It’s borrowing season. Leading up to the holiday season, more small businesses take out cash advances, according to industry reports. Financing continues to be a stumbling block for entrepreneurs, particularly those who have uncertain income, little or no credit history, or blemished credit. African American-owned businesses significantly lag behind their white counterparts in acquiring small business loans, angel investment, and venture capital.
Kabbage, a leading working capital lender, provides instant cash advances to grow a business. It is designed as a quicker fix for companies that need money to buy inventory, ramp up personnel, purchase equipment and more. Kabbage loans fall more within the realm of micro financing for small businesses.
Kabbage reports that it has provided $360 million this year to small businesses across the country, up from $123 million in 2013. The company has funded over $400 million to help over 100,000 businesses. Co-founder Rob Frohwein says more entrepreneurs are turning to alternative lending than ever before, especially banks are leery to lend to small businesses.
Business owners can borrow anywhere from $500 up to $100,000. Kabbage’s fast, flexible business line of credit is always available. Borrowers can draw against their line as often as once a day for anything that they need.
The application process in done online and approval is made within seven minutes. Kabbage looks at factors outside of your credit score, including seller rate, years in business, transaction volume, and revenue. Kabbage determines the amount of your line of credit based on your financial information, so the more financial sites you link, the better.
Kabbage only allows you to borrow money for up to 6 months, so if you borrow $50,000, you have to pay that entire sum back (plus interest) within the 6 month time frame.Â Fees are 1%—13.5% of the loan amount the first two months, and 1% for each of the remaining four months. One-sixth of the total loan amount plus the monthly fee is paid every month.
Kabbage in general doesn’t charge as much interest as traditional banks. However, if you want to take out larger sums and need more than 6 months to pay them back, it might be smarter to try for a traditional bank loan.
There are other alternative sources of startup funding and working capital for business owners to establish a solid market presence and generate a profitable revenue stream. These include: PayPal Working Capital (www.paypal.com/webapps/workingcapital/), OnDeck Capital (www.ondeck.com/), and Square Capital (https://squareup.com/capital).