Fundation was founded in 2011 and has grown to be one of the more prominent online small business lenders. With its focus on technology, Fundation has an innovative approach to funding and a unique application process that makes getting a loan easier.
Loan sizes vary greatly, so Fundation can help regardless of how much you need. It has decent terms and rates, and is looking to lend to small businesses that have been turned away by banks because they’re considered risky.
Fundation Small Business Loan Details
Fundation offers loans ranging from $20,000 to $500,000 on terms of 1 to 4 years. Interest rates begin at 7.99% and go up to 29.99%. The rates you’re approved for largely depend on your outstanding debt, credit history, past payment history, industry, and profitability.
Loans are essentially offered on two levels: if you’re looking to expand or make long-term investments, you’ll be able to borrow a higher amount on a 2 to 4 year term. If you’re simply looking for help in managing the daily activities of your business, you can borrow up to $150,000 on a 1 or 2 year term.
All loans are on a fixed rate with a “simple interest” calculation so you’re only paying interest on the account balance. You’ll make payments twice a month.
An example payment (using its payment calculator here): if you borrow $165,000 on a 4 year term at 10.65% interest, your semi-monthly payment will be $2,114.
The Pros and Cons of a Fundation Small Business Loan
Pro: The range of $20,000 to $500,000 is quite large and will most likely suit just about any small business. Loans up to $1,000,000 are possible if your business generates more revenue, but these requests are assessed on a case-by-case basis.
Con: Fundation isn’t completely transparent about its fees. While it says there’s an origination fee associated with the loan, we had to call and ask for the amount (5%).
Pro: The repayment terms are reasonable for the loan size, especially when compared with the 1 to 2 year repayment terms on loans of up to $200,000 offered by other lenders.
Con: While there’s a live chat function on the website, it’s not always available during regular business hours. If you’d like a quicker response, consider calling first. An email we sent also wasn’t answered.
Pro: With Fundation’s small business loan, you make payments twice a month, which might be more manageable than making one huge payment per month. Twice a month payments could be easier on your cash flow, whereas daily payments might be too inconvenient.
Con: Fundation has some stricter eligibility requirements that may make the loan impractical for select businesses. For example, you need to have 2-3 employees to qualify, so if you’re an entrepreneur working alone, you should look at other options.
What Businesses Are Eligible For a Loan With Fundation?
To be eligible for a small business loan with Fundation, your business must generate at least $250,000 in annual revenue, have 2 to 3+ years of operating history, and have 2-3 employees. The minimum credit score needed is 600+.
Fundation takes credit risk into consideration. This includes the industry you’re in, past payment history, and outstanding debt you have. The following industries are ones it works with: automotive repair, child care, IT services, convenience stores, law firms, manufacturing, medical practices, and wine and craft beer stores. Fundation doesn’t loan to new or used car dealerships, other lending companies, or businesses located outside of the United States.
Application Process and Documents Needed
Fundation’s application process is quick and simple. According to the site, it should only take you 10 minutes to complete. Plus, you don’t need to worry about excess paperwork, as it captures all the necessary data it needs to make a decision to lend to you or not based on the information you provide.
That’s not all – Fundation will show you how your data is being interpreted by the system as it analyzes your application. Depending on the amount of information provided, you may be given an instant decision and possible terms. If you’re approved, a Fundation account manager will reach out to you within 24 hours to discuss your options further. Customers are typically approved within 3 days.
It’s recommended you have 3 months of bank statements and 2 years of business tax returns ready when going through the application process, but you can allow Fundation access to these documents electronically as well. When you fill out the application, your business and personal credit will be pulled.
The Fine Print
There’s no penalty for paying the loan off early. Fundation’s origination fees 5% of the loan amount. That means if you borrow $50,000, the origination fee will be between $1,000 and $1,500.
A personal guarantee and UCC-1 on business assets is required.
You can refinance a larger loan after nine months of good payment history, and a smaller loan (less than $150,000) after six months of good payment history.
Fundation’s loans are subordinate to bank loans, so your business can receive additional funding if it already has a bank loan.
Which Businesses Benefit the Most from a Loan With Fundation?
Businesses that are already well-established will benefit the most from a loan with Fundation. You need 2 to 3 years of operating history, $250,000 annual revenue, and at least 1 or 2 other employees working with you to qualify. Newer businesses might not be able to meet these requirements.
Popular reasons for small business loans with Fundation include refinancing debt, hiring new employees, expanding to a new location, working capital, renovating facilities, and adding new services to your business.
Other Alternative Small Business Lenders
Fundation is a great bank-alternative, but in case you’re not approved for a loan, or don’t meet its requirements, these alternative lenders provide similar solutions.
Funding Circle offers almost the same loan range of $25,000 to $500,000 on terms of 1 to 5 years, with interest rates ranging from 4.99% to 26.99%. Its origination fees range from 0.99% to 6.99%, and there’s no prepayment penalty.
A minimum credit score of 620 is needed to apply along with $150,000 in annual revenue, 2+ years of operating history, and a reported profit for at least one out of the last two years of tax returns. This is a good alternative for businesses that aren’t making as much in annual revenue but are still profitable.
Bond Street offers loans from $50,000 to $1,000,000 on terms of 1 to 3 years with APRs ranging from 8% to 25%. Its origination fee is 3%, and there’s no prepayment penalty.
A minimum credit score of 660 is recommended, but not required, and your business must have 2+ years of operating history, as well as $200,000 in annual revenue. While its repayment terms aren’t as lengthy, its flat 3% origination fee may make its loan more affordable than Funding Circle’s.
Shopping Around is Worth the Time
As a small business owner, your time is valuable, but so is getting a decent deal on a small business loan. You want to get the best rates and terms available to you so you can make payments that are affordable, while still making a profit. It’s worth taking a few hours out of your day to apply for business loans with the various lenders that you qualify with. Applying within a 30 day timeframe also lessens the impact against your credit.
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* All banks listed are a Member FDIC.