If you’re looking for financing fast, you could try a short-term small-business loan or a business line of credit from Kabbage or OnDeck. Unlike a traditional bank loan — which takes time, great credit and, often, collateral, these online lenders promise quick funding, minimal paperwork, easy application and higher approval rates.
Here’s a comparison of the two lenders to give you an idea of which one may best suit your small business.
 |  |
|---|---|
| $5,000 to $500,000 for term loans Up to $100,000 for lines of credit | $2,000 to $100,000 |
| 9% to 98% for term loans 14% to 36% for lines of credit | 32% to 108% APR |
| 3 to 36 months for term loans 6 months for lines of credit | 6 or 12 months |
| Funding as fast as 24 hours, but typically in a few days to a week | Approval in less than 10 minutes, with funding immediately to a few days |
| • At least 1 year in business • $100,000+ annual revenue for term loans and $200,000+ for lines of credit • 500+ personal credit score for term loans and 600+ for lines of credit • No personal bankruptcies in past 2 years • Jump to more OnDeck details | • At least 1 year in business • $50,000+ annual revenue • Must have a business checking or online payment platform • Jump to more Kabbage details |
| • Expansion • Working capital • Businesses with consistent sales | • Working capital • Covering day-to-day expenses |
Should you choose Kabbage or OnDeck?
When to go with OnDeck: With borrowing amounts up to $500,000 and repayment terms stretching to 36 months, OnDeck term loans are better for business expansion, such as buying inventory, renovating real estate or hiring employees. Businesses with consistent sales or those that prefer smaller, more frequent repayments should also go with OnDeck, as the lender requires daily or weekly repayments.
When to go with Kabbage: Kabbage is a better for bad credit borrowers. The lender does not have a minimum credit score requirement (compared with OnDeck’s 500 credit score minimum for term loans and 600 minimum for lines of credit). It’s best for working capital and managing ongoing expenses. Kabbage is also best for businesses that are seasonal, with more lumpy sales, or that prefer larger, less frequent repayments, as the line of credit is repaid monthly.
Kabbage is a good option if:
- You have bad personal credit
- You need fast cash for working capital
Kabbage offers a line of credit repaid over six or 12 months. Credit line amounts range from $2,000 to $100,000. (Read our review.)
Speed: The online application process can take less than 10 minutes, with no documents needed and a loan decision on the spot. You can get funds immediately or in just a few days, depending on how fast Kabbage can verify your business data and bank account and on your method of receiving the cash. A direct transfer to your bank via your debit card or an instant transfer to your PayPal account is faster than an automatic deposit to your bank.
Minimum qualifications: You’ll need to have been in business at least one year, have annual revenue of at least $50,000 and a business checking account or online data source such as PayPal or QuickBooks. Find out more about the application process in our step-by-step guide.
Costs: You must repay money you borrow from a Kabbage line of credit monthly over six or 12 months. Each month, you pay a percentage of the amount borrowed (the principal) plus a fee, from 1% to 12% of the total loan.
With the six-month plan, the fee is higher in the first two months (up to 12%), before dropping to 1% in the remaining four months. With the 12-month plan, the fee is higher in the first six months, before dropping to 1% for the remaining six months.
The annual percentage rate for a Kabbage line of credit is from 32% to 108%. APR measures the true cost of borrowing, with all fees and interest included.
There are no early-payment fees, and if you do pay off early, you’ll save on fees. Since you pay most of the fees in the first two months in the repayment schedule for the six-month option, the savings would be minimal. Repaying early makes more sense with the 12-month option, but only if you repay it within the first six months.
Best uses: With a line of credit, you borrow money only when you need it and pay interest only on what’s borrowed. This makes Kabbage a better option for working capital and for covering day-to-day expenses, such as payroll and inventory.
OnDeck is the best option if you:
- You need fast cash for an expansion or for working capital
- You need to borrow more than $100,000
OnDeck offers term loans, which provide a lump sum of cash at closing that is repaid daily or weekly, and a line of credit. Term loans range from $5,000 to $500,000, with repayment terms of three to 36 months, while credit line amounts go up to $100,000, repaid over six months. (Read our review.)
Speed: The application process is simple and takes about 10 minutes, with a loan decision in minutes and access to funds in as little as 24 hours. You can apply online on the company’s website or by phone. Find out more about the application process in our step-by-step guide.
Minimum qualifications: To qualify for an OnDeck term loan, you’ll need to have been in business at least one year, earn a minimum of $100,000 in annual revenue and have a personal credit score of 500 or better, with no personal bankruptcies in the past two years. A personal guarantee also is required, and the company may file a lien on the assets of the business so it can take ownership of those assets to repay the loan if you default.
For the line of credit, you need to have a majority owner with a minimum personal credit score of 600 and minimum annual revenue of $200,000. OnDeck’s line of credit also requires the borrower to sign a personal guarantee. Unlike OnDeck’s term loans, its lines of credit do not require a lien on your business’s assets.
Finally, your business cannot be on the restricted industries list, which includes banks, real estate brokers, property managers, tax preparation services, auto sales and attorneys.
Costs: The APR of OnDeck’s term loans is 9% to 98%, which includes an origination fee of 2.5% of the total loan amount. The fee drops to 1.25% for your second loan and 0% for all loans thereafter.
You repay OnDeck term loans either daily or weekly, and payments are deducted automatically from your business bank account. The company doesn’t charge prepayment penalties and now offers prepayment options that include potential interest reductions if you pay early.
The APR of OnDeck’s lines of credit is 14% to 36%. Each individual draw on the credit line is repaid weekly over six months.
Best uses: OnDeck’s term loans are generally better suited for business owners who need a significant amount of money to buy equipment, open a new location, hire employees or make a large inventory purchase. Its lines of credit are a good option for businesses that need working capital or to handle unexpected costs.
Steve Nicastro is a staff writer at NerdWallet, a personal finance website. Email: Steven.N@nerdwallet.com. Twitter: @StevenNicastro.
To get more information about funding options and compare them for your small business, visit NerdWallet’s best business loans page. For free, personalized answers to questions about financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.
This post was updated May 27, 2016. It was originally published May 25, 2015.
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