As part of our battle series we’re stacking two of America’s most successful online business lenders against each other. It’s Kabbage vs OnDeck as we compare which of these two online lenders has better products, which has easier lending requirements and who can offer the most value in additional business services. We’ll provide details on OnDeck’s recent acquisition and news of a planned acquisition of Kabbage by a global financial giant. To finish it off we’ll take stock of where these two lending giants are currently at with regards to new lending applications following the coronavirus fallout and determine who might be the best option to apply with right now. 

Kabbage vs OnDeck: Quick Comparison

OnDeck vs Kabbage: We choose OnDeck

Given that it’s not as easy to get an OnDeck loan compared to some of its competitors (600+ credit score, $250k+ annual revenue, and 3 years in business), it’s not a cheap option. However, with next-day funding, a 100% prepayment benefit, a 10-minute application process, and solid customer experiences, there are certainly many reasons to opt for OnDeck.

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Kabbage vs OnDeck: Products

When Kabbage launched its line of credit it was all about keeping versatility in mind  – clients would only have to draw on the portion of the credit line required and would only pay interest on this amount. The facility can be up to $250k but the term length isn’t quite as flexible as you would think – clients opt for either a 6, 12 or 18-month repayment schedule. As a result, it may not be the best solution for businesses who require short-term financing (say 1-3 months) as interest is calculated on a minimum 6-month borrowing term.

The interest rates from a Kabbage business loan do however start very low – they can be anywhere from 4% upwards. What’s more the Kabbage line of credit is unsecured, so there are no requirements to put up collateral against any drawdowns. The standard policy is for a business director to provide a personal guarantee against the loan. It must be noted Kabbage also operates a front-loaded fee structure where you will pay the majority of your repayment fees earlier in the loan terms. The Kabbage repayment schedule can see you paying slightly more of your loan back at first, and then smaller payments as you reach the end of your agreed terms – all of this is clearly detailed in the Kabbage loan offer though so be sure to read this in detail and be sure you business can match the repayment schedule.

OnDeck provides more versatility as it tries to accommodate different needs. Their loans range from a wider timeframe than Kabbage between 3 – 36 months, and they offer both loans and credit lines. Credit lines are maxed at $100k, whilst loans can be anywhere up to $500k — a very significant amount for SMEs and the 36 month repayment schedule is well above the industry norm for online business lenders. Just like Kabbage, the OnDeck line of credit allows borrowers to pay interest only on the amount they draw. The OnDeck line of credit has the same borrower requirements as OnDeck term loans but smaller amounts can be borrowed to plug short-term cash flow gaps.

Speed is paramount to both of these online lenders – a credit application shouldn’t take longer than 10 minutes, and you can receive next-day funding if you’re approved. Both Kabbage and OnDeck use their own algorithms to assess cash flow and the risk profile of the borrower, ultimately determining how much finance they can offer. 

Kabbage vs Ondeck: Additional Features

The core offering of these two lenders is very similar – Ondeck offers both a line of credit and term loan whilst the Kabbage line of credit actually works as a credit line/term loan hybrid. When you drawdown on a Kabbage line of credit you choose to opt for either a 6, 12 or 18 month repayment schedule so it works much like a loan.

In addition, both firms have played a big role in helping to administer the SBA and US Treasury Paycheck Protection Program. As a result, drastically increasing the availability of the program to small businesses and sole traders.

In terms of additional features though, it’s a strong area for both but it’s Kabbage that perhaps pips this one. Both Kabbage and OnDeck provide a wealth of resources that provide more clarity and transparency to borrowers in the lending process – ultimately meaning businesses are aware of the exact costs involved when agreeing to a loan and can make a measured assessment as to whether their business can afford the repayments. 

OnDeck, for example, has a dedicated small business resource centre on its website and has even led a multi-lender initiative to establish an association of innovative lenders. The association has launched a first-of-its-kind lending comparison tool named the Straightforward Metrics Around Rate and Total Cost, aka the SMART Box capital comparison tool. The SMART Box provides an extensive and standardized breakdown of loan costs – making comparisons with other loan offers much easier. All information is provided in an easy-to-read format, highlighting the key metrics which help borrowers make a decision on their loan offer. 

Despite these initiatives it is Kabbage which is in a league of its own though for additional features. Just like OnDeck, they have an extensive resource centre for businesses to access and learn more around business growth, business management and business lending. In addition to this Kabbage has also launched Kabbage insights – a free and intelligent analytics tool that helps businesses make cash-flow decisions fast and with confidence. This free tool by Kabbage analyzes businesses’ real-time data on a transactional level to provide visibility into past, present and future cash positions. And of course we can’t fail to mention the Kabbage checking account and Kabbage payments solution either. The Kabbage checking account is an online savings account offering 1.1% annual interest (not bad at all for a simple savings account in the current climate) whilst Kabbage payments allows small businesses to accept card payments with a 2.25% transaction fee.

Kabbage vs OnDeck: Current State of Play

Kabbage, traditionally marketed around its credit line offering, is having to take a change of tact in response to the coronavirus pandemic. No doubt its existing customers are utilising their credit lines more than ever, and this may be the reason why the company turned its focus in April 2020 to its sole objective – processing PPP loans. Following the aftermath of COVID-19, Kabbage made the decision to close its new lending operations and only assist businesses seeking urgent help via the Government-backed Paycheck Protection Program. In total, Kabbage has lent over $3.5 billion through PPP, surpassing its total lending volumes for 2019, which totalled $2.8bn. Though, undoubtedly, the firm is making significantly less on loans issued through the Paycheck Protection Program then its usual lending operations. Still, it’s one of the largest amounts to be issued by an online lender through PPP, and a testament to the firm for getting stuck in at a time when small businesses need help – some 80% of the loans approved were for businesses with five or less staff. All very good when you consider banks were given a head start in issuing PPP loans too – online lenders only receiving approval once most of the initial $350 billion in government-backed funding went dry. 

In recent developments, it is being reported by numerous media outlets that Kabbage is set to  be acquired by American Express, in a $850 million deal. A testament to the underlying capabilities of Kabbage, even when it is having to reprioritise its focus following the coronavirus pandemic.

OnDeck, meanwhile, was acquired by the lending conglomerate Enova on July 28th, 2020 for $90 million. The firm, listed on the New York stock exchange, runs a number of private and business lending brands in the US and Brazil. In total, Enova has assisted nearly 7 million customers around the globe access more than $20 billion in financing. In terms of what it means for OnDeck customers, there will be no changes to existing loans as a result of the acquisition, the OnDeck brand will remain and all existing loans will continue uninterrupted with OnDeck. OnDeck hasn’t been immune to the coronavirus pandemic either and the acquisition will be welcomed by investors, and means new customers can still apply for both an OnDeck line of credit and an OnDeck term loan. In a time when credit is becoming increasingly difficult to attain this is great news for small businesses who are still in need of finance.

Kabbage Vs OnDeck: Our Take

Through uncertain times, both Kabbage and OnDeck have shown their dedication to small business in their commitment to the Paycheck Protection Program. Without online lenders such as Kabbage and OnDeck pushing for involvement in the SBA program, it’s likely that many small businesses wouldn’t have received the urgent PPP funding which they have now been issued. As a result of these unique times, Kabbage is no longer offering new credit lines but the rumours of an $850 million acquisition by American Express shows just how much pedigree this online lender has. We’re sure their full lending capabilities will be back soon. OnDeck has acted fast and through its own acquisition by Enova it continues to offer both credit lines and a line of credit with no changes to its broad and comprehensive small business offering. Kabbage vs OnDeck? Right now it has to go to OnDeck.

OnDeck vs Kabbage: We choose OnDeck

Given that it’s not as easy to get an OnDeck loan compared to some of its competitors (600+ credit score, $250k+ annual revenue, and 3 years in business), it’s not a cheap option. However, with next-day funding, a 100% prepayment benefit, a 10-minute application process, and solid customer experiences, there are certainly many reasons to opt for OnDeck.

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