As one of this year’s SBA-approved PPP lenders, Kabbage has received an onslaught of poor reviews recently, essentially pulling their trust score down quite a bit in a very short time. Now, you’re probably asking if you should believe what you read. Is Kabbage a legitimate lender? And, should you leverage their financial services for your business?
After you read this, you’ll be able to answer these questions with confidence. Here’s what’s in-store.
What is Kabbage?
While the platform is known for its small business funding, all Kabbage lending has been temporarily suspended for new and existing customers. While many companies across the globe were forced to close indefinitely in response to COVID-19, Kabbage chose to suspend their offer.
So, if you can’t access their core funding offer, what are you doing here? Well, the brand now offers several other business financial services. Let’s explore what’s up with Kabbage’s checking, payments, and financial insights platforms (accessible from one dashboard).
Kabbage Checking
Where there once were lending opportunities, you’ll now find earning opportunities.
Kabbage Checking offers FDIC-insured banking with 1.10% APY earned on funds, which they declare is the best deal you’ll find. I had my doubts about this claim, so I did some digging. Here’s how Kabbage compares to current checking account offers from some of the best business credit unions I know of.
To my surprise, Kabbage stacked-up well next to some of my favorite institutions. But, they don’t have the “best” offer. Consumer Credit Union, for example, offers nearly double APY or more on checking account balances up to $10K for those who use their debit card at least 12 times per month.
So, while it’s a good deal, it’s not the best out there. But, APY earnings may balance out against the competition for some companies who don’t plan to use their business debit card often.
Note: None of the above checking accounts demand monthly fees nor do they have minimum balance requirements. When you shop around for a business checking account, keep this in mind.
Kabbage Payments
Next on the list of financial services to leverage here is an online payment platform. Invoicing with Kabbage Payments costs 2.9% + $0.25 per transaction, which is five cents less than major competitors.
The invoicing cost is competitive. And, the platform offers email or web link billing. Also, you can leverage next-day deposits on eligible transactions. Any payments processed on the platform before 5 pm will be sent to your bank by the next business day at no additional cost.
Another promoted service within the payments platform is a unique URL where you can sell gift certificates from $15 to $500.
As with most online payment platforms, you will be asked to share your social security number when signing up (a sign that these financial services are not likely to help build your business credit).
Kabbage Insights
I might compare Kabbage Insights to Quickbooks. While it does deliver visual reports, it’s basically an accounting platform.
Theoretically, you can see all of your accounts in one place and start to get a clear understanding of your cash flow and revenue.
You do not need to use Kabbage checking or invoicing to use the insights feature, but I suspect you will receive more detailed insights if all of your accounts are connected.
Easily, you can link the system to your bank account including various smaller credit unions and community banks. While the dashboard claims that Kabbage Insights can be connected with PayPal, I wasn’t able to do so. Nor could I connect with Stripe.
These integrations aren’t necessary as long as all transactions are processed through your connected business bank or credit union accounts. But, it would be more convenient if they were to provide these options.
The Resource Center
Kabbage’s Resource Center is essentially just a blog with financial advice for business owners.
The articles here are pretty useful, easy-to-understand, and worth a look. Chances are, you’re likely to find helpful information here, whether a majority of Kabbage’s staff stays on furlough or not.
Kabbage Yesterday, Today, and Tomorrow
Launched in 2009, Kabbage was founded as an automated lending platform. By 2017, the company had grown to a net worth of $200 million, establishing itself as a leader in the business working capital corner of fintech.
Kabbage’s core offer included quick, easy loans with low credit requirements. The fees were transparent and small businesses could get approved for lines of credit up to $250K at a time. Most loans were extended within just a few days, making this a convenient option for companies that needed quick cash for their operations.
On the downside, the fixed-rate fees could be pretty steep, ranging from 24-99% APR. Early repayment didn’t save borrowers on interest, long-term repayment options were unavailable, and only companies with online checking or PayPal were approved by verifying cash flow.
With the onset of Coronavirus in March 2020, Kabbage furloughed workers and the situation looked bleak. Then, they began processing PPP loans, which ended up helping the company get back above water.
Recently, it was announced that American Express acquired Kabbage whose loan funds used to come from Celtic Bank. If the brand does offer working capital in the future, it will most likely come directly from Amex itself.
We’ll just have to wait around to see.
Kabbage Business Loan Pricing
Despite the fact that business loans are the core offer that has been temporarily suspended, it’s pretty important to understand how Kabbage funding works. The key to deciding if a working capital option like this one is right for you is to understand repayment terms.
So, if a business gets a loan from Kabbage, they will repay the funds over 6, 12, or 18 month terms. These loans have APRs that range between 24% and 99%. Each month, the borrower will repay a portion of the principal owed plus an additional 1 to 10% of the total funds toward the interest.
As with most loans, the interest you pay will be higher during the first portion of repayment. For example, a six-month loan requires 10% interest in addition to the principal payment for the first few months. After that, the interest amount decreases. Sadly, borrowers do not get a break for early repayment.
PPP Loans via Kabbage
In response to the US Stimulus bills passed in 2020, Kabbage offered Paycheck Protection (PPP) loans. After August 8, 2020, the Small Business Association (SBA) is no longer accepting new applications. So, you can no longer apply for one of these loans with Kabbage or anyone else.
While the brand seemed to leave some small business applicants unsatisfied, let’s be fair — nobody knew what they were doing as this was an unprecedented time for everyone. Furthermore, Kabbage was the second largest provider of PPP loans in the nation by application volume.
So, I would try to cut their reputation some slack. And, if there’s ever a similar round of funding offered, my guess is that the staff at Kabbage will know better than anyone else what not to do.
Final Summary
Right now, Kabbage’s desktop web app and mobile app both seem a little wonky. I’m assuming this is because they’ve furloughed staff and cut back on their service offer for the time being.
There’s no telling when and if they may offer their core loans again, as this will likely be dictated by the global economy as we rise back up from the effects of the Coronavirus. In the meantime, if it’s relevant for your operations, I would check out Kabbage Payments because the low transaction fees are great.
As far as the business checking accounts and insights platform are concerned, I would recommend going with more established solutions — at least until Kabbage revamps their offer (I wouldn’t expect this to happen until at least winter or possibly even Spring, 2021).
Kabbage is a legitimate FDIC-insured lender with an eleven-year track record of delivering convenient financial services to small businesses. If and when they reopen their doors for business funding, they are likely to come up with something fresh, unique, and trustworthy.
In the meantime, explore your other options. And, if you’re interested in learning how to obtain up to $100K in business credit in as few as 30 days, start here!
