Kabbage - A Leaf or the Whole Head?

How many mom and pop merchants are out there suffering just a wee bit in this economy? No doubt, some folks are living off of credit cards, while others are taking out payday loans.

Payday loans are simply a bad thing (on every level), however, what if you could take a payday loan and reinvent a payday loan to the point where you could sell it to merchants - who do business on Amazon, Yahoo and eBay?

I have an opinion about the site known as Kabbage and I have a feeling that this site may be nothing but bad news for anyone seeking a funding source for their online business model. It's basically a lending site with a program that decides if your business lives or slowly dies

Kabbage offers merchants what amounts to a loan against their future receivables. This might not be a bad idea for some of the big boys out there, however, the small fries might want to think twice about factoring their invoices. In a time when many folks can't get credit, sites like Kabbage pop up to fill the void between the banks and the financial unknown.

In order to review this site, I signed up and went through a process, which made me extremely (I mean EXTREMELY) uncomfortable. I shared my personal, business and banking information with a computer program, which acts as an automated loan officer.

The proprietary Kabbage program takes all of your banking, personal and business information and comes back with a quick 30 second decision.

Here's the rub. When you start the process on Kabbage (to secure financing), the site presents you with an estimated loan amount - displayed in the top right hand corner of the approval process screen. This number is displayed in the color of money GREEN and has been created in a bold font to keep your attention. In other words, keep your eye on the prize!

The estimated loan number number for me (after they got my vitals from Amazon) started out in the thousands (near $4,000.00). The system stated that my estimated loan amount would be near this amount. No doubt, there's some fine print somewhere stating that the final number is dependent upon some type of approval process.

However, Kabbage gets you thinking that you're good to go (early on) with the estimated loan amount as you know (that they know) what your Amazon or eBay sales early on in the loan approval process. 

Where I have a problem with this approval process is in the order in which they acquire the information. They assimilated (with my permission) my Amazon account information which included balances, feedback and order amounts. The system recorded my banking information including my username, account number, routing number and password for my business bank account. Then I provided all my verified information such as my personal information and social security number. In addition to all of this information, they also scarfed down my Paypal information such as; my username and password.

In the end, the user is presented with a loan agreement in which the user is beholden to the lender for what I believe is something short of usury (depending on what State you live in). These folks are located in Georgia and just received another $17M to dole out to those needing funds to buy product and sell at a profit.

I have a few questions of my own for these folks at Kabbage and the question is simple.

If you believe so much in the ability of folks to sell their wares on Amazon, Yahoo and eBay for a profit, why don't you take your OWN Kabbage and buy your OWN stuff to sell on these channels?

In the end, if you can afford to hand ALL of your most private and personal information over to an online virtual loan officer and, don't mind handing them the keys to your kingdom such as; the right to debit your bank and Paypal account, then go for it.

However, be warned that the little bold green number located in the top right hand corner of their site, displayed to you throughout the approval process - may drop to just $100.00 by the end of the process.

No doubt, this is their gimmick to get you through to the end of the loan approval process. They get folks to divulge their personal and business information to them by dangling the hope (the possibility) that they'll receive the funding they need to make their business grow, however, the only ones seeing green are those running the Kabbage patch and collecting all of those monthly payments plus, the original loan amount.

One can understand why an investment firm would fork over $17M to this group - just a few weeks ago. I have no doubt that with all of the information they gather and; the  ACCESS they are granted by the borrower; they are guaranteed to have very few loan defaults.

The online loan agreement should be reviewed by an attorney, however, if you're seeking a loan against your receivables, you more than likely don't have the money to have the agreement reviewed by anyone other than your spouse or partner. This is where sites such as Kabbage fail to serve. The agreement is extremely complicated and should be simplified and/or replaced with a shorter agreement, which spells OUT exactly the rights of the borrower. The agreement (as expected) is ONE-SIDED and basically protects the lender on so many levels (including access rights to bank accounts) that it appears as though Kabbage may be a hybrid of a 100% secured Payday loan.

In the end, don't go buying products for resale that you can't afford to hold onto in tough economic times. In fact, don't even think of borrowing money under the premise that anyone is going to help you GROW your business. The only folks growing their business (at Kabbage) are those who have NO CLUE what it takes to roll up their sleeves, buy product and pick, pack and ship that product on a daily basis.












Posted by Posted by Jewelry News at Sunday, October 02, 2011 7:25 PM
Categories: uncategorized
Tags: Kabbage Kabbage Reviews Payday Loans Fraud Watch Usury Loans PayPal Amazon
 

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