As a business owner, you always have to be prepared for the unexpected. An emergency arises, a bill needs to be paid, youâre running out of inventory â¦ you get the picture.
Have you ever found yourself in a situation where you know you donât have enough funds to comfortably cover the expense? Have you struggled to deal with that knot in your stomach and a constant feeling of dread wondering how youâll get the capital you need? Youâre not alone.
Or maybe youâre facing an entirely different challenge: business expansion. Youâre ready to grow your business, but unfortunately, all of your funds are tied up in operational costs and other expenses. How can you expand your business and boost your revenue if you donât have the capital you need?
Fortunately, thereâs a solution when you need cash quickly: a small business line of credit. With a line of credit from an online lender like Kabbage, you donât have to worry about waiting for days (or even weeks) to get an approval from a lender.
KabbageÂ specializes in small business lines of credit up to $250,000. You can use your line of credit for any business expense, from buying supplies and inventoryÂ to paying a utility bill or covering payroll expenses. Kabbageâs flexible lines of credit can be used for emergency expenses or to expand your business.
If you have credit challenges, itâs no problem — Kabbage looks at the performance of your business when issuing approvals. Once youâre approved, you can immediately make draws from your line of credit, getting the money you need as soon as the next business day.
In this article, weâll do a deep-dive into Kabbage lines of credit. From the application process to withdrawing funds, weâll cover it at all to help you determine if your business should explore this financial path.
Apply For A Kabbage Line Of Credit
|Time In Business:||12 months|
|Personal Credit Score:||N/A|
|Revenue:||$50,000 per year (or at least $4,200 for the last 3 months)|
The first thing to do when applying for a Kabbage line of credit is determining whether you qualify. Most business owners will find that qualifying for Kabbageâs line of credit is much easier than qualifying for other financial products. To be eligible, you must meet two minimum requirements:
- Be in business for at least 12 months
- Have at least $50,000 in annual revenue orÂ at least $4,200 per month over the last 3 months
Because Kabbage issues lines of credit based on the performance of a business, there are no minimum personal credit scores required to qualify. However, Kabbage does perform a hard pull on personal credit during the application process.
Step 1: Business Information
Once youâve determined that you qualify, you can start the online application, which takes just minutes to complete. To get started, the application requests information about your business including:
- Business Name
- Business Address
- Business Phone Number
You will also enter your email address and set a password in this first step. This will be your login information for accessing your account on Kabbageâs website or mobile app.
Next, you will provide more information about your business. This information includes:
- Industry Type
- Company Structure
- Date Established
- Tax ID Number
- Annual Revenue
You will be asked if you own at least 75% of equity interest and have significant responsibility in managing the business.
Step 2: Connect Accounts
Next, you will connect to your bank account or business services so that Kabbage can review your transactions to see if youâre eligible for a line of credit. In this step, you add the bank or service with the most revenue transactions. You can add additional accounts and services later.
Kabbage can connect directly with multiple banks including Chase, Wells Fargo, Bank of America, BB&T, Capital One, and SunTrust, just to name a few. You can also connect business services including but not limited to PayPal, Stripe, Sage, Square, eBay, Amazon, and QuickBooks.
Step 3: Personal Information
Once youâve connected your account, itâs time to provide personal information to Kabbage. This information includes:
- Date Of Birth
- Social Security Number
- Phone Number
Once you input this information and hit âSubmit,â Kabbage will perform a hard pull on your credit. Remember, though, Kabbage focuses on the performance of your business — not your credit score.
Once Kabbageâs system analyzes your credit history and your account transactions, an approval decision will be made. Within minutes, youâll be able to see if youâve been approved for a line of credit. Once approved, youâll have access to the Kabbage Dashboard, which features your full credit limit and options for withdrawing funds. You can withdraw the full amount, or you can select the amount and terms that work for you.
One last thing to note is that Kabbage can automatically approve you for up to $150,000. Higher credit limits up to $250,000 require a manual review.
Review Your Rate & Borrowing Terms
|Borrowing Amount:||Up to $250,000|
|Draw Term Length:||6 or 12 months|
|Borrowing Fee:||1.5% – 10% of the borrowing amount per month|
|Effective APR:||24% – 99%
After youâve been approved for a Kabbage line of credit, you can use the Dashboard to initiate draws, view information about previous loans, see account details, and view or add linked accounts. Account details show the percentage of funds utilized, your next statement date, your next due date, and the minimum amount due.
To review your rates and terms, select an amount to borrow as if you were initiating a draw. If youâre borrowing $10,000 or more, you can select from 12-month or 6-month terms. Loans less than $10,000 can only be taken with 6-month terms.
Once youâve selected the amount and terms, Kabbage will provide a breakdown of your payment schedule. This schedule shows the date of each payment, the principal amount that will be paid, the rate charged for that payment, the fee amount, and the total amount due for each month. Below your monthly schedule youâll find the new loan amount, the total amount of fees you will pay, and the total cost of the loan including principal plus fees.
Kabbage also has a loan calculator on its website if you havenât yet applied. While you wonât know the specific fees, credit limit, and other details until you apply, this can give you an idea of whether or not this financial product is an option that will work for your business.
Kabbage provides you with a summary of your fees when you initiate a draw, but how is this calculated? The lender charges a monthly fee each month that you have a balance. Fees range from 1.5% to 10% and are based on the performance of your business. This monthly fee is added onto your principal balance, which is divided evenly across 6 or 12 months depending on the terms you selected.
As you pay down your balance, your fees will be reduced. For example, you may pay 3% for the first 6 months of your loan, then pay just 1.25% for the last 6 months. There are no prepayment penalties, so you can pay off early and save.
Kabbage is very transparent about its fees and your total cost of borrowing. On each loan agreement you make with Kabbage, you will find a SMART Box. The SMART Box provides important information including:
- Disbursement Amount
- Repayment Amount
- Total Cost Of Capital
- Annual Percentage Rate (APR)
- Average Monthly Payment
This gives you an overview of all of the details of your loan, so thereâs never any question as to how much you are paying to draw from your Kabbage line of credit.
Optional: Request A Kabbage Card
One of the things that makes Kabbage stand out from other lenders is its Kabbage Card. When you make traditional draws using the Kabbage website or app, funds are transferred immediately to your bank account, but this process may take 1 to 3 business days. What happens if you need instant access to cash?
With most lines of credit, youâre stuck waiting it out until the funds hit your business bank account. But with the Kabbage Card, you can immediately access your line of credit anywhere Visa cards are accepted.
The Kabbage Card allows you to simply swipe to make your purchases. Once youâve made a purchase with your card, a new 6-month loan will be created. This loan will have the same rates and terms as traditional draws from your line of credit. Kabbage does not charge additional fees to use the Kabbage Card, and your credit will not be affected.
All Kabbage account holders are eligible to receive the Kabbage Card and can receive it by simply logging into their account and requesting the card. Once received, the card is activated through the Kabbage Dashboard and can be put into use immediately to purchase inventory, supplies, pay a bill, or cover emergency expenses. You must apply for a Kabbage line of credit in order to be eligible to receive the Kabbage Card.
Withdraw Funds & Repay Your Loan
Once youâve opened your Kabbage line of credit, youâre eligible to take draws immediately. Through the Kabbage Dashboard, you can make a draw on your line of credit in just a few easy steps.
Select the amount youâd like to withdraw up to and including your total credit limit. If you select an amount of $10,000 or more, youâll be able to choose between 6-month and 12-month terms. If the amount falls under $10,000, only 6-month terms are available.
Once youâve selected your loan amount and terms, youâll be able to view your repayment schedule. If you approve of the repayment schedule, you can continue to review the loan. The next step will include reviewing the details of your loan and the linked bank account information. If everything looks good, e-sign the agreement and submit. You should then expect to see the funds in your checking account within 1 to 3 business days.
Kabbage makes it easy to repay your loan by using your linked checking account for ACH withdrawals on your due date. Youâll receive a statement each month approximately two weeks before your due date. On your Kabbage dashboard, youâll be able to view the date of your next statement, your next due date, and the minimum amount due. This amount will be automatically withdrawn from your business checking account on your due date.
You also have the option to make a manual payment to your account through the Dashboard. You can select the minimum monthly payment, the entire amount, or another amount. This is an option you can use if you would like to pay down your balance or pay your loan off early.
If you have more than one loan, you will still just have one monthly payment. You can learn more about each loan through the âDetails by loanâ tab in your Kabbage Dashboard. This provides you with an overview of each loan youâve taken, including the date it was drawn, the original loan amount, and remaining balances.
Kabbage lines of credit are ideal for business owners who want quick access to cash without a lengthy, difficult application process. However, it is important to note that these lines of credit do come at a cost. Monthly fees added onto your principal balance are steep when compared to low-interest, long-term financing options. However, if you need business capital quickly and without hassles, the return-on-investment may be worth the additional costs. Check out our full Kabbage review to learn more about this lender and its lines of credit.
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