments. Although PayPal can usually charge for transferring money or making payments, Kabbage has worked out a deal where you won’t be charged anything for doing all of your financial business with Kabbage through PayPal.

The Pros

  • Easy application process
  • Quick approval
  • No hidden fees
  • Manageable monthly payment plan
  • No minimum credit score
  • Best for business owners building credit

Simplicity is the key to using Kabbage. The application process is fast — applicants find out within minutes instead of days to learn about approval and loan amounts. Upon approval, funds are transferred to the customer’s preferred bank or PayPal account for easy access. While you have access to the full loan for the duration of the loan term (six or 12 months), you only pay for what you use, plus a monthly fee. Kabbage is best for small business owners looking to build credit. Women and veteran business owners are also encouraged to apply for loans.

The Cons

  • Low capital
  • Short loan terms
  • Location restrictions
  • Unclear terms
  • Unexpected withdrawals
  • Complicated fee structure

The tradeoff for convenience is confusion. The Kabbage website is unclear regarding specifics about access to funds, loan fee structure and penalties for missed payments. Some things are out of Kabbage’s control — access to funding may take several days, depending on the rules of your banking institution. Some banks can take several days to process large transfers of funds.

The percentage of loan fees can range from 1.5-12 percent per month, but Kabbage’s fee structure has customers paying a larger percent of fees in the first two months of loan payments. These front-loaded fees means there’s no financial benefit to paying off the loan early. Kabbage’s short loan terms mean you’ll have to employ those funds and pay them back quickly.

If you’re using funds for renovations or manufacturing and face delays, you could be penalized. If you are delinquent in payment, Kabbage is legally permitted to pull money from your account without notification. The lender also keeps track of your cash flow, so if your business weakens during your loan term, Kabbage may reduce your borrowing limit or cut your line of credit.

For small businesses operating outside of the U.S., Kabbage is U.S.-based lender and requires businesses to operate within the United States for at least one year prior to application.

An online lending service that offers quick loans with minimal hassle seems too good to be true, but Kabbage loan reviews show users as seemingly satisfied with their results. Since joining the Better Business Bureau in January 2014, Kabbage has maintained an A+ rating as a BBB Accredited Business. Of the 34 complaints registered with the Better Business Bureau, most were about billing and collection issues.

Kabbage has a Net Promoter score of 75/100 — which indicates positive word of mouth and customers’ willingness to recommend the loan service — and an a 9.1/10 rating on TrustPilot, with 81.3 percent five-star reviews. The majority of users find Kabbage quick and easy to use, with a user-friendly website and mobile app and excellent customer service. Some users report technical issues with identity verification and banking connectivity in the application process.

Kabbage’s customer service gets rave reviews for being helpful, courteous and knowledgeable. Most of the complaints are generally related to high monthly payments and the front-loaded fees and not specifically about the lending service itself. Overall, customers praise Kabbage for its speed, minimal need for paperwork and convenience of use.

When Kabbage launched in 2009, it was one of the first alternative lending services on the scene in a shaky economy. Now the alternative lending industry is on the rise, and Kabbage has plenty of competition. Other popular non-bank lenders, specifically OnDeck, Dealstruck and IOU Financial, operate like Kabbage by using software to automatically review loan requests within minutes and provide customers with a quick line of credit.

OnDeck and IOU Financial offer larger loans with more flexible terms but requires annual revenue of more than $100,000 and a favorable credit score. Here is our full OnDeck review. Many lenders require weekly — or even daily — payback of loan use, where Kabbage allows monthly payback. Kabbage has partnerships with services that are frequently used by small businesses and offers free trials of these services, such as UPS shipping, e-commerce solutions and tax resources.

The terms and conditions vary from lender to lender, so you’ll want to compare to find one that suits your specific business needs. See our review of Credible here. If your company just needs a modest boost in funds, Kabbage loans could be the right solution for your small business.

About the Author

Jeff Hindenach

Jeff Hindenach is the co-founder of Simple. Thrifty. Living. He graduated from Bowling Green State University with a Bachelor's Degree in Journalism. He has a long history of financial journalism, with a background writing for newspapers such as the San Jose Mercury News and San Francisco Examiner, as well as writing on personal finance for The Huffington Post, New York Times, Business Insider, CNBC, Newsday and The Street. He believes in giving readers the tools they need to get out of debt.

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