- Fixed term installment loans
- Working capital loans
- Business expansion loans
- 1-4 year term lengths
- APRs between 8% and 30%
- Bi-weekly fixed ACH payments
- No prepayment penalty
- Excellent customer service
Fundation is an alternate lender that offers fixed term installment loans (think a bank loan but with a shorter term length and higher interest rates, and you pretty much understand Fundation loans).
The company was founded in 2011 and has quickly become one of the top funders in the alternate lending space, for good reason. Their terms and fees are just about the best you can get from a non-bank loan, and their time to funding beats out banks by weeks (if not months). On top of that, their advertising is transparent, their customer service is fantastic, and there are virtually no negative reviews of the company to be found on the web.
I like Fundation, if you couldn’t tell.
Some of this funder’s success can be attributed to the niche they’ve created: they fund the loans that banks can’t or won’t. While at its very basic, “funding merchants that banks won’t” is the schtick of every alternate lender ever, Fundation is is literally literally partnering with banks to do what used to be the bank’s job.
If you can’t get a traditional bank loan, I have no qualms recommending Fundation as the next best thing. I genuinely wish that that I could recommend Fundation to all merchants. However, many smaller businesses won’t meet the lender’s qualifications: you have to have been in business at least two years, have a minimum of three full-time employees, make a minimum of $100K per year, and have a minimum credit score of 600.
Not to worry: if you don’t meet those qualifications, there are other reputable lenders that might work. That being said, if you’re close to meeting the qualifications, I would still encourage you to apply; the customer service will tell you what you need to do to meet qualifications, and help you consider other financing options. Yes, they really do that.
Read on for the full review, or check out our other favorite lenders.
Fundation offers two fixed rate loans:
- Working capital loan
- Business expansion loan
These are the minimum qualifications required to be eligible for a loan from Fundation:
|Time in business:||2 years|
|Other:||Business has at least 3 full time employees, yourself included|
Terms and Fees
These are the terms and fees stated on Fundation’s website:
|Borrowing amount:||$20K – $500K|
|Term length:||1 – 4 years|
|Origination fee:||2% – 3%|
|APR:||7.99 to 29.99%|
|Collateral:||Personal guarantee, UCC-1 blanket lien|
Technically Fundation offers two different loans: a short term and a long term loan. The short term working capital loan has a term length between 1 and 2 years, with a maximum loan amount of $150K. The long term business expansion loan has a term length between 2 and 4 years, with a maximum amount of $500K.
Although Fundation is an online lender, their loans operate like a bank loan. The company offers fixed rate installment loans, which means that the loan has a set term length, and the interest rate will not change over the life of the loan. Every two weeks until the loan is paid off, Fundation will deduct a fixed amount of money from your bank account via ACH.
To apply for a loan from Fundation, you start by filling out the application on their website. The application will ask for information about you, your business, and your potential loan. Most of the information is fairly basic: what kind of business you own, annual revenue, number of employees, etc. To gauge the strength of your business, at some point they’ll want your business tax ID, three months of bank statements, and two years of business tax returns. However, if you give permission, Fundation can retrieve that information on their own.
What I really like is that throughout the application process, Fundation will tell you what all your information means. Own a coffee shop? Fundation will tell you the historical delinquency rate of coffee shop borrowers. Only been in business for 2 years? Have 8 full time employees? Fundation will tell you if those characteristics are good or bad.
At the end of the online application, you might be presented with an estimated quote, depending upon how much information the system could gather based on your application.
Regardless, before getting a real loan offer, everybody has to do this next part: talk to a Fundation “customer relationship manager.” Sometime in the 24 hours following the completion of your application, a rep will get a hold of you to discuss your business, your application, and to make sure that you understand the lending and repayment process.
After you’ve talked to a rep and provided all necessary documents, your application will be sent through underwriting and you will be presented with a real loan offer. When you accept and sign the loan agreement, the money will be wired into your bank account. Time from application to funding generally takes between 2 and 7 days.
Sales and Advertising Transparency
I am absolutely thrilled by Fundation’s advertising transparency. Their website discloses just about everything that you want to know before applying for a loan: minimum qualifications, term lengths, APR range, collateral, repayment, and fees.
The website also educates you, which I am a huge fan of. There’s information about how interest rates are determined, and this calculator, which explains the difference between loans that use interest rates and those that use fixed fees.
Suffice to say, if you read through the website before applying for a loan, you won’t be surprised by anything during the application process.
Customer Service and Technical Support
Merchants love Fundation’s customer service. The general consensus is that Fundation reps are not there to simply give you a loan; they genuinely care about understanding your situation, educating you on the loan and process, and getting you the capital that you need. I’ve even heard of Fundation reps referring merchants to other services to see if they can get a better deal elsewhere.
Customer service is available by phone, email via this field, and live chat (though the live chat is not always available).
They also have a fairly thorough FAQ. Although the FAQ appears to be aimed at merchants who haven’t yet taken out a loan, it also includes some information that might be useful for those who’ve already gone through the process as well.
Negative Reviews and Complaints
First things first: I could not find very many complaints about Fundation. For example, the service does not have a single complaint on the on the Better Business Bureau website. I should note that the BBB file has only been opened since August 2015, and Fundation has only been accredited since December of the same year. Nonetheless, thus far this funder has a stellar track record on the BBB and the internet at large.
Here are the most significant complaints I have gleaned:
- High interest rates: Fundation’s interest rates are undoubtedly higher than a bank or SBA loan. Yes, smaller interest rates would be welcome. However, alternate lending tends to be riskier than bank and SBA loans because alternate funders don’t have the same fallbacks. Fundation’s interest rates are comparable to services like LendingClub, and significantly lower than services like Kabbage and OnDeck, not to mention merchant cash advances.
- High qualifications: At a minimum of 2 years in business and 3 full time employees, Fundation’s qualifications are higher than other alternate lenders. Unfortunately, if you don’t meet those requirements, you’ll have to look elsewhere for financing.
Positive Reviews and Testimonials
- Personal touch: The customer service takes the time to get to know you and your business, and wants to make sure you’re informed about the whole process.
- Fast funding rate: Time to funding is usually a week or less. When you consider that the process to get a bank loan or SBA takes months, a week is nothing.
- No prepayment penalty: You are not penalized for being proactive about repaying your loan. What a crazy concept!
- Low interest rates: While some people complain about high interest rates, many people are happy with the rate that they received.
If you have an established business that doesn’t quite qualify for a bank loan, or don’t have the time to go through the lengthy process, Fundation is a good choice. The customer service is a huge selling point. Many lenders neglect to ensure that the borrower understands the lending process, which leads to all sorts of problems like merchants accidentally breaching their contract, or realizing that their business can’t operate well under the reduced profits. You won’t have those problems with Fundation.
Is Fundation your best choice? Not necessarily. There are other alternate lenders out there who offer similar rates and fees. You’ll just have to make some comparisons to find out.
Don’t quite meet their qualifications? If you have a decent credit score, you could qualify for a loan from a peer-to-peer service, which have similar lending models and rates. Lending Club requires two years in business, but only $75K in annual sales, and no employee requirements. Prosper doesn’t have any qualifications aside from a good credit score, though they don’t offer very large loans.