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Kabbage Review: Best Alternative Lender for Lines of Credit

Our 2017 research and analysis of alternative lenders leads us to again recommend Kabbage as the best alternative lender for small business lines of credit. We chose Kabbage from dozens of alternative lenders. To understand how we selected our best picks, see our methodology and a comprehensive list of alternative lenders on our best picks page.

Kabbage's automatic online approval process and easy repayment terms set it apart from many of its competitors. Here is a breakdown of why Kabbage is our best pick.

While many alternative lenders make you go through a lengthy application and underwriting process, application and approval for Kabbage is completed almost instantly, and totally online.

To get started, you first provide some basic information about your business, including:

  • Business name and address
  • Company structure
  • Tax ID number
  • Industry type
  • Month and year established

Instead of sending in financial statements, such as tax returns and debt structures, you link your application to a business checking account or other online service that you use, such as QuickBooks or PayPal. Kabbage's platform automatically and instantly reviews the data on those sites to determine if you meet Kabbage standards for a loan. The company looks at this information to determine your average monthly revenue, time in business and transaction volume, among other things.

The banks and online services you can connect with are Chase, Bank of America, Wells Fargo, PNC, U.S. Bank, Regions, BB&T, TD Bank, USAA, Citibank, Capital One, SunTrust, Navy Federal, BBVA Compass, Fifth Third Bank, PayPal, Authorize.Net, Stripe, Sage, Square, eBay, Shopify, Yahoo, Amazon, Etsy, Intuit QuickBooks, Xero and Fuelman.

As part of the approval process, Kabbage allows you to link your application to a business service you already use. Kabbage's platform automatically reviews the data to determine your eligibility.

Editor's Note: Trying to find the business loan that's right for you? Fill in the questionnaire below and you will be contacted by our partner alternative lenders who will help you find the right loan for you.  

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After conducting a quick analysis of your data, which also includes a personal credit check, Kabbage quickly lets you know if you've been approved for a line of credit, and if so, for how much. The process typically takes only several minutes to complete. Once approved, you have instant access to your loan. You can also link additional services to your account to potentially increase your line of credit.

Kabbage does note, however, that in some situations errors may occur during the sign-up process, or the service may need to send micro deposits to confirm your bank account for security purposes. In these cases, you may not have access to your loan for several days.

Since every business has a different financial makeup, it's impossible for us to say exactly what it will take for you to be approved for a line of credit with Kabbage. Your financials, such as monthly revenue, transaction volume and credit score, play a large role in determining not only whether you get a loan, but also for how much.

However, in order to even be considered, there are two minimum requirements you need to meet. You must:

  • Have been in business for at least 12 months
  • Have a minimum of $50,000 in annual revenue or $4,200 per month over the last three months

What separates Kabbage from many other online lenders is the minimum amount of revenue the company requires before it will consider you. For many of the other lenders we looked into, the minimum revenue requirements were at least double what Kabbage requires.

Kabbage also looks at your Experian credit score when deciding whether to give you a loan and determining the term rate you will receive. Typically, your score has to be at least above 550 to be approved.

A Kabbage line of credit works more like a credit card than a traditional loan: You use only what you need and pay fees on only how much you actually use. For example, if you're given a $20,000 line of credit, but only use $10,000, you pay fees only on the $10,000. With Kabbage, you can draw money against your line as often as once per day.

The company offers lines of credit of between $2,000 and $100,000. Each draw against your line of credit is considered a separate loan. Each time you take one of those loans, you have six or 12 months to pay it off. The 12-month repayment term is a new addition to the Kabbage service.

To make the payment process easier, Kabbage combines all of your payments into one due date each month. What's nice is that there are no early payment penalties, which some of the other lenders we considered charge.

Instead of paying interest as you do on other loans, you pay monthly fees. You pay anywhere from 1.5 to 10 percent of your loan for the first two months of a six-month loan or six months of a 12-month loan. There is a standard 1 percent fee for the remaining months of the loan.

Other than the monthly fees, there are no added costs for a Kabbage line of credit. Nearly all of the other lenders we considered charged at least an additional origination fee.

Kabbage does not impose any limitations on what your loan can be used for. One month, you might need to buy inventory, while in another, you might need to build a new website. How you use the money is totally at your discretion. Some of the other lenders we looked into wanted to know specifically what you were going to spend the money on on as part of the approval process.

Kabbage is also one of only a few lenders with a mobile app. Using the app, you can draw money from your line of credit, make loan payments and view your transaction history.

We were very pleased with the level of customer service we received from Kabbage. To test the type of support customers can expect, we called the lender several times posing as a business owner interested in a loan.

During our initial call, we were quickly connected to a customer support agent who was able to answer all of our questions. Rather than grilling us on what type of loan we wanted or how much money we needed — which many of the other lenders we called did do — the Kabbage representative made sure all of our questions were answered first.

During that first call, we discussed a range of topics, including the application process, the type of online services we could link to, what the money could be used for, the minimum requirements needed for a loan and the repayment process. On subsequent calls, which were also answered promptly by helpful representatives, all of our questions were answered in enough detail that we were left with a clear understanding of how the Kabbage loans work.

At no time during any of our calls did the representatives pressure us to start the application process immediately. Many of the other lenders we spoke to tried to get us to apply for loans during our calls.

We were also impressed with Kabbage's online help center. In addition to an easy-to-understand FAQ section, there are a number of help videos that describe the entire process. These videos show customers how to use the online portal, how to withdraw money from their lines of credit, how to make payments on their loans and how to connect their accounts with various online services. Most of the other lenders we examined lacked such an extensive video library.

Kabbage offers an extensive help center with valuable FAQs and videos that explain the entire lending, application, approval and repayment processes.

You can contact the Kabbage customer support team via phone, email and a form on the company's website.

One downside of Kabbage is the short amount of time you're given to pay back your loans. While the company recently started offering a 12-month repayment term, not all borrowers qualify for that option. Those who don't will have only six months to pay back their loans. If you are looking for longer loan terms, consider our best alternative lenders for working-capital loans: Fundation.

We also found a handful of complaints about Kabbage that were filed with the Better Business Bureau (BBB). According to the BBB website, there were 33 complaints filed against Kabbage over the past three years, six of which were resolved to the satisfaction of the complainants. Although Kabbage addressed the other 27 issues, the consumer did not accept the response, or the BBB has not heard back from the consumer as to their satisfaction. It's important to note that nearly all of the alternative lenders we reviewed had some criticisms levied against them with the BBB. You can read more about the specific complaints on the BBB website. Despite the complaints, Kabbage is an accredited member of the BBB, with an A+ rating.

Ready to choose an alternative lender? Here's a breakdown of our complete coverage:

Editor's Note: Trying to find the business loan that's right for you? Fill in the questionnaire below and you will be contacted by our partner alternative lenders who will help you find the right loan for you.  

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Chad Brooks

Chad Brooks is a Chicago-based freelance writer who has nearly 15 years experience in the media business. A graduate of Indiana University, he spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including, local and state government, crime, the legal system and education. Following his years at the newspaper Chad worked in public relations, helping promote small businesses throughout the U.S. Follow him on Twitter.