For every business owner in need of a small business loan, there are more options available than ever before. Actually, sometimes it becomes hard for small business owners to choose the best source of funding from an array of financing options. Among many sources of financing, here is a comparison between the two most reliable and efficient alternative financing sources: OnDeck and Kabbage. In this article, we’ll explain which option to choose among them and how they differ in terms of business loan programs, terms, requirements, reviews, and features so you can select the best small business loan option for your business.
OnDeck vs Kabbage: Key Characteristics Difference
While comparing OnDeck and Kabbage, here are some key characteristics that differentiate them from traditional bank loans.
- Little Documentation – In comparison with traditional bank loans, both OnDeck and Kabbage have quick application processes with little documentation requirement.
- Personal Credit Scores – Both these alternative financing sources are best suited for startups and new businesses with low business credit scores. They focus more on personal credit score, and less on business credit score, making eligibility criteria flexible and easier for small businesses.
- Time in Business – Traditional lenders require more than 2 years of time in business in order to approve you for funding. Whereas business loans from OnDeck and Kabbage have little time in business requirement than most bank loans.
- Cash flow Requirements – The major benefit of alternative financing is that they focus more on a business’s cash flow and revenues as compared to documentation and credit histories. Similar to any funding source, they want to ensure you can repay them back easily.
- Quick Funding Source: Alternative financing sources like OnDeck and Kabbage offer a quick and easy way for small businesses to secure financing that often can’t get traditional financing.
OnDeck vs Kabbage: Borrower Requirements
- Time in Business – Both OnDeck and Kabbage have 12 months of time in business requirement.
- Business Revenue – OnDeck requires $100,000 per year as business revenue, whereas Kabbage requires $4,200 in revenue for the last 3 months.
- Personal Credit Score – OnDeck requires a minimum credit score of 600, whereas there’s no actual personal credit score requirement for Kabbage.
OnDeck vs Kabbage: Rates & Terms Comparison
- Borrowing Amount – With OnDeck term loans, you can secure $5,000 – $500,000 and $6,000 – $100,000 for business lines of credit. With Kabbage lines of credit, you can obtain up to $250,000 loan amount.
- Term Length – The terms for OnDeck term loans from 3 – 36 months and 6 months for lines of credit. Kabbage has a 6 – 12 months term length for lines of credit.
- Estimated APR – For OnDeck term loans, the estimated APR is between 9.4% – 99.7% and 11% – 63.2% for lines of credit. For Kabbage lines of credit, the estimated APR is between 24% – 99%
- Borrowing Fees – OnDeck charges 0% – 4% origination fee for term loan and $20 monthly maintenance fee for lines of credit. Kabbage has no origination fee for lines of credit.
- Collateral – OnDeck requires a personal guarantee; possible blanket lien for term loans. Kabbage doesn’t require any personal guarantee for lines of credit.
- Repayment Terms – The repayment terms for OnDeck term loans are from 3 to 36 months and weekly repayment terms up to 12 months for lines of credit. Kabbage offers two monthly repayment terms: 6 months and 12 months.
- Early Loan Payment – OnDeck offers a 25% discount on remaining interest if you pay the loan off early, but forgive it all entirely. With Kabbage, you can save some money by repaying the loan early.
OnDeck vs Kabbage: Reviews
OnDeck has an A+ rating with Better Business Bureau (BBB) and 5-star ratings on many online review sites. The positive reviews indicate fast application, smooth funding process, outstanding customer support, and a high level of transparency. The negative reviews indicate high-interest rates, low prepayment discounts, and strict qualification criteria.
Kabbage also has an A+ rating with Better Business Bureau (BBB) and 5-star ratings on many online review sites. The positive reviews indicate fast funding, the easy application process, low minimum qualifications, and additional features like mobile app and the Kabbage Card. The negative reviews are shared by those who are unable to qualify or received higher interest rates.
OnDeck vs Kabbage: Additional Features
Both OnDeck and Kabbage offer additional features such as a mobile app for borrowers to manage payments, contact support, and ask for funds. Kabbage has an additional feature of a Kabbage Card for borrowers to access its lines of credit easily.
Kabbage Mobile App
The features of the Kabbage mobile app include:
- Overview of current loan balances and any transactions made.
- You can make loan payments via the app.
- You can apply for lines of credit directly via the mobile app.
With a Kabbage Card, borrowers can easily access their lines of credit, allowing them to make purchases from suppliers who will accept a credit card payment but not a wire transfer.
OnDeck Mobile App
The features of the OnDeck mobile app include:
- Overview of current loan balances and the status of all account transactions.
- You can call or email support directly from the mobile app.
- You can access and draw funds through the mobile app.
OnDeck Capital: The Overview
OnDeck Capital is a pioneer in alternative lending and provides fast and quick access to large amounts of capital to small businesses. Since its inception, OnDeck has provided the capital of over $2 billion to new and established businesses in various industries.
The major types of financing by OnDeck includes the following:
- Short-term Business Loans.OnDeck Capital offers short-term business loans with loan amounts from $5,000-$250,000. On the Merchant Advisors platform, borrowers are able to secure an average loan of $25,000 with a median factor rate of 1.28 and 4.9 days. The repayment of short-term loans is made within three to 24 months based on loan amounts. The minimum personal credit score requirement is 500; with minimum annual revenues of $100,000 and tine in the business of less than a year.
- Lines of Credit.OnDeck Lines of credit are available for up to $20,000. On the Merchant Advisors platform, business owners borrowed a median of $10,000 at a median interest rate of 32%. The funding time for OnDeck’s lines of credit is within 45 days, but Merchant Advisors customers experienced an average of three to five days for funding. To secure a credit line, the minimum personal credit score requirement is 600, time in business at least 12 months with minimum annual revenues of $200,000. OnDeck Capital charge $20 monthly as maintenance fee for lines of credit and fixed weekly payments are automatically deducted from your bank account.
The loan application process takes less than 10 minutes to complete and the paperwork includes three months of business bank statements and credit card statements, Social Security number and/or employer identification number (EIN). They have a satisfied customer rating due to the simplified application process, quality support team, and the quickness of their loans or lines of credit funding.
Kabbage: The Overview
Kabbage is another alternative lender that has provided the capital of over $1 billion in small business loans to small businesses. Kabbage offers business lines of credit with loan amounts ranging from $2,000 to $150,000 with an easy application process than OnDeck and approval in few minutes via their business-related accounts such as QuickBooks, Square or PayPal. The repayment time for lines of credit is six months.
Kabbage also offers short-term loans and smaller loans than OnDeck. Kabbage doesn’t charge interest but has monthly fees ranging from 1 to 10 percent for the first two months, and 1 percent for the final four months. The Kabbage credit lines are repaid with monthly payments, each payment being one-sixth of the total amount borrowed (plus month’s fees) without any early repayment penalty plus savings benefit on early repayment.
The Bottom Line
Both OnDeck and Kabbage offer financing opportunities for small businesses in need of working capital. When you need more money, a larger loan amount and more flexibility, OnDeck is a perfect choice. Kabbage is a great option when you need more than $20,000, with the ability to pay back the loan in six months.
They both have pros and cons, so it’s vital to prudently assess your business financing options to conclude which loan will fulfill your needs best and generate the best return on investment (ROI).