Kabbage is one of the leaders in small business lending and recently announced custom loans for their Kabbage Payments customers. By way of background Kabbage Payments allows for businesses to invoice customers, accept card payments and manage customer and item information
When we think of short term loans in small business lending we often think 6, 12 or 18 month terms, but the new loan program will offer loans as short as 3 days and up to 45 days. It aims to solve for the cash flow challenges many small businesses face.
Borrowers will have the ability pay the loan back when the loan matures or as an alternative to allocate a percentage of Kabbage Payments revenue towards the balance over the term. If opting for the latter the borrower will pay any remaining balance at the end of the term. These custom loans have a one time fee starting as low as 0.1%.
CEO Rob Frohwein provided this statement in the press release:
We’re changing the dynamics of cash flow for small businesses by integrating solutions that help them quickly settle payments and access flexible funding to better manage their businesses.
It is amazing today the number of options that small businesses have for financing. It would have been hard to imagine a decade ago that a small business could get a loan for such a short duration and that it would be financially feasible for a small business lender to provide these loans. With this new product the main alternative for a small business lender is a credit card.