The need for fast cash is often so great in small businesses that they forget it can come with a hefty price tag. This is evident in the success of business lenders that revolve around the ability to approve and distribute small business loans in 24-48 hours. Many of these lenders promise fast cash with little requirements, an offer so tempting that borrowers don’t bother thinking about how the terms of the financing will impact cash flow.
Just a little research would tell them there are many options for fast cash in today’s alternative business financing universe. Arguably the most prevalent example of one such lender is the online sensation Kabbage.
Applying In The Blink Of An Eye
The convenience of Kabbage’s application may very well be unrivaled. A minimum personal credit score is not required, but a score of at least 500 is preferred. Borrowers must be in business for at least one year and have an annual revenue of at least $50,000. Instead of providing paperwork, borrowers simply connect Kabbage with their business checking account, bookkeeping software or online payment platform such as PayPal or Quickbooks.
And that’s it. The entire process can reportedly be completed in a matter of minutes, and depending on how long it takes Kabbage to verify your online data, you could get funded almost immediately after your application is filed. Normally a few days is the longest Kabbage borrowers have to wait to receive funding.
Great Company, But Only One Product
The bubble begins to burst when you learn that Kabbage offers just one type of loan program; a business line of credit. Anyone looking for a working capital loan, accounts receivable factoring, standard term loan, SBA loan, or merchant cash advance is out of luck. This is particularly surprising because Kabbage encourages borrowers to use PayPal, which, like a merchant cash advance, is designed for companies that conduct the majority of their sales via credit card. Someone looking for a business loan application that takes just five minutes to fill out would likely be equally interested in the convenience of no strict due dates, no fixed monthly payments, or the various other convenient features of a merchant cash advance.
As for terms, you choose between making monthly payments over the course of six or twelve months. Once again, another rule is revealed that directly contradicts Kabbage’s main attraction. What happens in the event of a sudden expense or dip in revenue within this timeframe? A business that is strapped for cash might find it difficult to pay off its debt by a specific date, partially because due dates are a surefire recipe for stress. Paying off debt is already stressful enough, especially when you’re in the midst of carrying out an expensive investment. Growing a business demands 100% of your concentration; something that can’t be put on hold for a couple of months.
Then again, the investment you have in mind might be off the table considering Kabbage’s borrowing limit of $150,000. Chances are, you’ll need a lot more than that to cover large equipment purchases or renovations. You don’t have to look far to find a business lender that can provide over three times that amount and give you more than two choices for a due date.
What Do Fees Look Like?
Perhaps the most common complaint about Kabbage is its fee structure and interest system. Kabbage APRs run between 24% and, wait for it, 99%. Yes, you read that right. These innovative and convenient business lines of credit are among the most expensive in today’s business lending industry. Because qualifying for this program is much easier than a traditional bank loan, Kabbage is totally in the right for mitigating risk with APR’s that justify taking the risk on small businesses that wouldn’t otherwise get funded.
Monthly payments for a business line of credit are based on how much you borrow. With Kabbage, a percentage of the total amount borrowed along with a separate fee are tacked on to your monthly payments. This separate fee, which is also a percentage of the amount borrowed, varies based on whether you choose a six or twelve month program.
In the case of the former choice, the fee is 1% to 10% of the amount borrowed for first two months and then 1% for every month that follows. For a twelve-month term, the fee is 1% to 10% for the first six months and 1% for each month after.
Is My Business Scenario A Good Fit?
You don’t need to be a business financing expert to envision this system and how it could affect the normal flow of your business. Before delving into specifics, let’s get one thing out of the way: Regular monthly payments are crippling by definition. Many important investments like marketing campaigns or new hires take several months to contribute to your revenue stream and are therefore usually carried out during the slow season, when sales are down. An extremely common dilemma for countless businesses is the need to prepare for the busy season despite barely having enough money to cover bills, rent, etc. These businesses cannot afford to make fixed, monthly payments immediately after receiving funding.
With Kabbage, the brunt of the debt is supposed to be paid off in the first few months. Say, for example, you take out a six month, $50,000 line of credit with $6,000 in fees. Your first two monthly payments could be over $10,000, with around $8,000 for the last four monthly payments. For the most part, their business line of credit product is tailored mostly for businesses that experience a tiny “hiccup” in working capital that would otherwise be used for short-term expenses like financing receivables, inventory, or making payroll. Such businesses typically have plenty of cash on hand for these expenses but for some reason, there was just a little less than usual available at that specific time.
You Deserve The Best Options
Almost every praiseworthy article on Kabbage highlights two features: Getting cash fast and the absence of a perfect credit score. Kabbage borrowers are grateful for these features. They would also be pleased to know is that whether you’re looking to cover short-term or long-term expenses, Kabbage is not the only source of fast cash for borrowers with sub-par credit.
United Capital Source checks both of these boxes, and even goes one step further by offering bad credit business loans for borrowers with little or bad credit history. In some cases funding can be distributed as quickly as Kabbage does, typically in a few business days.
Rather than just one funding program with one set of terms, UCS can literally create the perfect working capital loan for your unique circumstances. Some of our programs do not feature due strict dates or fixed monthly payments because we understand that even the most successful businesses go through cyclical, inevitable dips in revenue. With a merchant cash advance (a.k.a credit card processing loan), the majority of the debt is paid off when sales start to increase because repayment is tied to sales volume.
The flexibility of our payments is particularly advantageous for companies that do not get paid up-front for their services, like medical practices or retailers, and must cover business expenses as they await reimbursement.
While Kabbage loans are geared towards a certain type of investment, UCS can help you cover investments of all sizes in addition to regular business expenses. Our clients’ needs include increasing staff, buying expensive parts for major auto repairs, renovating facilities, or advertising new products for the holidays. How can we possibly know how to finance so many investments? The answer lies in what might be UCS’s largest benefit, our experienced and tirelessly hard working team that helped us make the Inc 5000 list of fastest growing companies for the 2nd time in 3 years!
Customer Service Like You’ve Never Seen!
United Capital Source has clients spanning across hundreds (yes, hundreds) of industries. We are well-aware that even the most conveniently-designed funding program will not work for everyone. The working capital loan you receive will be crafted by someone who is familiar with the kind of financial obstacles your industry is prone to. Since so many of our clients borrow funding for large investments, we calm their nerves by walking them through every step of the repayment process.
Kabbage has a reputable support team but UCS clients have access to more than just good “customer service.” From the day you first contact us, you will have forged a partnership with a business financing expert who will gladly provide any budget-related advice or quickly find a solution for the occasional bumps in the road.
And this partnership doesn’t end when the financing is paid back in full. Your first phone call with UCS will show you that we take a genuine interest in our clients’ goals because seeing their companies’ grow is our greatest reward. Our business funding programs are crafted to not only be paid back without greatly impacting cash flow but also to position your business to expand even further. You will have a plan for your immediate future as well as a new sense of control over your finances. Your hard work deserves terms of the utmost convenience, and we assure you that you won’t find them anywhere else!