- Fully amortized loans
- Competitive terms
- Excellent customer service
Many small business owners are stuck between a rock and a hard place. On one hand they may have a great credit profile which means they likely meet the criteria that qualifies them for a loan from the US Small Business Administration. On the other hand, what they may not have is the luxury of time to wait for funding, given all the red tape they would be forced to go through to secure an SBA loan. Fundation was formed to help small business owners get funded faster, and in this Fundation review, we’ll take a look at how this lender operates, what it can offer, and if it’s the right funding option for your small business.
Established in 2011 and headquartered in Reston, Virginia, Fundation's mission is to provide small and mid-sized businesses with top of the line credit solutions through technology and advanced analytics. In fact, the company partners with a number of community and regional banks, as well as other B2B (business-to-business) companies simply because they have had such success serving small business customers.
Loan amounts can range from a low of $20,000 to as high as $500,000, a fairly-high loan amount compared to other alternative lenders. If you, as a small business owner, qualify for an SBA loan or a traditional bank or credit union loan, you have probably already met the stringent requirements for Fundation. And if you don't qualify for an SBA or bank loan, a Fundation loan is still worth reaching for. Their rates are competitive, not just in the alternate lending space, but comparable to traditional lenders. Moreover, Fundation’s fees are transparent and they have exceptional customer service. If you have a solid credit score and are looking for the best rates and quick funding, then this lender will certainly be worth a few minutes of your time.
- Terms and fees are extremely competitive
- Fees are transparent
- Time to funding averages about three days
- No prepayment penalty
- Outstanding customer service
- Payments on a bi-monthly basis, less frequent than some competitors
- Not suited for new businesses or start ups
- Long application process with strict requirements
- Business must have a minimum of three employees
- Personal guaranty required
Fundation offers two kinds of loans; small business loans (or term loans) and a line of credit. In either case, the minimum amount of a loan is $20,000 while the maximum is $500,000. Fundation points out that its shorter-term loans, i.e. of a duration of only one to two years, are generally used for a borrower's short-term working capital needs. Loans with a duration of three to four years are primarily used for equipment purchases, or to fund expansion costs.
Below are the specifics for each type of loan from Fundation.
|Types of Loans||Minimum Loan Amount||Maximum Loan Amount||APR||Other Fees||Terms and Repayment||Collateral Required|
|Small Business Term Loans||$20,000||$500,000||7.99% to 29.99%||Origination Fee up to 5%
Late fee of $35 or 5% of amount due, whichever is higher.
|1 to 4 years;
|Line of Credit||$20,000||$100,000||7.99% to 29.99%||Closing fee: $500
Draw fee: 2%
Late fee of $35 or 5% of amount due, whichever is higher.
|Up to 18 months; monthly.||UCC-1 Lien|
The term loan will attract an origination fee which varies for each borrower and could be as high as 5%. Each term loan will have a fixed rate of interest charged, which will be dependent upon the borrower's credit strength. The loan is fully amortized, and repayments can be spread over one year or up to four years, with ACH repayments made on a bi-weekly basis.
For those borrowing via a line of credit, there is a fixed $500 fee for the closing; thereafter, beside the interest rate charged, each individual draw against the line of credit will attract an additional fee of 2%. Each draw has a repayment term of up to 18 months, with ACH repayments made on a monthly basis.
If the original amount requested is insufficient for the borrower's needs, Fundation allows the borrower to apply for additional capital. For a loan with a term of one (1) year, the borrower can reapply after six months, while for terms beyond one year, the borrower can reapply after nine (9) months.
Rates and Fees
Fundation prides itself on its transparency regarding fees. Unlike some other alternative lenders, Fundation charges an origination fee only on its term loans; that fee can be up to 5% and will be based on several factors as determined by the underwriter. The origination fee is deducted from the loan disbursement, a fact that should be borne in mind especially if you had need of a specific amount.
Under the line of credit, there are two applicable fees; the first is the flat closing fee of $500 and the second is a 2% fee charged and deducted each time you use the line of credit.
Unlike many of its competitors, Fundation does not have a fee or penalty for early payment of the loan or line of credit.
Charges for a late payment may be assessed on a case-by-case basis; Fundation recommends that if you know you will be late making a payment, or if you find are finding it difficult to meet the repayment schedule set out for you, that you contact your designated account representative to see what options you may have. In cases where a late fee is assessed, it is generally $35, or 5% of the amount due, whichever may be higher.
- Minimum annual revenue: $100,000
- Minimum time in operation: One (1) year
- Personal Credit Score: Minimum FICO score of 660
- Minimum annual revenue: $750,000
- Minimum time in operation: Five (5) years
- Personal Credit Score: Minimum FICO score of 720
As is common in the industry, the stronger the credit score, the greater the likelihood that the borrower will be able to get a loan with a lower rate of interest.
Fundation also has other business-related condition which must be met.
- Business must have least three (3) full-time employees, which can include owner(s)
- Borrower must have a business address (i.e., the business cannot be home-based)
- A business bank account is required
- A minimum of $2,000 average daily balance is required in the business’s bank account
- No bankruptcies within the past three years
- No late payments on any loans within the past year
- Businesses located in Nevada or outside the U.S. are excluded
- Industries which are not eligible for funding include money service industries, adult entertainment, cannabis dealers, real estate agents, car dealers, pawn shops, nail salons, retail, and construction businesses
- Federal tax forms for your business the past three years
- Current balance sheet and profit and loss statement
- Current schedule of outstanding debt
- Tax ID-number
- Evidence of insurance coverage of assets
- Bank statements for the business checking account for the past three months (if loan is less than $100,00) or six months of statements (if loan is greater than $100,000)
With the questions answered and the documentation in order, your application will be sent through the underwriting process which can take about 24 hours. During that period, you will be alerted that your credit report has been pulled, with instructions on how to access your application and review its status.
Fundation has four categories and sub-categories which they take into consideration when deciding on the approval of a loan, as well as the amount and interest rates to be offered.
If everything looks acceptable to the underwriter, they will provide the borrower with a formal offer letter. Once accepted and the loan agreement signed, funds will be deposited to your business bank account. The application process, from beginning to end, can take as few as two days but, more often than not, it is about a week before you will see the funds in the account.
Repayment dates on the term loan will depend on which cycle you have been assigned (either 1st and 16th or 8th and 23rd). For the line of credit, repayment will begin the first month after a draw, with the amount drawn fully amortized over 18 months.
Help & Support
Fundation prides itself on having an exceptional team to meet the needs of its clients. All of its customer service representatives are available either by email or by phone, though each borrower will have been assigned a dedicated account representative. From the early stages of the application process, representatives will answer questions and help the borrower better understand exactly what they have agreed to in terms of interest rate, fees and repayments.
In general, there are very few user reviews for Fundation. On the website Trustpilot, there are only two reviews, both of which are 5-star or excellent ratings. The fact that there are very few reviews may worry some business owners, but we found no reason to be alarmed during this Fundation review. The offering seems solid, and it could very well be that Fundation focuses more of its efforts on helping its clients than soliciting reviews. Having said that, one review on Trustpilot noted that the process was positive overall, but that interest rates were high; that is to be expected with this type of lender, especially if the borrower does not have a sterling credit rating. Perhaps more importantly, Fundation is accredited by the Better Business Bureau and does not presently have any complaints against it – a metric we value more than its lack of ratings on user-review sites. Finally, Fundation has received some positive reviews and reports in the mainstream media, including from Bloomberg, The Wall Street Journal, and the American Banker.
If your business is not a start-up and you have, at a minimum, fair credit, then Fundation could be a good fit for your funding needs. The application process is slightly longer than that of some other lenders, but the interest rates, especially if your business is sound and your own credit history is good, are competitive with those of traditional lenders and thus, the application time should be worth the effort. The time it takes from application to funding can vary from a few days to upwards of a week, but it is also heavily dependent on your ability to be forthcoming and proactive with the information you self-report and the documentation needed to make a loan decision. The ability to pre-pay a Fundation loan without penalty is icing on the cake for a borrower looking for a short-term loan or line of credit.