As a borrower who doesn’t live and breathe the world of online small business finance, alternative lenders likely aren’t names that you’ve had the opportunity to get to know and trust. Not everyone has spent time analyzing Fundbox vs. Kabbage, or BlueVine vs. OnDeck. It’s true: These names weren’t plastered on the bank where you opened your first checking account as a teenager. Nor have they had a community branch in your neighborhood for years.
But working with online alternative lenders presents a great opportunity for business owners to obtain financing quickly, affordably, and under realistic qualification standards—something that for more than a decade now has been all but impossible through a traditional bank.
Without the opportunity to meet with these new lenders face to face, how do you know which online alternative lender to trust with your small business loan? If you’re comparing Fundbox vs. Kabbage, for example, how do you know which of these lenders will be the best choice for your business’s needs?
To start, you read to an article just like this one.
The nice thing about being an online small business loan marketplace is that we’ve matched thousands of small business owners with loans from dozens of lenders. (It’s quite literally our job here at Fundera.) All of those hours have allowed us to evaluate and review nearly every online lender that offers products for small businesses, and both Fundbox and Kabbage are lenders that we work with every single day.
Our borrowers can attest that both are fantastic companies to do business with. However, Fundbox and Kabbage offer very different loan products for different kinds of customers, so the best choice for you depends on your business’s unique needs and financial situation.
To help you evaluate Fundbox vs. Kabbage and identify the best choice for your small business loan, let’s break down how each of these lenders work, the loan products they offer, and what their own customers have to say.
All About Fundbox
For service-based businesses with a B2B (business-to-business) model, financing through Fundbox can be a great solution for maintaining positive cash flow while you await payment on one or several major invoices.
Fundbox is actually ideal for businesses in this situation because its reliance on the invoices themselves as collateral for your funding means that you’ll carry far less personal risk on the loan. And you’ll likely be offered a lower interest rate than you’d find with other loan products.
Before we go any further, here’s an at-a-glance look at the terms of invoice financing solutions from Fundbox:
- Loan Amount: $100-$100,000
- Loan Term: 12 weeks
- Loan Rates: Approximately 0.5% of invoice amount per week
- TrustPilot Score: 9.7/10
Sound like a potential fit? Here’s what you need to know about working with Fundbox for your small business loan.
Best for: B2B Companies Who Regularly Invoice Customers
Simply put, the Fundbox financing model is designed exclusively to finance B2B businesses on the basis of their outstanding invoices. So if you’re not a B2B, don’t use invoices to bill your customers, or if the amount of money you need to borrow doesn’t line up with your current accounts receivable, then Fundbox probably won’t be your best choice.
However, if you do invoice customers and are currently facing a cash flow challenge as you await payment on invoices, Fundbox could be your perfect fit. It offers one of the simplest, fastest underwriting processes of any lender—and unlike most invoice financing companies, Fundbox will advance 100% of your outstanding invoices.
From there, you’ll pay back the loan over 12 weeks with automatically withdrawn weekly payments and predictable fees. Fundbox doesn’t directly collect funds from your customers, so you maintain total control of your customer experience. And if your customers happen to pay their invoices ahead of schedule, you can pay off your loan early with no prepayment fee.
Best for: Companies Using Cloud-Based Accounting Systems
In order to obtain invoice financing from Fundbox, you’ll be asked to connect your accounting software directly to their system, granting Fundbox access to detailed analytics about your past invoices as well as your currently outstanding receivables.
Once your financing has been approved, this connection will also give Fundbox access to timely updates as your customers issue their payments.
Fundbox’s system is readily engineered to work with any one of these cloud-based accounting systems:
- QuickBooks Online
- QuickBooks Desktop
- Freshbooks
- Harvest
- Wave
- Xero
- SageOne
- InvoiceASAP
- Clio
5 Steps to Financing Through Fundbox
- Create a free Fundbox account.
- Connect your accounting software.
- Choose eligible invoices to finance. (These are called “clear” invoices.)
- Once you’re approved, an advance is transferred to your bank for the full amount of that invoice.
- Each Wednesday for 12 weeks, your account will be debited for payment.
Once you’ve been approved for initial invoice financing, you’ll be able to keep your accounting software connected to Fundbox and request a cash advance at any time. Simply select the invoice you want funded, and you’ll see the cash appear in your account almost instantly.
Fundbox’s Eligibility Requirements
The best news for business owners is that because of this unique invoice-based lending model, the financial standards to qualify for a loan from Fundbox are relatively limited. Here’s a quick glance at the average requirements you’ll need to meet:
- Minimum Time-in-Business: 3 months
- Profitability: No
- Collateralized: No (the invoice being funded is considered collateral)
- Personal Guarantee?: No
- FICO Credit Score: Fundbox doesn’t check your credit score
- Annual Revenue: Fundbox doesn’t check your annual revenue
- Entity Type: Any
As you can see, Fundbox can be a great option for businesses in need of a cash advance while awaiting payment on invoices. But as you make a borrowing choice for your own business, we wouldn’t expect you to rely on our word alone.
Instead, you can take a look at the hundreds of independent TrustPilot reviews of Fundbox from its existing customers to come to your own conclusion about this business financing option:
Saved My Business During a Difficult Time
They came through when no one else would. No credit check, just going on the health of the business from an analysis of my bank account. The modest funds they made available to me literally saved me, as a failed HVAC hit me hard. I’m trying to grow a small business, and access to funds like this as needed helped me fill a cash flow gap that occurs during the holidays. Thanks, Fundbox! Your support means a lot to me personally. You’ve done a lot of good, and helped at a difficult time!
—Mathnasium of North Manchester, New Hampshire, on 1/24/2018
When Fundbox Isn’t a Fit
Although Fundbox has few restrictions in terms of your credit history or your business’s financial qualifications, this lending solution certainly isn’t the right solution for every business.
Fundbox won’t be a good fit for your business if you:
- Have a B2C business model
- Don’t invoice your customers
- Won’t be able to repay the loan within 12 weeks
- Have individual invoices that are worth more than $100,000
All About Kabbage
If you need quick access to working capital for your business but don’t have the option to leverage outstanding invoices, Kabbage might be your perfect solution.
The primary loan product that Kabbage offers is a short-term line of credit. This works very similarly to a traditional credit card in that you’ll be approved for a maximum funding limit from which you can draw upon the balance as needed. You’ll only need to pay interest only on the funds you actually use.
Funds obtained through a Kabbage line of credit can be used for almost any business purpose—and because they aren’t tied to your business’s invoices or any other specific asset, the amount of money you can borrow is based only on your needs and financial qualifications. That flexibility is definitely a bonus, because anyone who knows small business knows it’s anything but predictable.
Here’s a topline, by-the-numbers look at Kabbage lines of credit:
- Loan Amount: $2,000-150,000
- Loan Term: 6-12 months
- Loan Rates: Flat monthly fee of 1.%5 to 10%
- TrustPilot Score: 9.3/10
Does this seem to potential match your business’s needs? Here’s a closer look at what it means to obtain small business financing from Kabbage.
Best for: Businesses That Need Quick Cash
As a lender, Kabbage is known for two things: speed and flexibility. This lender prides itself on making their application and underwriting process as quick, simple, and automated as possible.
The application process typically takes 1 to 5 days—and once your application has been reviewed and an offer made, you can have cash in your business bank account within minutes.
Along with the ability to obtain approval and funding quickly, Kabbage is also a useful choice for borrowers because their line of credit model offers the flexibility to use those funds only when you need them—you pay interest only on the amount of the loan that is actually outstanding at any given time.
You can pull from your pool of funds up to once per day, and Kabbage will then auto-draft payments from your business checking account according to a previously agreed upon schedule.
Of course, all of this speed and flexibility does come with a significant price tag. To minimize your interest rate, be sure to issue full repayment on your Kabbage line of credit as quickly as you can.
Best for: Borrowers with Poor Personal Credit
Kabbage is also a particularly great option for businesses that don’t have stellar credit. That’s because although Kabbage does check your personal credit score, it isn’t weighed as heavily as the rest of your business information.
Instead, Kabbage will request to connect electronically with one or more of your online banking, accounting, or merchant services accounts in order to evaluate your business’s recent financial history.
Here are a few examples of the accounts that Kabbage may consider:
- A business checking account
- eBay account
- Paypal account
- Amazon lender account
- Etsy account
- Yahoo account
- Square account
- Authorize.net account
- Sage account
- Stripe account
- Quickbooks account
- Xero account
Because you’ll be asked to connect at least one of your business’s financial accounts to the Kabbage system (you’ll have better odds if you do more, though), they will review your financial history carefully before making a decision. This offers Kabbage a more holistic view of the internal workings of your business.
Kabbage’s Eligibility Requirements
Along with helping you get cash into your bank account quickly, Kabbage is seen as a great option for many borrowers because of their relatively flexible qualification standards. Here’s a high-level look at what Kabbage’s general requirements in order to consider extending a line of credit to your business:
- Minimum Time-in-Business: 12 months
- Profitability: No
- Personal Guarantee: No
- FICO Credit Score: Kabbage doesn’t require a minimum credit score
- Minimum Annual Revenue: $50,000
In addition to these factors, Kabbage does have a few other eligibility requirements for its borrowers. You must be able to show a minimum average bank balance of $2,500, and you may not have filed for personal bankruptcy within the last calendar year.
That said, it is particularly attractive to borrowers that although Kabbage will review your personal credit history, there is no specific credit score that is required as a minimum in order to be eligible for financing.
And just like Fundbox, you can also read thousands of TrustPilot reviews of Kabbage from real customers to help take any fear out of going through the alternative lending process.
Customer Review of Kabbage
I found myself in a very difficult position unexpectedly, and I needed some funding quickly. I applied to Kabbage for a small unsecured loan. I had the needed money in my checking account within 2 days…and this was on a weekend. Great service. — Nancy on 1/22/2018
Fundbox vs. Kabbage: Making Your Choice
At its most simple, what you need to know for the comparison of Fundbox vs. Kabbage is that they work with two different loan types. Fundbox offers invoice financing, while Kabbage offers lines of credit. But the best part of both of these lenders? They both work with less established businesses as well as borrowers with less-than-stellar credit scores.
If you’re struggling to choose between Fundbox and Kabbage for your own financing needs, here are some quick and easy questions to ask yourself:
Have a B2B business model?
Fundbox
Is your business a B2C?
Kabbage
Do you have outstanding customer invoices?
Fundbox
Don’t use an invoicing system for customers?
Kabbage
OR Need to borrow more than your current outstanding invoices?
Kabbage
Can you repay your financing within 12 weeks?
Fundbox
Need a longer repayment term?
Kabbage
Most businesses will find themselves in need of a loan at some point—and it can be difficult to decide where to turn for that funding. Fortunately, both Fundbox and Kabbage can be a great option for business owners. And now that you understand what Fundbox vs. Kabbage can offer for small business owners and how they differ from each other each, it should be pretty simple to determine which will be the best fit for your business.
The post Fundbox vs. Kabbage: Which Is the Better Lender for Your Business? appeared first on Fundera Ledger.
from Fundera Ledger https://www.fundera.com/blog/fundbox-vs-kabbage
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