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National Funding vs Kabbage: Which lender offers the best small business loan?

Every small business needs a little extra help from time to time, whether it’s because they're struggling with cash flow issues or they’re ready to


Shira Mizrachi
Shira Mizrachi
September 29, 2020

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Every small business needs a little extra help from time to time, whether it’s because they're struggling with cash flow issues or they’re ready to expand and need some additional capital. Applying for a business loan through a traditional bank can take a long time, often in excess of 90 days, and almost 50% of all loan applications from small businesses are turned down.

Fortunately, alternative online lenders can fill the gap and provide the business funding you need. Here, we’ll compare National Funding and Kabbage small business loans to see which is the best choice for your small business.


Table of Contents

National Funding Small Business Loans: Loan Amounts, Terms and Rates
Kabbage Small Business Loans: Loan Amounts, Terms & Rates
Qualification Requirements
Application and Underwriting Process
Post-Funding
Takeaway
Reviews
Key Differences/Short Summary
Net Takeaway

National Funding Small Business Loans: Loan Amounts, Terms and Rates


National Funding offers flexible short-term loans for any business purpose, plus equipment financing loans and merchant cash advance.

Loan amounts are:

National Funding prides itself on its personalized funding solutions, so your loan term and fees depend on your business revenue and credit score. You’ll discover your term and fees when you talk to your personal loan specialist, but loan terms range from 6 to 15 months, and the flat loan fee is 17% to 36% of the loan amount, instead of paying a monthly interest rate.

Kabbage Small Business Loans: Loan Amounts, Terms & Rates

Before we dive into Kabbage funding for small businesses, it’s important to note that when COVID-19 hit, Kabbage put all its lending on pause and focused only on helping small businesses expedite PPP loans. It was recently acquired by American Express, which might be about to stop Kabbage loans altogether so that it can focus on the cash flow management tools.

For the moment, then, Kabbage funding includes just one product: a business line of credit of between $2,000 and $250,000. The way it works is that Kabbage will approve you to borrow a certain amount, and then you can withdraw the funds whenever you like. It’s similar to a credit card.

Each withdrawal has to be in increments of $500, and you only pay fees for the amount you’ve withdrawn, not the amount you’ve been approved to borrow. Kabbage doesn’t charge a typical APR on your loan; instead it charges a monthly fee of between 1.25% and 10%, depending on how your business is performing.

Takeaway

National Funding has a wide range of small business loan options suitable for almost all credit types or funding needs., They’re also willing to fund much larger loans. If you need a large business loan, it’s ideal. Kabbage funding gives you the flexibility to borrow as much as you need, whenever you need it, but the maximum amount is much less than you could get through National Funding.

Qualification Requirements

Every lender has different conditions for providing funding. You want to know if you can get the funds you need in your specific circumstances.

National Funding Lending Requirements

For most loans through National Funding, you need to have been in business for at least one year, have a business bank account, a personal credit score of 550 or more, and minimum annual revenue of $10,000. Your average bank balance must be at least $1,500, and ideally $3,500 or more. National Funding is sensitive to lending to small businesses that have a history of excessive non-sufficient funds (NSFs), so if your business consistently runs out of cash throughout the month, they may not be the best lender. Instead take a look at the lenders listed in our recent article on businesses with challenged credit.

While National Funding provides bad credit loans too, they won’t give you a loan if you’ve had a bankruptcy in the past year, or have more than five non-sufficient funds (NSF) notices on your last three months of bank statements. You’ll need to provide a personal guarantee for your loan, but there’s no collateral required.

While it’s quick and easy to secure a small business loan through National Funding, if you’re looking for an equipment financing loan (often referred to as an equipment lease) you’ll likely find a different process, where underwriting is more in-depth and an average funding time of approximately 30-45 days. Equipment financing loans have slightly different requirements; you’ll need to show only six months in business, but you’ll also have to have a FICO score of over 650 , comparable credit reference (example of your business borrowing from another bank or financial institution), have no history of suits, liens or judgments, a mortgage or auto loan history and no late payments on any financial obligation personal or business-related.

National Funding lends to most industries, but its prohibited industries list includes:

Kabbage Lending Requirements

Like National Funding, Kabbage requires your business to have been operating for at least one year, but the minimum revenue requirement is much lower — you only need to show annual revenue of $50,000, or a monthly gross revenue of at least $4,200 for the past three months.

You also have to provide a personal guarantee in your loan agreement.

Kabbage loans aren’t available to business that operate in these industries:

Takeaway

Business owners with poor business credit and low personal credit will find it a lot easier to qualify for a loan with National Funding, as long as their business meets some bare minimum revenue targets and doesn’t have a history of non-sufficient funds (NSF) in their business bank account. . However, if you have strong credit but low gross revenue, you’ll find it easier to qualify for Kabbage funding.

Application and Underwriting Process

When you need a business loan, you don’t want to have to fill out reams of paperwork or wait days for a reply. You want a fast and simple application process.

National Funding

Applying for a loan with National Funding is easy. You complete a simple online application form, and then wait for your personal loan specialist to contact you and ask you more questions about your business and your funding needs.

It takes up to three days for National Funding to review your bank and business documents, but if you have everything ready to go, you can complete the process within one business day. Once your application is approved, funds are deposited in your bank account via ACH or Wire (additional fee may apply) in as little as 24 hours.

You’ll need to provide three months of bank statements, unless you’re applying for a merchant cash advance. In that case, you’ll need to show six months of credit card statement, and monthly credit card transactions of over $3,000. National Funding also runs a personal and business credit check.

Kabbage

Kabbage connects with your bank account to crawl your financial history for the information it needs. Don’t worry, the process is highly secure and Kabbage won’t be able to change anything in your accounts. ,

For loans of up to $200,000, the process is automated and you can get approval within minutes. If you’re seeking a loan of over $200,000, you’ll need to wait a little longer for a manual review, which can take up to several days.

Kabbage also asks for some basic information about your business, and runs a personal and business credit check.

Once approved, funds are available immediately.. If you’re managing your loan through a PayPal account, it only takes a few minutes before you can withdraw funds. Kabbage also offers a Kabbage Card, which functions like a credit card. You can withdraw funds from your Kabbage card immediately too. Loans deposited into your business checking account are processed in as little as three days.

Takeaway

It’s really easy to apply for a loan from both National Funding and Kabbage, and the process is fast with both lenders. That said, Kabbage’s automated process means that you could start withdrawing loan funds within minutes, which is quicker than National Funding.

Post-Funding

Getting a business loan is only half the process. You also care about how much you’ll have to pay in fees, whether there are any early prepayment penalties, and what happens if you need to borrow more or renew your business loan.

National Funding

With National Funding, you’ll repay your loan in automated daily or weekly repayments over a loan term of six to 15 months. When it comes to merchant cash advances, you’ll repay the loan through automated deductions of 10% off every transaction.

If you want to check up on the progress of your loan you’ll have to call the customer support center, because there is no iOs or Android application, nor does National Funding have an online loan dashboard.

Instead of charging monthly interest rates, National Funding charges a flat fee of 17%-36% of your loan amount, and you’ll repay that fee along with the principal in your daily or weekly payments. You’ll also have to pay an origination fee of 2% for a business loan, but there are no other hidden fees. One of the best things about National Funding is that not only are there no prepayment fees, you’ll also save 7% (6% for equipment financing) off your total remaining balance when you repay the entire loan within 100 calendar days.

It’s good to know that you can use your loan from National Funding for any business purpose you like, including covering payroll, land purchase, working capital costs, and more.

Kabbage

Because Kabbage offers a line of credit, you’ll only repay the amount that you withdraw, not the amount that you’ve been approved to borrow. Kabbage offers a flexible repayment schedule of six, 12, or 18 months on each withdrawal.

Every month, you’ll repay part of the loan, plus a monthly fee of between 1.25% and 10%, through automatic payments. Apart from this fee, there are no other costs for Kabbage loans, and no prepayment penalties. You will have to pay a late fee of $10— $100 on overdue payments, depending on the outstanding balance amount, but you’ll get a four-day grace period before the fee is applied.

Kabbage customer service is primarily online. It has an online loan calculator that helps you keep track of how much you’ve repaid and how much is left to pay, as well as the amount of funds that remain for you to withdraw. You can make withdrawals as often as you like, up until your maximum credit limit, and once you’ve repaid a withdrawal you can take out more funds again in the future.

Kabbage doesn’t place any restrictions on what you do with your loan. It’s yours to use however you like for your business. You can make repayments through your bank checking account or a PayPal account. Payments made through your bank take 1-3 business days to process and up to seven days to be reflected in your available funds, while PayPal payments are processed immediately.

Takeaway

The fees are high for loans through National Funding, and repaying loans on a daily or weekly basis instead of monthly could cause cash flow problems. But the generous discount for early prepayment is very appealing for anyone who expects to be able to pay off their loan quickly. In contrast, Kabbage is a much lower-cost lender, and makes it easy to extend your loan without having to reapply.

Reviews

The Working Capital team has prepared in-depth reviews of both Kabbage and National Funding with additional information.

You can find our National Funding review here. Our Kabbage review is available here.

Key Differences/Short Summary

National Funding and Kabbage offer very different business loan products. With National Funding you’ll get a short-term small business loan. Kabbage offers a business line of credit that allows you to make withdrawals whenever you need, up to your maximum credit amount. But Kabbage loans might be about to disappear. Both of them have fast application processes and allow you to use your loan amount for any business purpose.

Net Takeaway

If you have poor business or personal credit, or you need a larger loan amount up to $200,000, National Funding is your better option when compared with Kabbage. It’s fast to qualify and covers almost every industry. However, if you’re looking for the quickest possible lending process and lower fees, Kabbage is a better option.


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