In April of 2014, Kabbage announced that it secured an additional $270 million in financing, and that’s a relief to many small online businesses hoping to take advantage of the loans Kabbage provides to many who can’t get a traditional bank loan. Since 2011, Kabbage has already advanced $250 million to its more than 25,000 customers.
How Kabbage Works
The Kabbage Working Capital works is simple enough. To apply, you don’t need to pay an application fee. You just need to link any of your financial institutions such as your bank, Amazon, eBay, or PayPal to Kabbage, and you get your line of credit approved in seconds.
Your line of credit can be anywhere from $500 to $100,000 depending on your financials. You pay off your loan in just 6 months, and each month you need to pay off one-sixth of the loan plus the interest. In the first two months, the interest rate can be set anywhere from 1% to 13.5%. After that, for the remaining months the rate is fixed at just 1%. But there are no additional fees if you want to pay early.
Pros and Cons of Kabbage
In many ways Kabbage offers a lot of advantages if you’re running your own home business. For one, it’s easy to get the loan, compared to getting a loan from your bank. A bank loan can take quite a bit of time, and there’s a lot of paperwork involved. With Kabbage, getting approval is much quicker.
The line of credit is also much more convenient than a traditional loan, so you only pay interest on the money you actually borrow. It’s much like a credit card, except that the interest rate is obviously much lower with a Kabbage loan. Even if your financials aren’t solid, you can start with a lower limit and a higher interest rate, and then your limit may rise and your interest rate can go lower once you establish a pattern of paying off your debts in time.
Of course, the Kabbage loan isn’t for everyone. It won’t be much help for you if you need more than $100,000. Also, you may find that if you already have a business account with a particular bank, that bank may be able to offer you more money at even better interest rates and a longer time frame. With Kabbage, you’re limited to getting $100,000 at the most and you have to pay it all back in six months.
Finally, while the money transfer and payback is actually very smooth with Kabbage, you need to use PayPal. That may not be a feature that jives with your business preferences.
It’s all up to you whether or not a Kabbage Working Capital loan can help, but if you need a micro-loan of just a few thousand dollars, it offers a better alternative than a traditional bank loan or using your credit card. It’s very easy to get, the interest rates are reasonable, and you can use the money for things that are crucial to your business growth and development such as hiring new staff, buying inventory, and getting new equipment.