Getting a business loan from a bank can be a nightmare even if you’re well-qualified, because they’re slow and require tons of paperwork. Short-term lenders can make getting a small business loan easier. In this article, we review the rates, terms, and qualifications of the two best short-term working capital loans for business: Kabbage vs. OnDeck Capital.
OnDeck: Best Short-Term Loan Provider
We recommend an OnDeck business loan over a Kabbage loan because it offers lower rates for prime borrowers (700+ credit score) and OnDeck can originate much larger loans. OnDeck can get you a term loan much quicker than traditional financing lenders, like banks. Plus, on average, OnDeck is half as expensive as a merchant cash advance.
Loan Amount: $5K – $500K
Terms: 3 – 36 Months
Starting Rates: 9% APR
Expected APR Range: 30-50%
Funding Time: 1-3 Days
Credit Score: 500+
Kabbage: Best OnDeck Alternative
As one of the best short-term loans, a Kabbage loan can be a better fit than OnDeck if you can’t meet OnDeck’s revenue requirements or if you require monthly repayment terms. Kabbage business loans are much quicker and easier to get approved for than a loan from a traditional bank. They’re also more affordable than a merchant cash advance.
Loan Amount: $2K – $250K
Terms: 6 or 12 Months
Starting Rates: 18% APR
Expected APR Range: 30-50%
Funding Time: 1-3 Days
Credit Score: 550+
Kabbage vs OnDeck Capital Summary
|Expected APR Range|
*Updated: December 2018
Is Kabbage or OnDeck Right for Your Business?
How We Evaluated Kabbage vs OnDeck Capital
One of the most popular OnDeck competitors for the best short-term loans is Kabbage. These two are often compared because they are considered amongst the best short-term loans. Because it can be hard for businesses to identify the best lender, we compared the features of Kabbage vs OnDeck that matter to businesses to determine which one is best. Our criteria included the loan amount you’ll receive, price you’ll pay, and typical repayment terms.
The criteria used in our evaluation of Kabbage vs. OnDeck included:
- Rates and Costs: What interest rates and fees you can expect Kabbage and OnDeck to charge you for a short-term business loan.
- Qualifications: What factors Kabbage and OnDeck will consider when evaluating you for a short-term loan.
- Loan Amount: How much you can borrow from Kabbage and OnDeck.
- Repayment Terms: How quickly Kabbage and OnDeck will require you to pay back your loan.
- Repayment Schedule: How frequently you’ll need to make payments with Kabbage and OnDeck (daily, weekly, or monthly).
- Approval and Funding Speed: How quickly Kabbage and OnDeck will approve and fund your short-term business loan.
We believe OnDeck gives small businesses the best chance of getting approved for a short-term business loan. This is because OnDeck has a lower minimum credit score than Kabbage. Plus, OnDeck offers larger maximum limits. Lastly, OnDeck offers the best rates to prime borrowers (700+ credit score), who can qualify for rates as low as 9 percent. Kabbage is better for monthly payments, which isn’t an option with OnDeck.
Why We Chose OnDeck as the Best Short-Term Business Loan
OnDeck loans are our top choice as the best short-term loans for business. The primary reasons we chose OnDeck as the best primarily relate to its simple qualifications, large loan amount, flexible repayment terms, and quick approval speed. We believe the combination of these factors make short-term business loans available to businesses in a wide range of financial positions.
The primary reasons we chose OnDeck as the best short-term loans for business include:
- Rates and Costs: Prime borrowers (700+ credit score) can receive interest rates as low as 9 percent.
- Lower Minimum Qualifications: Business owners only need a credit score of 500+, $100,000 in annual revenue, and one year in business. Some OnDeck competitors require credit scores of 600+ and two or more years of business history.
- Loan Amount: At $500,000, OnDeck’s maximum loan amount is much larger than some of the competition, including Kabbage. OnDeck may approve you for as much as 15 percent of your annual revenues.
- Repayment Terms: You can choose repayment terms between three and 36 months, based on your planned use for the loan proceeds and how much you can afford to repay monthly.
- Approval and Funding Speed: You can get pre-qualified online in minutes and funded in as soon as one day. This probably has something to do with why OnDeck has so many great customer reviews.
Qualifying with OnDeck is a breeze and prime borrowers (700+ credit scores) can benefit from rates as low as 9 percent. OnDeck is very quick to approve and fund your loan compared to other financing options. Its application is online with very little paperwork. You can get approved the same day and funded in as soon as one business day.
When You Should Consider a Kabbage Loan Instead of OnDeck
Kabbage issues loans for 12 months or less and has a maximum loan size of $250,000. If you need a small business loan for a short period of time, Kabbage may be your best choice.
Very small businesses will have trouble meeting the minimum annual revenue requirement of $100,000 per year for an OnDeck loan, but Kabbage only requires $50,000.
The other reasons it’s good to consider Kabbage for a short-term business loan include:
- Loan Structure: Kabbage loans work like a line of credit. You can draw what you need up to your approved limit and only pay interest on the money you use. As you pay off what you borrow, it becomes available again. OnDeck also offers lines of credit, but the qualification requirements are stricter than Kabbage’s.
- Repayment Schedule: One of their best features is that they require monthly payments, where OnDeck requires payments every week. While Kabbage customers don’t provide as glowing reviews as OnDeck’s, Kabbage also gets good reviews. Their monthly payments probably have something to do with this.
- Approval and Funding Speed: Kabbage is also quick to fund and like OnDeck, they can get you the money you need in as quickly as one day. With its connected Visa, you can access funds the same day if you use the card.
With Kabbage, you can get financing up to $250,000 in as soon as a day. Plus, Kabbage gives you a Visa card to use with your line of credit. This means you have same-day access to funds when needed. If Kabbage sounds like a good fit for you, you can apply online and get pre-qualified in minutes.
When to Use OnDeck & Kabbage Competitors
OnDeck and Kabbage are both great at offering short-term working capital. However, you might want to consider an alternative if you need a specific niche type of financing. For example, you may qualify for a more affordable loan if you have outstanding invoices or if you process your customer payments with a specific service, like Square or PayPal. Further, if you need a longer-term loan, then an OnDeck or Kabbage competitor may be best.
Common OnDeck & Kabbage Competitors
|BlueVine||Flexible business lines of credit up to $250K for recurring, short-term working capital needs.|
|LoanBuilder||Newer businesses (9+ months) and businesses needing a line of credit up to $500K.|
|Fundbox||Businesses needing up to $100K with no minimum credit score required.|
|Payability||Ecommerce businesses selling with Amazon, Walmart, and similar marketplaces needing quick access to funds.|
|Square Capital||Companies that accept payments through Square and need up to $100K in financing.|
|StreetShares||Veteran-owned businesses looking for medium-term loans up to $100,000.|
|SmartBiz||Businesses with good credit (680+) needing up to $350K in long-term financing.|
|Small Business Credit Card||Businesses needing a smaller revolving credit line with cash back and rewards.|
When to Apply with BlueVine
BlueVine offers two main products. One is invoice factoring based on the value of your invoices and the other is a business line of credit with a minimum credit score of 600+. You’ll want to use BlueVine over Kabbage or OnDeck if you have a low personal credit profile or if you have a lot of outstanding customer invoices (up to $5 million).
When to Apply with LoanBuilder
LoanBuilder is a good OnDeck and Kabbage competitor if you need a larger small business line of credit (up to $500,000). You’ll be required to make weekly payments for 13 to 52 weeks on any advances. To qualify, you need to have been in business for at least nine months, carry a 550+ credit score, and have $42,000 or more in annual revenue.
When to Apply with Fundbox
Fundbox also offers a business line of credit with up to $100,000 in financing and no minimum credit score requirement. The amount of financing you receive is largely dependent on much you invoice your customers. If you only need up to $100,000 in financing, then Fundbox is a good Kabbage and OnDeck competitor to consider.
When to Apply with Payability
Payability is a great OnDeck and Kabbage competitor for ecommerce businesses that sell directly on marketplaces such as Amazon and Walmart. With Payability, ecommerce businesses are able to borrow against future or daily marketplace accounts receivable. The benefit is you get access to your funds two weeks or more sooner than would otherwise be the case.
When to Apply with Square Capital
If you currently process a large number of your customer payments through Square, then you could qualify for up to $100,000 in financing through Square Capital. This is a niche-based financing option, but could be a good capital source for Square users looking for an OnDeck and Kabbage competitor.
When to Apply with StreetShares
StreetShares is an OnDeck and Kabbage competitor that offers longer-term loans and line of credit products to veteran-owned businesses and borrowers with stronger credit profiles. If you want a more affordable loan with a longer term up to $100,000, this could be a good alternative option for you.
When to Apply with SmartBiz
SmartBiz offers fast SBA loans of up to $350,000 for working capital with terms up to ten years and rates as low as 5.75 percent in as quickly as 30 days. If you’re a prime borrower (680 to 700+ credit score) and can wait a month or more for financing, then this is a great long-term financing solution.
When to Apply for Small Business Credit Cards
Small business credit cards aren’t typically considered a Kabbage or OnDeck competitor, but they can be a good alternative solution if you need a small amount of capital. In fact, small business credit cards are great to have in any business’ financial toolkit, regardless of your other capital sources.
Kabbage vs OnDeck: In-Depth Comparison
It’s important to understand each aspect of Kabbage and OnDeck loans in more detail to fully understand how they compare to one another. Below we’ll look at loan requirements, terms, and costs to give you a better idea of which lender is the best choice for your business.
Kabbage vs OnDeck: Minimum Qualifications
When applying for a short-term business loan, the three main qualifications that the lender will consider are credit score, revenues, and time in business. Kabbage requires $50,000+ in annual revenues compared to $100,000+ for an OnDeck loan, making qualifying with Kabbage easier. However, in terms of credit score, OnDeck is easier, with a 500+ credit score compared to 550+ for Kabbage.
Kabbage vs OnDeck: Loan Amounts
OnDeck is the big winner if you need financing north of $250,000, because that is the maximum you can get with Kabbage. While both companies can get you funded for small amounts, OnDeck will lend up to $500,000 to businesses with better revenues and longer operating histories.
Kabbage vs OnDeck: Approval & Funding Speed
OnDeck and Kabbage offer very quick business loans. Despite the fact that they have a pretty high cost of capital, most customers seem to be willing to go back for a second or third loan from these alternative lenders. The speed of funding is very helpful and convenient, even for prime borrowers (700+ credit score) who have the capacity to repay the funds quickly.
Kabbage vs OnDeck: Rates, Costs, & Repayment Terms
The convenience of short-term loans comes at a price, which is why the APR on a short-term loan is relatively high compared to more traditional financing. The Annual Percentage Rate (APR) is the cost of a loan over one year, including interest and fees. Compared to the interest rates on a home mortgage or car loan, the APR for short-term loan providers may seem high.
OnDeck loans and Kabbage loans have similar costs, with both companies reporting average APRs of approximately 40 percent. However, OnDeck’s potential 9 percent rate for prime borrowers (700+ credit score) is lower than Kabbage’s. OnDeck’s average APR includes an origination fee of approximately 2.5 percent (taken out of your loan upfront). Kabbage charges a monthly single interest fee with no additional fees.
Kabbage & OnDeck Cost Examples
The total out-of-pocket cost of a short-term business loan is often less than the out-of-pocket cost of a bank loan. Although OnDeck and Kabbage have high APRs, you end up paying them off much quicker than you would a conventional bank loan. Paying 50 percent APR over nine months to meet a short-term need (e.g., payroll) may be preferable to paying 5 percent APR over 10 years.
Some more thoughts to ponder as you’re considering a Kabbage or OnDeck short-term loan:
Kabbage & OnDeck Capital Factor Rate Example
The factor rate is the total dollar amount you’ll have to pay back over the life of the loan. Kabbage and OnDeck focus on this rather than APR. A factor rate of 1.3 means that the borrower would have to pay back 1.3 times the original loan amount.
For example, on $100,000 borrowed, a company would have to pay back $100,000 in principal and $30,000 in interest/fees over the life of the loan. One common mistake is to think a factor rate of 1.3 equals a 30 percent APR. This is most likely not true. Depending on several factors, a 1.3 factor rate might equal a 70 percent APR or higher.
Kabbage & OnDeck Capital Average Annual Interest Rates
The weighted average interest rate for OnDeck term loans is 47.3 percent as of March 31, 2018. Kabbage, which is not a publicly traded company like OnDeck, told us that risk analysts in two separate offices confirmed an average APR of approximately 40 percent.
While each company advertises lower possible rates, we expect the typical Kabbage and OnDeck borrower to pay between 30 percent and 50 percent APR. This interest rate could be lower or higher depending on the creditworthiness of the borrower, the amount of the loan, and when the loan is paid back.
Kabbage vs OnDeck: Repayment Schedules
It’s important that the repayment schedule of a working capital loan fits within a small business’ normal cash flow. Some small businesses will have no problem adhering to a daily or weekly repayment schedule. For other businesses, monthly payments may seem like the only repayment that will work. Kabbage offers monthly repayment, while OnDeck’s is daily or weekly.
Kabbage vs OnDeck: Personal Guarantee
Both OnDeck and Kabbage require a personal guarantee, as is common with most small business loans. A personal guarantee means that you’re personally responsible for payment of a loan. If your business goes under and you can’t afford the loan payments, the lender can make you turn over your personal assets (e.g., your car or home) to pay off the loan.
Kabbage vs OnDeck: Collateral
Neither OnDeck nor Kabbage require specific assets (personal or business) as collateral. Collateral is an asset or assets that you pledge as security for a loan. Most traditional bank business loans require you to put up specific collateral, such as business equipment or machinery, as backing for the loan.
However, OnDeck places a UCC lien on your general business assets for all loans, and Kabbage does so for loans above $20,000. This means that the lender can seize any and all business assets if you’re unable to pay back the loan.
Kabbage vs OnDeck: Customer Service
Both Kabbage and OnDeck have responsive customer service teams. While customer service may not be the first thing you think of when comparing lenders, good customer service can save you trouble. You might have a problem with your loan, or have a question you need answered quickly. If this happens, you need to have confidence that your provider will be there to help you.
Kabbage vs OnDeck: Additional Features
Both Kabbage and OnDeck have additional features beyond what has already been discussed that make managing your loan very convenient. These services range from making online payments on the go to easily being able to reach a customer service representative.
Kabbage vs OnDeck: Mobile Apps
Small business owners are busy and not always behind a desk. This is why it’s essential in today’s business world for financing to be available on mobile devices. Kabbage and OnDeck do this by having their own mobile apps. Each app is easy to use and will help you stay up to date with any outstanding loans you have.
OnDeck’s Mobile App
The features of OnDeck’s mobile app include:
- Single Place to Manage Your Loan: The app gives an account overview of where you stand on each loan you currently have in repayment. You can also easily check the status of all account transactions, including the loan payments you have made.
- Customer Service Support: OnDeck provides contact information for your individual loan specialist and information on contacting the general support department. You can email or call their support team directly from the app.
- Draws on Your Business Line of Credit: OnDeck offers a business line of credit in addition to a short-term loan. Once you’re approved for the OnDeck LOC, you can use its mobile app to quickly and easily withdraw funds (shown in the middle picture above).
Kabbage’s Mobile App
The features of Kabbage’s mobile app include:
- Overview of Your Loan Details: The Kabbage app allows you to see an overview of each of your current loan balances and any transactions made on your account.
- Loan Payments: You can quickly make your Kabbage loan payments directly through the app when you are away from your desk.
- Apply for a Loan: Kabbage makes it very easy to enter your information and get pre-qualified for a loan in just a few minutes on its app. The whole process takes place in the app, and when you’re approved you can get connected to a loan specialist.
OnDeck Reviews vs Kabbage Reviews
OnDeck and Kabbage both get pretty good customer reviews. Both are able to retain customers for multiple loans despite their high APR costs. This speaks volumes to the customer service of each, which we have found to be very good with both businesses. However, past customers rank OnDeck a bit higher on overall satisfaction than the ratings by Kabbage’s customers.
Kabbage vs OnDeck: Loan Originations
The graph below shows how much money each lender has loaned out from the inception of their business to 2017. Both companies have initiated more than enough loans for you to be comfortable with them, but businesses have borrowed twice as much from OnDeck as they have from Kabbage.
Kabbage vs OnDeck: Understanding How Much Your Loan Will Cost
The language and details of a loan can be difficult to understand, and they often sound very different from one lender to the next. You shouldn’t need a finance degree to figure out how much you’re going to pay for a loan.
OnDeck and Kabbage are part of a group of lenders who have come together through the Innovative Lending Platform Association (ILPA) to provide a disclosure tool that can help you better understand and compare the true costs of their loans. This disclosure is available after the application process, but before you commit to the loan.
SMART Box Capital Comparison Tool
The SMART Box tool helps you understand and compare the costs of small business financing. It does this by giving you five different ways to measure the cost of your loan so that you can compare it to other loan products as you shop around. SMART Box then defines each measurement (such as APR) in plain English so that you know what you are looking at.
The need for a tool like Smart Box arose because short-term lenders often describe the cost of their loans using something other than APR (the measurement most consumers are familiar with). They do this because short-term loans almost always have higher APRs than long-term loans. The results were confusing, irregular measurements that left business owners in the dark.
“The SMART Box was built with the small business owner in mind. The SMART Box will further empower the small business owner to fully assess and compare financing options and make the right decision for themselves. We believe the SMART Box tool really moves the needle as far as informing the small business owner.”
How SMART Box Can Help You
The SMART Box tool provides a better picture of your total cost of capital, allowing you to:
- See if a potential loan is affordable
- Easily compare a potential loan to similar loan products
- Compare a potential loan to dissimilar loan products
SMART Box not only provides you with actual numbers and percentages to analyze, but gives you plain English explanations of what those numbers mean to your business. The SMART Box disclosure provides an overview of your loan amount, disbursement amount, repayment amount, and term.
Additionally, here is a list of common cost metrics that the SMART Box disclosure provides:
- Total cost of capital
- Annual percentage rate (APR)
- Average monthly payment
- Cents on the dollar (amount of interest paid per dollar borrowed)
- Prepayment penalties
Here is an example of what the SMART BOX disclosures look like:
Overall, the SMART Box tool is a great way to measure your loan costs more accurately and to compare those costs against other options. Both OnDeck and Kabbage currently provide this disclosure after you finish the application process, but before you accept the loan. Before you take out an online business loan, look for the SMART Box disclosures.
Kabbage vs OnDeck: Ownership
Whenever you borrow money, you should be aware of where it’s actually coming from. The ownership structure of your potential loan provider will give you a good idea regarding the future of the business. This is important because you want to borrow from a stable lender. This is why we’re providing you with information on the ownership of OnDeck and Kabbage.
Kabbage vs OnDeck: Company Valuations
As a public company, OnDeck is required to regularly report its earnings. The total value of OnDeck is its market capitalization (market cap), which is the value of its current outstanding shares. Kabbage is a privately held company, so valuations available to the public are rare.
Bottom Line: Kabbage vs OnDeck
Small business owners are fortunate to have so many short-term working capital options, with OnDeck and Kabbage leading the way. We recommend OnDeck overall for small businesses because they offer larger loan amounts with longer terms. A Kabbage loan is a good option for small businesses generating lower revenues of $50,000+, or who need monthly payment terms.
OnDeck loans go up to $500,000 with terms of three to 36 months. If you have $100,000+ in annual business revenue, a credit score of 500+, and business operations of one or more years, then you can pre-qualify online today in a few minutes. Plus, you can get funded in as quickly as one day.