LoanBuilder VS Kabbage: Which Lender Is Best For Your Business?

We all know that running a small business requires capital. While it would be great to cover all of our expenses out-of-pocket, for most small business owners, this just isn’t a reality. For times when money is tight, a small business loan makes expansions or simply covering day-to-day operations possible.

But what happens when your revenues are too low, your time in business too short, or your credit score doesn’t meet bank requirements for a traditional loan? Instead of giving up, turn to an alternative lender like LoanBuilder or Kabbage.

LoanBuilder and Kabbage have emerged as frontrunners among small business lenders. Online applications eliminate the need for face-to-face visits with your local banker, to begin with. Borrower requirements are also more relaxed, and you can get the money you need in days — no more waiting weeks for approval.

You want to make the best financial decision for your business, so which lender do you choose? In this post, we’ll compare these two lenders to help you make the right choice. We’ll take an in-depth look at the application process, break down terms and fees, and help guide you on your path to small business financing.

Ready to get started? Let’s dive in.

Services Offered

Winner: Kabbage

LoanBuilder provides capital to small business owners through short-term loans. When you apply for a LoanBuilder loan, you can receive between $5,000 and $500,000 for your business. Once approved, you’ll receive one lump sum of cash that can be used as working capital, for an emergency, to expand your business, or for any other business purpose.

One of the benefits of a LoanBuilder loan is that you can “build” your own loan. With the LoanBuilder Configurator, it’s possible to check out different options to find the financing solution that’s best for your business. You can easily adjust the borrowing amount and terms to compare your options. For example, if you want low monthly payments, select a longer repayment term and lower borrowing amount. If you’d rather reduce your fixed fee, opt for a shorter term.

If you want more flexible financing, Kabbage is the better choice for your business. Through Kabbage, you can receive a line of credit with a limit of $2,000 to $250,000.

A Kabbage line of credit is significantly different from a traditional loan. Loans — like the ones available through LoanBuilder — are sent to your bank account in one lump sum. Once you’ve paid off the loan, you’ll have to reapply to receive more money. With Kabbage’s line of credit, you’ll be assigned a credit limit, and you can make one or more draws up to and including that credit limit. Each payment is applied to your balance plus fees. As you repay borrowed funds, they’ll become available for you to use again — no additional approvals needed.

One of the best things about a Kabbage line of credit is that you don’t have to use it immediately. With a traditional loan, you are still required to make regular payments, even if the funds sit untouched in your bank account. With a line of credit, though, you won’t have to make payments until you request a transfer of funds. This makes it a much better option for those “what if” scenarios you can’t predict. It is this flexibility that gives Kabbage a slight advantage over LoanBuilder.

Borrower Qualifications

Winner: Kabbage

LoanBuilder Kabbage

9 months

Time In Business

12 months

$42,000 per year

Minimum Sales

$50,000 per year

550

Minimum Credit Score

N/A

Even if you’ve been turned down for a small business loan in the past, you may still qualify for funding through LoanBuilder. Unlike traditional lenders, LoanBuilder has more flexible criteria for receiving one of its loans.

To qualify for a LoanBuilder loan, you must meet the following minimum requirements:

  • U.S.-based business in a qualifying industry
  • Time in business of at least 9 months
  • At least $42,000 in annual revenue
  • No active bankruptcies
  • Personal credit score of 550 or above

Please note that these are minimum requirements and that meeting these minimum requirements does not guarantee your approval.

During the application process, you can review your offers with no impact to your credit score. If you decide to move forward with applying for and accepting a loan, a hard credit pull will be initiated by LoanBuilder, which may have a small impact on your credit score.

While the requirements for a LoanBuilder loan are pretty simple, it’s even easier to qualify for a line of credit through Kabbage.

To qualify, the minimum requirements of Kabbage are:

  • In business for at least 1 year
  • At least $50,000 in annual revenue OR at least $4,200/month for the last 3 months

Kabbage looks at the performance of your business when determining whether to approve your line of credit. However, a hard pull will be performed to check your personal credit, although the lender has no credit score minimums to qualify.

Having no minimum credit score requirements really makes Kabbage stand out from other lenders. If you’ve had personal credit challenges, such as an active bankruptcy or a credit score that falls below 550, Kabbage is the better financial product for your business. However, if you have a shorter time in business or lower revenues but meet all credit requirements, you may want to consider giving LoanBuilder a shot.

Terms & Fees

Winner: LoanBuilder

LoanBuilder Kabbage

$5,000 – $500,000

Borrowing Amount

Up to $250,000

13 – 52 weeks

Term Length

6 or 12 months per draw

One-time fee of 2.9% – 18.72% of the borrowing amount

Borrowing Fee

1.5% – 10% of the borrowing amount per month

None

Other Fees

None

Now, it’s time to look at one of the most important factors to consider when borrowing money from any lender: how much is it going to cost? Before we break down the costs between LoanBuilder and Kabbage, note that these are alternative lenders that provide funds to borrowers with less-than-perfect credit. As such, these financial products have a higher cost of borrowing than traditional loans you’d receive from your bank or credit union.

A great feature about LoanBuilder loans is that just one fixed fee is charged, making it easy to understand the cost of borrowing. Fees range from 2.9% to 18.72% of the borrowing amount. The most creditworthy borrowers will be rewarded with the lowest fees. There are no origination fees or additional costs added to your loan.

LoanBuilder loans have terms between 13 to 52 weeks. Terms are based on the amount of your loan. Each week, payments are automatically withdrawn from your business bank account.

Kabbage’s fee structure is a little different. A fee is charged each month when there is a balance. Fees range from 1.5% to 10% and are based on the performance of your business. Your fees may change throughout your repayment period. For example, you may pay a 3% rate for the first 6 months, then pay just 1.25% for the remaining 6 months. This is just an example, and your actual fees may vary.

Kabbage has repayment terms of 6 or 12 months and are based on the amount you borrow. If you borrow less than $10,000, your repayment terms will be set at 6 months. If you borrow $10,000 or more, you can choose between terms of 6 or 12 months. Payments are withdrawn monthly through automatic drafts of your business bank account.

If you prefer to make weekly payments, LoanBuilder is the better choice between the two lenders. If you want a loan with a single fixed fee structure that’s easy to understand, LoanBuilder is also the better option. However, if you’d prefer to make one monthly payment, consider applying for a Kabbage line of credit.

The Application Process

Winner: Kabbage

Now that you know more about the features of LoanBuilder and Kabbage, you’re getting one step closer to choosing and applying for a financial product. Before you start filling out your personal information, though, let’s explore what to expect during the application process.

The first step to receiving a LoanBuilder loan is to fill out the online questionnaire. This questionnaire should only take about 5 to 10 minutes to complete. During this step, you will provide contact information, personal information, business details, and verify your identity.

Once you’ve completed the questionnaire, one of two things will occur: your application will be declined or you’ll receive an offer. If your application is turned down, LoanBuilder will provide you with further details and you’ll be eligible to reapply in 30 days. At this point, you’ll need to pursue other financing options. However, if you’ve received an offer, you’ll be able to adjust the duration of your loan and the borrowing amount to compare costs and select the terms that work best for your business.

At this point, your offer is just a pre-qualification. At any point in the process your application may be declined, and receiving an offer is not a guarantee of approval.

After you’ve selected your terms, you’ll be required to fill out a more comprehensive application. You’ll provide more information to the lender, and you’ll be required to submit documentation such as business bank statements. During this process, a hard check will be performed on your credit.

Once LoanBuilder has analyzed your business financials and personal credit history, your application will be approved or declined. If you’re approved, you’ll electronically sign a contract and the funds will typically be deposited into your business bank account the next business day.

You can also bypass the online system and contact a LoanBuilder Business Funding Expert through the lender’s toll-free number. This may be the best option if you have additional questions about LoanBuilder’s loans. However, the online process is typically much faster and easier for most business owners.

While it is possible to receive your funds just one business day after applying, most small business owners will receive funding within 2 to 7 days.

Kabbage’s application is also available online and can be completed in just minutes. When applying for a Kabbage line of credit, you’ll start by providing information about your business, such as your business name and phone number. During the first step, you’ll also input an email address and create a password. This information will serve as your login credentials for the Kabbage website and app.

Next, you’ll link your business accounts so Kabbage can evaluate your business revenue. You can connect your business bank account from institutions including PNC, TD Bank, Chase, and Bank of America, or you can link business services such as PayPal, Square, Etsy, or Amazon. After you’ve been approved, you can link multiple services and accounts to maximize your credit limit.

Finally, Kabbage will request personal information. This is very basic information including your legal name and home address. You’ll also provide your Social Security Number. At this stage, Kabbage will initiate a hard inquiry on your personal credit.

Once you’ve completed this step, you’ll receive an approval decision. If you’ve been approved, you’ll be taken to the Kabbage Dashboard. Through this dashboard, you can view your credit limit and immediately initiate your first transfer. You can withdraw your full credit limit, a portion of your credit limit, or wait until a later date to make a draw. On this dashboard, you’ll also be able to select your repayment terms and view your payment schedule.

After you make your first draw, funds will be sent to your business bank account immediately. You should then receive the funds within 1 to 3 business days.

Once you’re approved for a Kabbage line of credit, you can also request the Kabbage Card. You can use the Kabbage Card anywhere Visa cards are accepted. Simply swipe your card, and Kabbage will create a new loan with 6-month terms and the same fees as your other loans.

Both LoanBuilder and Kabbage simplify the loan application process. However, Kabbage is the clear winner in this round. Kabbage’s simple application process is hassle-free and has no documentation requirements. With Kabbage, you can receive an approval decision in just minutes and put your line of credit to work for your business immediately.

And The Winner Is …

LoanBuilder and Kabbage each offer benefits to small business owners. LoanBuilder loans provide short-term financing options for business owners that wouldn’t qualify for financing through traditional lenders. However, Kabbage stands out for a number of reasons.

The simple application process, flexibility, easy borrowing requirements, and lightning fast approvals are just a few of the benefits Kabbage offers to small business owners.

Which Is Best For Your Business?

LoanBuilder and Kabbage are similar in that they offer alternative financial solutions for business owners that may not qualify for other loans or financial products. However, there are distinct differences between the two. Determine how much you need to borrow, nail down how you plan to use the funds, and make your decision from there.

Choose LoanBuilder If…

  • You prefer to make smaller weekly payments rather than a larger monthly payment
  • You want one lump sum of money that can be repaid over time
  • You need to borrow more than $250,000

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Choose Kabbage If…

  • You’d rather make monthly payments
  • You want a flexible line of credit that you can use when you need it
  • You want an instant approval with no hassles or paperwork

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Final Thoughts

Kabbage and LoanBuilder both provide quick financial solutions for small business owners. However, don’t forget that this speed and convenience may come at a high cost. These are short-term options that may have higher fees than other financial products. Shop around with lenders, compare any offers you’ve received, consider other loans such as accounts receivable financing, and evaluate the cost of any loan you choose to accept.

By doing your homework, you can better ensure you’re making the most financially-savvy move for your small business.

If you’re still undecided, check out our other resources, including How To Get A Small Business Line Of Credit and The Business Owner’s Guide to Getting A Short-Term Loan.

The post LoanBuilder VS Kabbage: Which Lender Is Best For Your Business? appeared first on Merchant Maverick.

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