Kabbage vs. LendingClub: Which Lender Is Better for Your Small Business?

Kabbage vs. LendingClub: Which Lender Is Better for Your Small Business?

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Small business owners now have more options than ever to get a business loan. Business owners can now apply online for a loan at lenders like Kabbage and LendingClub, and many online lenders have more lenient eligibility criteria than banks or credit unions. For business owners thinking about getting an online business loan, we compared the benefits and drawbacks of taking out a loan through Kabbage and LendingClub and which lender is better in certain situations.

Kabbage vs. LendingClub Summary

If you’re looking for a quick comparison between these two lenders, we’ve summarized what each lender is best for in the table below. Generally, Kabbage is better for quick or short-term loans whereas as LendingClub is better for larger and longer-term loans. We also look at the minimum eligibility criteria required to qualify at both Kabbage and LendingClub. Finally, we summarize the loan products that each lender offers, including the loan amounts, terms, repayment options, fees and rates.

Better For
  • Short-term loans
  • Fast business loans
  • Business loans for bad credit
  • Large business loans
  • Long-term loans
  • Business loans for good credit
Minimum Age of Business12 months
  • 12 months
Minimum Annual Revenue$50,000 in annual revenue$50,000 in annual sales
Minimum Credit ScoreNone620
Personal GuaranteeNoYes
Other RequirementsNoneBusiness loan:
  • Minimum personal credit score: 620
  • Minimum annual revenue: $50,000
  • Minimum time in business: 1 years
  • Borrower owns at least 20% of business
  • No recent bankruptcies or tax liens
Products OfferedLine of credit
  • Business Loan
Loan Amount Range$2,000 - $250,000$5,000 - $150,000
APR Range20.00% - 80.00%5.99 - 29.99%
Loan Terms6, 12 or 18 monthsOne, two, three, or five years
Repayment OptionsMonthlyMonthly
Prepayment PenaltyNoNo
Funding TimeAs fast as same dayAs fast as five days
Apply NowApply at KabbageApply at LendingClub

When to Use Kabbage Over LendingClub

Kabbage may be a better option than LendingClub if:

  • You have poor to fair personal credit
  • You need money quickly
  • You want a short-term loan
  • Your business is less than 2 years old

LendingClub requires borrowers to have at least fair credit (typically at least 620), so it’s not ideal for those with lower personal credit scores. Kabbage, on the other hand, does not require borrowers to have a specific credit score. Instead, Kabbage evaluates your company based on time in business and financials -- the more revenue and cash flow you have, the higher your chances of getting approved. So if your credit isn’t great, but your business has strong revenue, Kabbage will be a better option for getting a small business loan.

Kabbage can also get you money much quicker than LendingClub. If you have a PayPal account, Kabbage can deposit your funds in as fast as the same day (or up to three days if you prefer to use a business bank account). Because LendingClub is a marketplace lender, it can take up to one to two weeks before investors fully fund your loan offer. If you need money within one to three days, Kabbage is the clear winner here.

If you prefer to pay back your loan over a shorter period of time, Kabbage offers terms of six or 12 months. The minimum terms for LendingClub are 25 months for a line of credit and one year for a term loan. For those borrowers that a want a short-term line of credit, a Kabbage line of credit makes more sense than a two-year LendingClub line of credit. However, there are no prepayment penalties with either lender, so you can make either loan shorter by prepaying your loan balance.

Borrowers with business less than two years old will not be able to qualify at LendingClub, but borrowers can still qualify at Kabbage if their business is at least one year old. Unlike your credit score or revenue, the age of your business is not something you can easily change or increase (as it only improves with time!). While lenders may be flexible on some eligibility criteria, time in business is a criterion that most lenders require their borrowers to meet. Kabbage is the only option available between the two if you’ve only been in business a year.

When to Use LendingClub Over Kabbage

LendingClub is a better option than Kabbage if:

  • You want a term loan instead of a line of credit
  • You can afford to wait for funds to get a lower APR
  • You need more than $150,000
  • You want a longer-term loan

Kabbage doesn’t offer term loans, so LendingClub is the sole choice between these two lenders if you want a term loan. LendingClub offers term loans with terms between one and five years and monthly repayment. Because of the longer terms, these loans can be used for serious investments in your business, such as long-term equipment purchases, large inventory purchases or business expansion. On the other hand, the lines of credit at Kabbage are more suitable for short-term working capital or seasonal inventory needs.

As mentioned previously, LendingClub does take longer to fund your loan offer because it is a marketplace lending partner. However, if you don’t need fast access to cash, you may be able to get a lower APR through LendingClub, especially if you have good to excellent personal credit. APRs at LendingClub range from 7.77% to 35.11%, while the rates at Kabbage start at 20% and can be as high as 80%. The bottom line here is that for borrowers who can afford to wait, you may save on interest by taking out a loan through LendingClub.

If you need to borrow more than $150,000 or want a long-term loan, your choice between the two lenders is clear -- LendingClub is the only one of the two that offers loan amounts higher than $150,000 and terms longer than one year. Through LendingClub, you can borrow up to $300,000 through a line of credit or a term loan. For its term loans, you can choose a maturity between one to five years, and the term for its line of credit is fixed at 25 months. If you prefer to repay your loan over the course of several years, then LendingClub is the better choice.

How to Choose Between Kabbage and LendingClub

Before you consider choosing between the two lenders, you should see if your business meets each lender’s eligibility criteria. Both lenders have specific time in business and revenue requirements that you must meet to be eligible: Kabbage requires one year in business with $50,000 in annual revenue for lines up to $100,000 while LendingClub requires two years in business with $75,000 in annual revenue. In addition, LendingClub also requires borrowers to meet certain credit score thresholds (at least 620) and requires that borrowers own at least 20% of the business. If you are not eligible, you’ll need to look at other lenders whose criteria you do meet.

For eligible borrowers, next consider how much money you need, what you want to use it for and when you need it. For instance, Kabbage may be a better choice if you need an emergency line of credit for $50,000. LendingClub, on the other hand, may be better if you are planning on opening a new business location. In general, lines of credit and short-term loans are more suited for smaller or recurring business expenses, daily working capital or cash flow gaps. Long-term loans are generally better for large, one-time investments in your business. Finally, think about how quickly you need the money. LendingClub may take up to two weeks to fund your loan, whereas Kabbage takes one to three days.

Once you apply, and if you are approved for loan, look at the loan amount, maturity, APR, repayment schedule and total cost of capital. You should know how much you will pay back over the life of the loan and how frequently you will repay your loan. Some businesses may prefer to get a higher APR in exchange for a shorter term, and some companies may prefer to make daily repayment as opposed to monthly repayment. These are all factors you will need to consider. You will also need to consider the fees that each lender charges and any stipulations in the loan contract. Are there origination fees? What are the late payment, NSF or prepayment fees? Are you required to personally guarantee the loan? Are there any ways you could void the loan? Make sure to carefully read and understand your loan agreement before signing.

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Justin is a Sr. Research Analyst at ValuePenguin, focusing on small business lending. He was a corporate strategy associate at IBM.

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