Kabbage: cash gets your business moving
Convincing anyone to give you an advance payment, especially a financial services institution, is an uphill battle. Traditional lenders are already becoming stricter on who they give funding to, and there are usually a lot of required steps that companies have to go through before they receive capital. Kabbage, a company that provides capital advances to businesses seeking funding, hopes to make it easier for entrepreneurs to access the money they need in order to increase revenues.
As business owners start to make their Kabbage profiles, the site will ask them for information including the channels in which its products are sold as well as proof of past revenues. Interested applicants must use Ebay, Shopify, Amazon, Yahoo or Etsy in order to qualify for funding from Kabbage, and the more marketplaces they operate in, the larger amount of capital they are eligible to receive.
The site also looks at a business’s social media presence and customer engagement initiatives as those with a stronger social media plan are likely having more frequent conversations with customers, which can lead to increased sales.
How Kabbage funding works
After inputting this information, Kabbage lets you know how much capital you are eligible to receive, and from there, interested applicants can opt to receive funding. A cash advance is typically given with a 6-month payment timeline, and the amount owed each month is equal to the monthly payment plus a small percentage of the amount advanced – usually around 1-7 percent depending on the company’s revenues and Kabbage score. There’s no penalty for paying off the amount owed early, and unlike a loan, users of the site don’t pay accrued interest or other financing costs.
If all goes according to plan, business owners take the advance, invest into high-growth areas of their business and then take resulting profits to pay back the amount owed. The Kabbage platform seeks to establish a relationship with innovative business leaders by fronting needed capital that will allow them to make aggressive investments that will result in pronounced growth in the market.
From that, entrepreneurs benefit from having a reliable source of capital should they ever need it, and have the potential to be awarded lower rates than if they were to take out a loan from a traditional financial services institution.