Running a business is not for the fainthearted: from ensuring there are enough funds for working capital to having a long-term goal such as expansion or marketing. All of these need funds.
And getting traditional lenders to fund your business is one of the hardest things. However, the age of the internet and technological advancements have eased the process of business financing.
Nevertheless, it does not make the decision-making process easier. For small business owners, getting a business loan requires making a calculated decision.
There are numerous lenders out there, and one needs to know which one is best for their business: from checking the cost of the loan to the repayment period and the minimum amount you can get.
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Since their inception, these institutions have given business loans to numerous small business owners. You do not need collateral like traditional lenders to access their business loans.
However, other minor details, such as lending limits and requirements, might leave you debating between the two. By the time you are done reading our review, you will know which one suits your small business needs.
About the lenders
Kabbage was founded in 2008 with the sole aim of providing business lines of credits to small businesses. Their lending platform is fully automated, which makes the application process easy for borrowers.
Over the years, they have managed to offers more than $5.6 billion of credit to over 100,000 small businesses. Kabbage offers secured, unsecured small business, minority, and industry-specific business loans.
On the other hand, OnDeck was founded a little bit earlier than their counterpart. Since its establishment in 2006, the company has offered over $10 billion in financing to numerous companies in various industries.
Unlike their counterparts who provide only one types of funding, OnDeck offers two types of credits to small business owners. They have both short and long-term loans and line of credit financing.
In 2014, OnDeck was listed on the New York Securities Exchange (NYSE). They expanded their wings and in 2015, started offering their services outside of the USA in Canada and Australia.
Kabbage vs. OnDeck
As much as both lenders require you to have a business that has been running for at least a year, they have some eligibility differences.
With Kabbage, your business needs to have annual revenue of at least $50,000 or a monthly income of $4,200 for the past three months. Kabbage also offers you a chance to increase your eligibility. To do this, you only need to allow them to review your business and checking accounts.
While OnDeck does not offer you such as a chance to improve your eligibility, you do stand a chance with a credit score of at least 600. Thus, businesses with a strong credit rating and cash flows are eligible.
Your business needs to have a revenue of at least $100,000 in the previous year. For subsequent borrowers, your repayment history on any previous loans that you might have narrowed (borrowed??) also play a role in determining your eligibility.
Kabbage offers from $500 – $250,000 in credit. However, it is important to note that they have only one form of lending, which is business line credit.
In contrast, OnDeck offers two types of credits. With their business line credit, you can get up to $100,000 in credit for your small business. In case you need the term loan, you can get a business loan from $5,000 up to $500,000.
The only issue with OnDeck’s business line credit loan is that it is less than what Kabbage offers. In case you wanted to opt for OnDeck for your small business loan and you wanted more than $100,000, then you would have to choose their term loan.
Application and approval process
Both lenders have managed to offer borrowers a seamless application through their online platforms. Nevertheless, the small difference in funding between the two cannot go unnoticed.
Kabbage requires your business, financial, and personal information during the application process. Once you have clicked on the application tab on their website, you are transferred to a different page where you need to fill in these details. You will also need to link up your business accounts.
It is an application process that you can complete in less than 5 minutes. The response time is also swift. Within a few minutes of completing your application, you will know whether your loan has been approved and the amount awarded. You will need to sign a contract, and the funds will be wired to your account in a few days.
Once you have clicked on the application link on OnDeck’s website, you fill in your basic information. This data includes the amount of money you want to borrow, how soon you need the money as well as the purpose of the money.
Besides that, you will also need to fill in your personal details. This application process creates an account for you and leads you to the next process: more information about your business, yourself, and bank statements.
Within minutes of completing your application, you will get an answer. If you qualify for the loan, you will sign the contract and depending on the type of loan you applied for; you will have the funds within 1-5 business days.
It is important to remember that OnDeck does not offer funds only to small businesses in the United States, but also in Australia and Canada. Therefore, when applying, pick your country from the drop-down menu on their website.
The repayment period for Kabbage’s business loans is 6 or 12 months. With OnDeck, the repayment period you get will depend on your choice of loan. For term loans, repayments period is between 3 – 36 months. Their line of credit repayment period is 6 months.
When it comes to fees and interests, Kabbage and OnDeck have different structures. While OnDeck gives you the APR rates for their line of credit and term loans, with Kabbage, the amount you repay every month is made up of an equal amount of your principal and a monthly fee.
Kabbage charges 1.5% – 10% on principal amounts for the first 2 months on 6 months business loans. For the remaining 4 months, they charge 1% on the principal amount.
In case you settle for the 12 months repayment period, they charge 1.5% – 10% on your principal amount for the first six months and 1% for the remaining 6 months.
Since OnDeck has business lines of credit and term loans, both short and long-term, the rates vary depending on the one you choose.
The APR for their business lines of credit range between 11% to 60.8%, and a maintenance fee of $20 per month. The maintenance fee can be waived if you make an initial $5,000+ withdrawal.
The APR for their term loan ranges between 5.99% – 99.4% and an origination fee of 2.5% – 4% of the amount you borrow. Subsequent borrowers get a lower origination fee. The fee is dropped to a range of 1.5% – 3% for second-time borrowers and 0% – 3% for other subsequent loans you get with them.
In conclusion, if you are looking for less than $100,000 of business line credit, then Kabbage is the option for you. The limit for OnDeck business line credit is $100,000 while that of Kabbage is $250,000.
You can use such funds to sort your working capital expenses, any unforeseen business costs, or small inventory purchases. However, if you are seeking a term loan, then OnDeck is the place to go.
The limit of their term loans is $500,000 with a payment period of up to 36 months. However, following up the fees and interest payment structures of Kabbage can be challenging.
If you need a structure that is simpler to follow, then OnDeck is a better choice.
Since Kabbage does not offer term loans, small business owners in need of large amounts of money can get financing from OnDeck. As long as you are looking to borrow more than $250,000, then OnDeck is the right place.