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A Review of the Kabbage Line of Credit

Many people know of Kabbage as an alternative lender dispensing business loans.  But Kabbage also has a line of credit that can be used in place of a business loan.  If your needs are variable month to month in terms of purchasing, inventory, payroll, etc. then the Kabbage line of credit may be a good option to assure you have funds available and not overspend.

Getting Started

The process of acquiring a line of credit from Kabbage is the same as the requirements for getting a business loan.  The application takes only minutes, is entirely web based and is one of the things that set them apart from other lenders.  The application process requires some key information to get started:

  • Business name and address
  • Taxpayer ID number
  • Industry
  • Month and year established

Once Kabbage has this information, they ask you to link your bank account and other online accounts and services such as PayPal, Amazon, and even your accounting platform.  From this information Kabbage determines monthly revenue and length of time in business.

The actual minimum requirements you must meet are:

  • Having been in business for twelve months or more.
  • Have a minimum annual revenue of $50,000 or $4,200 a month in the last three months. This is a distinct advantage for Kabbage compared to other lenders because it is a much lower amount of annual revenue and therefore more small businesses are eligible.
  • 550 Credit rating or higher.

The approval for the line of credit is determined from the above information.  In most cases, once approved, you have access to your funds almost immediately.  Because of this method of application and approval Kabbage has one of the most user friendly and painless application processes available.

Using Your Funds

The Kabbage line of credit can be an expensive option cost wise.  However, outside of the fee structure there are no other hidden fees and accessorial charges.  Kabbage cleverly considers each draw against a line of credit as a separate loan.  And each draw for one of those “mini-loans” results in either six or twelve month’s paybacks, depending on what was applied for and approved.  However, they will roll all of those draws into a single monthly payment mitigating cost with convenience.

The line of credit offered by Kabbage ranges from $2,000 and $100,000.  But you only pay fees on the amount used.  If your business has variable needs in terms of monthly expenditures, then a line of credit can reduce your monthly expenditure and help control costs.  There are also no restrictions on what the cash can be used for.

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Please Hold for…

Kabbage has invested a lot into their customer service.  They have a clear, concise and easy to follow FAQ section and a selection of videos to answer many questions.  They also offer multiple ways to connect including phone, form and email.  And for those seeking conversation with an actual person, the customer service reps are reported to answer all questions first before pushing the upsell on a loan.  While there are a few complaints against Kabbage with the Better Business Bureau they have maintained an A+ rating.  Over 80% of the issues filed in complaint with the Better Business Bureau have been resolved.

Negatives

  • Kabbage can offer quick cash at a lower net revenue requirement than other lenders. One of the biggest negatives is the length of the term. Kabbage only offers six month terms for many and twelve for qualifying borrowers. If you are unable to meet the six-month repayment terms then despite the advantages of simplicity and flexibility in spending, the line of credit will not do you any good. If a longer-term loan is desirable or required there are other lenders who may be able to provide a loan or line of credit at terms longer than twelve months.
  • A Kabbage line of credit can also affect your future borrowing power. Kabbage does a hard pull of credit on the front end of the application process. This has an initial effect on your credit score, many of whom already have credit issues. But the ripple effect extends beyond this in that Kabbage does not report to credit agencies. This means that if you pay all your line of credit, or your Kabbage business loan, the lack of reporting to credit agencies will have had no positive effect in building a higher credit score to restore your credit to a level where traditional lenders would accept you as a borrower.

If you have variable cash needs from month to month and can handle the outlay in terms of monthly payments, then a Kabbage line of credit may be a good short term choice.  With the flexibility of paying for only what you use it could make the difference in your choice of lenders in the short term.