Kabbage offers short-term loans to small businesses with weaker credit profiles. They have extended over $6 billion in financing for these customers, making them one of the most popular alternative lenders out there today. Kabbage began in 2011 and has now extended credit lines to over 170,000 small business customers. But does Kabbage credit check?
Kabbage takes a different approach to underwriting loans, one that doesn’t rely heavily on FICO credit scores. Instead they look at factors such as transaction volume, social media activity, and how long you’ve been in business when deciding whether or not you’re eligible for their services – does this mean your score will go down if you apply for a loan with Kabbage? Find out more about how a Kabbage loan impacts your credit score.
Does Kabbage Report to Credit Bureaus?
Kabbage does not report repayment behavior to business credit bureaus or personal credit bureaus. This can be a double-edged sword. On the one hand, if a small business owner runs into difficulty in making timely repayments, the three major credit bureaus (Experian, Equifax and TransUnion) will not be notified, and there will be no detrimental entries made onto the business’ or business owner’s credit reports.
However, it would be irresponsible to view this reality as a “benefit,” since the objective when borrowing should always be to pay off the debt. The downside with Kabbage is that paying off small business loans won’t help your creditworthiness. The answer to the question does Kabbage report to credit bureaus is no, and that can be a disadvantage for small businesses who want to improve their credit score.
Does Kabbage Do a Hard Credit Check?
Does Kabbage do a hard pull when you apply for a line of credit? No, at least not at first. Kabbage does what’s called a “soft pull” of your credit history that won’t negatively affect your score. While Kabbage doesn’t do a hard pull, it does require that the small business owner possess a minimum FICO score of 560 (a typical client checks in at 640 or higher). Credit scores are used to determine rates and terms.
In addition to a credit score above 560, you’ll also need to have been in business for at least 12 months, annual revenue of at least $50,000, and a business checking or an online payment account with PayPal or QuickBooks.
But does Kabbage do a hard credit check once you accept a loan offer? Yes. Kabbage will perform a hard pull of your credit history with Experian as soon as you accept a line of credit. Kabbage will also put a UCC lien on your business, meaning your business assets will be collateral for the loan if you can’t repay.
The Kabbage Loan Process
Kabbage extends credit lines of up to $250,000 over 6- to 12-month periods. Their APR ranges from 24% to 99%, although the average APR is 42%. Each withdrawal from the credit line is considered a separate loan with either a 6- or 12-month duration. Repayments are automatically deducted from your business checking account each month.
Kabbage charges monthly fees of 1% to 10% of the balance, and these fees are front-end loaded. For example, for loans with a six month term, fees are assessed at between 1.5% and 10% for the first two months, and 1% thereafter. For twelve month loans, fees are assessed at 1.5% to 10% for as many as six months, and 1% thereafter.
Steven Brachman is the lead content provider for UnitedSettlement.com. A graduate of the University of Michigan with a B.A. in Economics, Steven spent several years as a registered representative in the securities industry before moving on to equity research and trading. He is also an experienced test-prep professional and admissions consultant to aspiring graduate business school students. In his spare time, Steven enjoys writing, reading, travel, music and fantasy sports.