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Kabbage funding service provides quick capital to small online businesses

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Kabbage Working Capital

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For many individuals, fresh business ideas are a regular occurrence along with the tempting desire to pursue one or two of them occasionally. What holds back some would-be entrepreneurs are their present financial situations. Perhaps you might not have enough funds on hand to get a small online gig off the ground and need a nudge of capital inflow to overcome the initial expenses inherent with jump starting business endeavors.

The Kabbage Working Capital service was created with that very issue in mind and while it is certainly no substitute for the more conventional bank business loans, it can potentially alleviate some of the initial financial burdens an individual would face with a small to medium sized eBay or Amazon store.

The service is aimed squarely at online businesses, especially merchants, as evidenced by their business model. All prospective registrants must have a PayPal account and an operational web store of some sort whether it is eBay, Amazon, Shopify, Yahoo, Etsy, AuthorizeNET, or Bigcommerce. During your sign up process, Kabbage will interface with your web store (if it exists already) to gauge information such as seller rating, volume of sales, age of business, etc in order to determine what amount you qualify for.

I personally gave the service a try a while back with my very much experimental web store venture, BlueSparkz Electronics. At the time, my store had been open for a little less than a year with low to moderate sales and fair credit history; yet, still I managed to get approved for $1000 and qualified for an additional $1100 more after establishing transaction history with the service.

After you have registered and ready to initiate your first transfer, you simply click on the “Get Cash” tab of your account web interface and select the amount you wish to borrow from a drop down list. The amounts are sorted by hundreds starting at $100 as the least amount. Kabbage advertises up to $50,000 maximum payment, but obviously the exact amount differs from person to person. It is also worth noting that all funds are disbursed using PayPal only. No deposits into your bank account directly; however, you are free to transfer the funds from PayPal to your bank account at no charge (as with all PayPal funds).

Keeping in mind that the service is more akin to a cash advance rather than a full-fledged business loan, your advance payment will have to be paid back within six months from its disbursal. According to their website, interest rates can range anywhere from 2% to 10% of the principal (again, determined on an individual basis); however, when I experimented with the service the interest rate was actually around 2.1% for the first couple of months and 1.89% for the remaining four months bringing the total interest cost to about 12%.

My final impression was that the service offers a great opportunity to those who want to test the waters and get a feel for of how operating a small business for extra income is like. The only potential risk would be borrowing a greater amount than you are capable of paying off, but it does seem as though they are fairly cautious with lending out large amounts to newcomers so I wouldn’t imagine it being a likely issue. Just remember to borrow only the amounts you are confident you will manage to pay back in full within six months. I am, however, unsure if Kabbage is the best solution for funding in the long term, but it certainly does not hurt knowing it exists as an option especially when first starting out with your business. The registration was a breeze and the funds are available immediately thereafter. Other funding options exist out there for sure, but I highly doubt many of them are as tailored, quick, and straight forward as Kabbage.

On the other hand, if you already have banks lined up and clamoring at your feet to grant you a business loan then obviously this service would not be quite as useful, but for the everyday Joe (or Jane) that doesn’t command such sway with the more traditional lenders, Kabbage is a viable option that I would recommend. Unless you lack a solid plan for your online business or you are completely unrealistic about your business’ projected performance, the process should be straight forward and painless.

You can visit the Kabbage website here and see for yourself whether or not the service is well suited for any of the business ideas you might be contemplating. What is particularly great is that signing up is free and you will only be obligated to pay the designated fees when you actually agree to accept funds from them. As of this writing, there is even a $50 promotional incentive offered when you qualify for funds so it definitely bears reason to look in to. Good luck!

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