Review of Kabbage’s Business Loans
Many new and often struggling enterprises find themselves in need of short term operating capital in the first few years. Whether the cash is needed for inventory, equipment, payroll, or some other critical function; when the need for cash strikes, it is usually needed quickly. Many times, the business doesn’t have the resources, credit strength or credit history to obtain working capital loans through traditional lenders and the owners inevitably find themselves at the doorsteps of an alternative online lender.
In a search of short term business loans for working capital, Kabbage will always be among the top of the search lists online. With terms of six and twelve months Kabbage can provide the infusion of working capital quickly and with much less stringent requirements than a traditional lender. However, are business loans from Kabbage a net positive, a net negative or a mix?
Advantages of a Kabbage Business Loan
- Speed of Approval: As mentioned, often the need for short term capital strikes quickly due to a missed vendor deadline, an unexpected shortfall in sales or an unforeseen circumstance. Kabbage’s online application is fast and simple. And in many cases, you can be approved for a loan within a few days.
Access to the cash is also quick. While the rates are higher than a traditional lender, the speed of the application and access to the funds can be a positive trade off when time matters. The process is paperless and Kabbage connects directly to a checking account, PayPal account or accounting software. You can also connect other accounts if needed (such as Amazon, eBay or Square)
- Repayment Period: Short term business loans are just that, designed to cover a gap until a crisis has passed or until stronger ground is available after a holiday or product rollout when a product or service may scale. And with loan terms of six or twelve months, the repayment can be achieved in a short period without being a burden on long term cash flow.
- Credit Shortfalls: If a business hasn’t existed long enough to establish its own credit strength and the owners have issues with their personal credit histories, Kabbage loans can fit the need for many businesses. Most applicants using Kabbage do have personal credit histories above 500 but it can be an option for business owners with bad credit.
- Higher Rates: Kabbage’s fee structure and policies can result in an APR that ranges from In practical terms, if the loan means continuing operations, and the outlook down the road truly is positive; the higher rates, while burdensome, may prove to be a last resort that pays off.
Not all high interest decisions by businesses are bad. If the loan is needed to expedite a product from an overseas supplier in time for a critical holiday, or