Kabbage vs OnDeck 2020

Kabbage vs OnDeck: Which Lender Is Best for Your Business?

By Sarah Davis
Advertiser disclosure

Kabbage and OnDeck are among the most popular and well known online lenders. Both have excellent reputations and were among the first disruptors in the alternative lending space. Following the 2008 crisis where banks could no longer lend small businesses a hand, these lenders helped to fill the financial void.

The automated application process plays a huge role in their continued success. This allows clients to fill out an online form in 10 minutes and see whether or not they qualify. The eligibility criteria are also far lower in comparison to banks.

However, there are still many differences between companies in the online lending space. There can be a large degree of variance in terms of rates, penalties, customer service, and minimum qualifications. Let’s take a look at some of these differences below.

Short in time? Quick Comparison

KabbageOnDeck
Funding Time
Max Loan Amount
Loan Options
Reputation
Customer Service
Analytics and Dashboards
Application Criteria
Website
ReviewFull Kabbage reviewFull OnDeck review
Kabbage Pros

  • Smooth Application Process
  • Credit Bureau Reporting
  • Low Minimum Qualifications
  • Excellent Mobile Application And Dashboard
  • Short Funding Time
  • Business Credit Card

OnDeck Pros

  • Smooth Application Process
  • Credit Bureau Reporting
  • Fantastic Customer Service
  • Very Reputable Lender
  • Short Funding Time

Kabbage Cons

  • Low Maximum Range
  • No Term Loan

OnDeck Cons

  • Daily Payment Schedule
  • High Minimum Requirements

What Are The Primary Differences Between Kabbage and OnDeck?

While both lenders have similar functions, they have distinct target markets and unique loan products, with specific terms and conditions. The biggest point of distinction is that Kabbage is a 100% fully automated lender, while OnDeck requires a phone call and a more manual process.

This might seem like a slight difference, but it is quite profound. OnDeck provides more of a personalized approach with its customers while Kabbage operates purely on an algorithmic method. You simply link up your bank account or accounting software and the process is automated depending on some other criteria (credit score, annual revenue, etc). This is not an advantage or disadvantage, just a different mode of operation.

The target markets of both lending providers also differ. OnDeck only caters to businesses that have an impressive track record with a stronger credit rating. In contrast, Kabbage tends to accept a wider range of applicants. OnDeck offers higher loan amounts in comparison to Kabbage, but its lending process and eligibility criteria tend to be harder to meet.

Another big difference is that Kabbage fees are paid monthly while OnDeck fees are paid weekly or daily. This can be an advantage or a disadvantage. But with the weekly and daily repayment schedule, loan applicants must ensure that they always have the appropriate funds in the account to avoid a late payment penalty. The benefit is that the daily repayment schedule can be superior for credit reporting in certain instances.

Kabbage vs OnDeck Loans Compared

Kabbage

While OnDeck only offers the 12-month line of credit, Kabbage offers a 6, 12, and 18-month line of credit. A line of credit is used as you need it for general purposes. The benefit is really that the line is available if something comes up.   The Kabbage line of credit extends to $250,000 while the OnDeck line of credit only extends to $100,000. This may not be enough for certain companies. Kabbage only offers a single kind of product, leaving it at a disadvantage in comparison to OnDeck.

OnDeck

While Kabbage only offers the business line of credit, OnDeck offers both the line of credit and the term loan. A line of credit and a term loan are not the same. The term loan is a fixed loan with specific payment periods. For instance, you might want to take out a loan to pay for fixed assets for a restaurant. You could get a $20,000 loan upfront with a fixed repayment schedule. The purpose of the loan is fixed. A line of credit is an available ‘line’ that can be drawn upon as needed. While the line of credit is taken out on a ‘just in case’ basis, the term loan is taken out for a very specific reason – such as the purchase of fixed assets, inventory, or equipment.

Winner: OnDeck – OnDeck offers more loan options in comparison to Kabbage.

Kabbage
Kabbage 
OnDeck
OnDeck
Products OfferedLine of CreditLine of Credit, Term Loan
Loan Amount Max$250,000 for Line of Credit$100,000 Line of Credit
$500,000 Term Loan
Funding TimeWithin 1 Business DayWithin 1 Business Day
Loan Length6, 12, or 18 months (Line of Credit)12 Months (Line of credit)
12 – 36 Month (Term Loan)
Application Speed10 Minutes10 Minutes
Automated ApplicationFully AutomatedAutomated and Phone Call
Repayment ScheduleMonthlyDaily or Weekly

Minimum Qualifications

Kabbage

Practically any small business should qualify for the Kabbage line of credit. All that is required is a year in business with $50,000 in annual revenue. This should be enough for most businesses, Also note that loans over $100,000 require 3 years in business with Kabbage, not 12 months. This fact is not well advertised and could misguide applicants. For loans with both Kabbage and OnDeck, a personal guarantee and business bank account are required. This is the case with practically all online lenders. However, OnDeck will additionally file a UCC-1 blanket lien upon loan acceptance.

OnDeck

OnDeck is far more difficult to meet the minimum criteria, in comparison to Kabbage. What’s more, is that OnDeck very recently updated its qualifications to make them even higher. Be aware that many online reviews are still quoting the old, lower requirements for OnDeck. It is now three years in business to qualify for an OnDeck loan, and not two. And the minimum annual revenue has been increased to $250,000, not $100,000. The requirements for the OnDeck term loan are identical to the line of credit. This is another recent change with this provider, that used to have separate criteria for the two products.

Winner: Kabbage – Kabbage minimum qualifications are easier to satisfy in comparison to OnDeck.

Kabbage
Kabbage Line of Credit
OnDeck
OnDeck Line of Credit
Minimum Credit ScoreNone (540 recommended)600
Minimum Time in Business1 Year (3 if above $100,000)3 Years
Minimum Annual Revenue$50,000$250,000
Personal GuaranteeYesYes (+UCC-1 Lien)
CollateralNoNo
Business Bank AccountYesYes

Rates & Penalties Compared

Kabbage

Kabbage has also adopted the Smart Box model, and is now equally opaque in its fees. The estimated APR for Kabbage loans is 24% – 99%. While this might seem like a large range, this is how the industry works. There are many loan options and loan durations to take into account. And there are many businesses with different credit histories to account for. When considering rates and penalties, there are many reasons that the APR is misleading. A lender that has low eligibility requirements will facilitate borrowers that are less creditworthy. To offset this risk, the interest rate will naturally be higher. So to say a borrower has a higher average interest rate is misleading unless all other factors are accounted for.

OnDeck

When it comes to rates and penalties, OnDeck is certainly ahead of the curve. OnDeck was a pioneer in using the ‘Smart Box’ model. This is a very simple (but useful) model that lets customers know how much they are going to be paying on their loans. This model allows for easy comparison of various loan types with an all-inclusive APR rating. OnDeck charges a 0 – 4% origination fee on its term loans. This origination fee is often reduced for people that return to OnDeck. OnDeck has a very loyal following and 80% of people return to OnDeck for a second loan.

Winner: OnDeck – The rates are a little cheaper with OnDeck on average, but by a tight margin.

Kabbage
Kabbage Line of Credit
OnDeck
OnDeck Line of Credit
Origination FeesNoNo
Maintenance FeeNo$20 (monthly)
Prepayment PenaltiesNoNo
Withdrawal FeesNoNo
Late Payment PenaltiesLess than $100 – $10
$100 – $5,000 – $35
Greater than $5,000 – $100
Unknown
Average APR Range24% – 99% (1.5 – 10% each month)11% – 63% (weighted average is 35%)

Which Lender is Cheaper?

Due to the complexities of understanding loan interest rates, it can be hard to give exact figures. Different lenders use different criteria for the purpose of evaluating loans. It’s best to look into the distinct fees and charges of each lender to make an informed decision. The APR can always range from around 9% – 99%.

There is little standardization between lenders in terms of how fees are calculated. It helps to know that the lowest rates are very seldom granted, and then only to the very best of applicants. An APR between 20% – 40% is far more common.

Kabbage

Kabbage only has one all-encompassing fee, which is a huge advantage. APR rates alone can be misleading, as other fees can skew this figure. Kabbage prefers to use the term ‘monthly fee’ for all charges so you can understand exactly how much you will be paying each month. With Kabbage, there are no prepayment penalties, no origination fees, and no maintenance fees. Just one single monthly rate.

OnDeck

OnDeck displays its average APR fees on its main page. However, this does not mean cheap. The weighted average APR for OnDeck term loans is 49.06% while the weighted average for the lines of credit is 35.2%. Similar to Kabbage, you can easily see what you will be paying each month. OnDeck charges origination fees and maintenance fees for its line of credit product.

Winner: OnDeck – When all is said and done, OnDeck is the cheaper lender on average, but Kabbage has the easiest fee structure to understand.

Which Has a Smoother Application Process?

Kabbage

With Kabbage, the process is 100% automated without manual review. This makes the entire application more streamlined. All things considered, Kabbage wins out when it comes to the application process. However, OnDeck only does a soft pull on your credit rating during the application process. In contrast, Kabbage does a soft and then a hard pull on your credit rating. The difference is that a hard pull can have an adverse effect on your credit score, even if it’s not very serious.

OnDeck

Both applications should take less than 10 minutes to complete, only requiring basic information (social security number, business name, Tax number, bank statements, etc). However, OnDeck will need to give you a call for additional verification and information. Additionally, you will have to supply more information with OnDeck in comparison to Kabbage. But this is to be expected. OnDeck issues larger term loans for more reputable borrowers and needs to verify them.

Winner: Kabbage – Kabbage has a smoother application process, though OnDeck also rates very highly in this regard.

Underwriting Process Comparison

Kabbage

With Kabbage, the loan underwriting process is completely automated. You can get approved within minutes, and then you will see the terms and conditions of the loan. You then choose to accept/reject the agreement, and the capital will be delivered to either your business bank account or a PayPal account (whichever you prefer). After the offer has been accepted, Kabbage pulls a hard credit check on your score. You’ll also need to sign a personal guarantee.  Both businesses are registered with the Better Business Bureau (‘BBB’) and the Innovative Lending Platform Association.  OnDeck has a better rating with the BBB as an A+ business.

OnDeck

With OnDeck, the underwriting process is a little more rigorous. After you have filled the outline form and talked to a representative (also sending the required documentation), OnDeck pulls a soft credit check. OnDeck places a larger emphasis on the credit score in comparison to OnDeck. If an offer is made, you will be sent a Smart Box with the loan terms and conditions. You then accept and sign a personal guarantee. OnDeck then files a UCC-1 blanket lien on your business.

With OnDeck, the loans are issued by Celtic Bank, who are registered in Utah and a member of the Federal Insurance Deposit Corporation (‘FDIC’). Kabbage loans are also underwritten by the same bank – Celtic Bank.

Winner: Kabbage – The Kabbage underwriting process is a little more streamlined.

Customer Reviews & Feedback

Kabbage

Kabbage also has excellent reviews on multiple review sites, with a 4.5 rating on TrustPilot out of over 6,000 reviews. The most commonly cited attributes are the fast funding time (quoted as less than 7 minutes to funding upon approval) and the ease at which the line of credit can be extended. Because Kabbage rolls all fees into one monthly package, customers are satisfied with what they have to pay and are not ‘caught out’ with extraneous fees. Kabbage is also an excellent provider to use for businesses looking to increase their credit score quickly. The support is very responsive and is easy to call or email. They try to respond to all queries within 24 hours.

OnDeck

Both Kabbage and OnDeck are loved by their customers. OnDeck has an especially high rating by its clients, as it places an emphasis on customer service. Each client gets assigned a personalized representative with the company who they can talk to about their loans. 80% of customers end up returning to OnDeck. The most common praise of OnDeck is in relation to the professionalism of its support team. This is where it really shines. It has a 4.9 star rating on TrustPilot out of over 2,400 reviews and customers are raving about the quality of service.

Winner: OnDeck – OnDeck is probably the most reputable and well-liked online lender in the marketplace. Customers love this provider.

When to Choose Kabbage

Kabbage is ideal for a small business that is just starting out and needs a revolving line of credit as an extra safety net for general expenses. The advantage of having a line of credit is that you can pay it off and use it over and over and over. This can be contrasted to the term loan, which is taken out for specific purposes. With the term loan, you would need to take out another loan if you needed the money for a different purpose. This can get complex quite quickly for a rapidly expanding business.

Kabbage can provide small business owners with a $250,000 line of credit after a 10-minute application process. The line can become available instantly. This kind of capital can really help to accelerate the growth of a new business. The eligibility requirements are so low that practically anyone can qualify. This is where it shines. Simple, no-hassle finance for nearly every small business.

In sum, Kabbage is the default option for a small business that is just starting out and that does not have a strong credit history or annual revenue. The line of credit is the perfect form of security against any issues that could arise during the course of business expansion. Another benefit of Kabbage is its slick technology – the mobile application, desktop application, and dashboard are very intuitive with easy integration.

When to Choose OnDeck

OnDeck is perfect for small businesses that have some experience. They only accept businesses with a 3-year history, $250,000 in annual revenue, and a 600 minimum FICO score. This means that only established businesses are going to get the opportunity to benefit from this provider.

But they are the best option for small businesses that have a profitable long-term model. This is for two main reasons:

  • OnDeck offers an amazing level of customer service that is unmatched by any other provider.
  • OnDeck offers lower rates than the vast majority of other providers for its services.

So OnDeck offers quite a lot, once the minimum criteria are met. The application process is also very streamlined. On top of the line of credit, OnDeck also offers the term loan. So if you have a specific purpose that you want to use the capital for, OnDeck is the only option. These purposes can include the purchase of fixed assets or working capital. You can also take out a term loan and a line of credit, if this is what your business is looking for.

Keep in mind that both lenders are not the cheapest available – you can expect to pay significant interest rates on the loans that you do take out. Read the terms and conditions of each loan (especially the fee breakdown) before you accept the offer. Saying this, if you are really looking for a no-hassle loan quickly, then OnDeck and Kabbage are both ideal.

Bottom Line

Both Kabbage and OnDeck are very popular providers in the online lending space. They are separated mainly by their eligibility criteria. If you are a new business just starting out, then Kabbage is perfect. If you are an established business older than 3 years with $250,000 in annual revenue, then go with OnDeck.

If you are not certain on either of these two lenders, we have plenty of alternative options available. We can also walk you through the process and help you understand the complex arena of interest rates and payment conditions. It’s easier than you might think.

Sarah Davis
Sarah Davis
Sarah Davis is a business executive specializing in mergers and acquisitions, corporate finance, and international law. She achieved her MBA from Cornell University after completing a legal undergraduate at UC Berkley. Sarah runs her own business consultancy firm in tandem with working alongside the FinImpact team.