Fundation Review: Best Alternative Lender for Working Capital Loans (3rd Consecutive Year)

Our 2017 research and analysis of alternative lenders leads us to again recommend Fundation as the best alternative lender for working capital loans. We chose Fundation from dozens of alternative lenders. To understand how we selected our best picks, you can find our methodology and a comprehensive list of alternative lenders on our best picks page.

Why Fundation?

Fundation offers an easy application and approval process, simple loan terms and impressive customer service. Here is a breakdown of why it's our best pick.

Application and Approval Process

Applying for a loan with Fundation is quick and simple. The application can be completed online in less than 10 minutes. In addition to asking the basics about you and your business — name, address, email address, social security number, phone number, etc. — Fundation requests a few other details up front to help determine if you have a reasonable chance of being approved for a loan, including:

    • What your business does.
    • How long the business has been open.
    • Annual sales.
    • Annual business profit before taxes.

Based on that information, Fundation provides an instant profile analysis that includes how much of a borrowing risk businesses in your industry are, whether the amount of time you have been in business meets the company's guidelines and how your business profit before tax compares with other, similar businesses.

Moving forward, Fundation's online application asks you a number of other questions, including:

  • The type of legal entity your business is.
  • The percentage of the business you own.
  • How you plan to use the money.
  • If your business has any outstanding debt.
  • How many employees you have.
  • Whether you own or rent your primary office space.
  • If you have property or liability insurance.
  • The type of benefits you offer your employees (health, retirement, etc.).
  • The value of your personal bank and retirement accounts.
  • Household income.
  • Annual charitable giving.
  • If you have personal life insurance.

Fundation's proprietary application software then automatically captures additional information from credit, public-record and government-database sources in order to see if you might be a good fit for a loan. The software provides real-time, interactive feedback so you know where you stand. Based on this data, Fundation can give you a preliminary decision within minutes.

Businesses that get preliminary approval then work with a loan specialist, who gathers more specific financial data. Among the items Fundation will ask to see are three months of bank statements, a debt schedule for any outstanding debt, two years of tax returns and year-to-date financials. You have the option of sending this information to Fundation, or letting the company's system electronically retrieve these documents directly from the IRS and your bank.

The loan specialist also talks with you to get a better understanding of your business and how it operates. The specialist wants to get the "story" of your business, so he or she can advocate on your behalf if an underwriter has questions. We like that these specialists take the time to put some context to your financial info. We didn't see this type of personal attention with many of the other lenders we examined.

An underwriter then reviews the application and financial data and makes a final approval decision. The underwriting process typically takes about 24 hours, which is faster than some of the other lenders we investigated. If you're approved, the company emails you loan documents to sign. Once signed, the money is typically deposited into your account the same day.

Who Qualifies

There are a wide variety of variables that determine which businesses qualify for loans. The business's profitability, how much debt it has, how much money you need and what it will be used for are all taken into consideration.
While there are no hard-and-fast rules about who gets approved, there are several minimum requirements that must be met before you can even be considered. You must:

  • Have been in business at least two years.
  • Have at least three employees.
  • Have annual revenue of at least $100,000.
  • Have personal credit above 600.

We found it especially useful that Fundation clearly defines its minimum requirements; some of the other lenders were a little vague about theirs.

Loan Terms

Fundation offers conventional fixed-rate loans. This means that the interest rate remains the same for the entire length of the loan, regardless of whether market conditions change. We found it appealing that you know exactly how much the loan will end up costing you from the beginning. Some of the other lenders we looked into had variable-rate loans, which could end up costing you a lot more than you were envisioning at the start.

Fundation offers loans between $20,000 and $500,000. The money can be used for a variety of purposes, including working capital, business expansion and inventory purchases.

Since each business receives different loan rates, it is impossible for us to say how much a loan will cost you. However, Fundation's annual percentage rates (APR) range from 7.99 to 29.99 percent. Fundation was one of the few lenders we examined that even provided an APR range. The total APR rates include origination and closing fees.

Repayment terms are between one and four years. Shorter terms are for working-capital and cash-flow-management loans, while longer terms are for loans for business growth and expansion purposes.

To repay the loan, borrowers make fixed-amount payments twice a month. The payment is automatically deducted from your bank account, which helps ensure you pay on time each month. Depending on the terms of your loan, you're eligible to refinance after nine months of good payment history.

Fundation gives businesses the option of paying off the loan early for no additional costs. Many of the other online lenders we analyzed charged businesses a fee for repaying their loan amount early.

Customer Service

We were very impressed with Fundation's customer service. To test the type of support you can expect, we called the lender on several occasions and posed as a business owner interested in a loan.

A loan specialist, who was happy and able to answer all of our questions, immediately answered our initial call. Many of the other lenders we talked with wanted us to answer their questions — how much money we needed, how soon we wanted the money, if we were ready to apply over the phone, etc. — before addressing any of ours.

During our first call, we talked about the application process, the types of documents we would need to provide, what went into the underwriting process, how quickly we could get our money, how the repayment process worked and the types of loans offered. Our questions were answered clearly and in enough detail to make us feel confident about Fundation's processes. Some of the other lenders we spoke with gave us only one- or two-word answers that left us puzzled about their loans and how they operated.

When we made subsequent customer service calls, a friendly loan specialist answered, and spoke with us in great length about the Fundation loans, the process to get approved and repayment terms.

These loan specialists were also the only ones we spoke with who encouraged us to investigate other, alternative lenders to make sure we would be comfortable with Fundation. They explained what made their loans different and listed some specific questions we should ask other lenders. We liked that they were so confident that they had the best offering that they were willing to so far as to invite us to investigate other options.

Fundation also offers live-chat support, and is one of only a handful of lenders we looked into that made this option available. When we tested this service, our questions were quickly answered and they gave as much detail as when we spoke to the company representative over the phone.

In addition to being available via phone and live chat, Fundation loan specialists can also discuss loan options via email and an online form.

Limitations

The biggest limitation with Fundation is that some businesses might not meet the lender's minimum requirements. If your business hasn't been open for at least two years, doesn't have at least three employees and doesn't bring in at least $100,000 a year, Fundation won't even consider you for a loan. We would encourage businesses that don't meet these criteria to check out our second-place winner in this category, OnDeck, which only requires at least one year of operation and $100,000 in revenue over the past two years. If your business has been open for less than a year, you should consider our best pick for startups, Accion.

by Fundation

Q&A Break with Sam Graziano, CEO of Fundation

This is a reposting of the piece "Q&A Break with Sam Graziano, CEO of Fundation," published by Politico Pro / Politico LLC.

Fundation is one of a growing number of online small-business lenders that have popped up in the last several years. Company CEO Sam Graziano took a few minutes out of the fintech conference to chat about the company’s hopes and concerns on government policy toward small-business lending.

This transcript has been edited for length and clarity.

 

You’ve mentioned your concerns about regulating small-business loans like consumer loans.

My main concern would just be if there ends up with state-by-state rulemaking that is too prescriptive. An example would be, there are some people that feel different ways about ability to repay, the concept of ability to repay [in small business lending]. And while on the surface that seems like, "yeah, the customer should be able to pay," when you sort of peel the onion back a layer and sort of look at that issue it would actually be very dangerous.

The businesses that need capital the most tend to be younger, higher growth businesses. And those tend to be the businesses where expenses come before revenue. So you can look at that on the surface and say that business doesn’t have the ability to repay, but in reality they are a business that needs capital the most and is in a position to sort of do the most for society.

And so while I think some rules and regulations could be well-intentioned, I am worried that they could end up having the wrong effect. So that would be my concern if we end up with a state-by-state regulatory regime that could be too prescriptive, more onerous for small business finance companies.

So shifting that to the OCC fintech charter, what was your reaction to that proposal, and moving forward what are things you’re looking at in terms of your decision as to whether to go for a charter?

I think we need to see it play out a little more, to see a little bit more of the substance behind what does it actually mean to have the charter. What areas that exist within bank regulation today are going to be applicable to a company that has this sort of special charter?

So something like capital standards.

A perfect example? Should capital standards apply to a business like ours and what is the risk to the economy at large if a business like ours goes down? Our whole industry is still tiny in the grand scheme of the capital markets, so it’s those types of things in particular.

The Community Reinvestment Act is another thing. For us, the CRA’s probably not an issue at all, the vast majority of our loans are less than a million dollars for companies with less than a million dollars in sales, and we’re like the poster child for CRA-style lending.

Nonetheless, there are things that just need to be a little bit clearer. I think the benefits are certainly allowing institutions like ours a safe harbor, if you will, out there. If you have this charter and you operate a certain way, you can do your business without having to worry about any type of state-by-state law or type of regime.

What’s your policy wish list for this administration?

I think further fleshing out the OCC charter is certainly a big one. Another that comes to mind, the different regulators that supervise the banking industry in essentially similar ways, but they all have their own take—the Fed, the OCC, the FDIC—you’re talking about a number of different regulatory bodies that are all essentially regulating the same things, I think jointly having very clear guidance of, when is it ok for you, Mr. Bank, to partner with a fintech, and what exactly needs to be in place for that to happen? What exactly does that fintech need to be doing to make that OK?

Third-party vendor guidance.

There’s some guidance out there. The FDIC has some, the Fed has some, but I think one comprehensive document that is signed off on by each of those regulatory agencies to say we’re comfortable with fintech partnerships when they look and smell like this, I think that would be great.

Several trade associations for online lending have popped up recently, do you think there’s going to be consolidation on that front?

I think there has to be. I think, again, there’s a lot of good intentions out there. They’ve been in a little bit of … a chess match with some of these associations and coalitions of different philosophies and different things like that. Generally speaking, pretty well-aligned but it’s sort of been a messy process to get people to come together.

Whatever the subtle or not-so-subtle differences are between one group or another, I think not sorting that out is more dangerous than not having a unified voice to be able to say to government, "Look, here’s what we’re doing well for society, here’s our concerns" and to talk about what those clear issues are. But if they’re getting conflicting points of view from different groups, or different groups are saying different things, it could sort of start to muddy the waters a bit.

And for an industry that is in the grand scheme of things not that big — we look at it and feel that it’s big.

You’ve attracted a lot of attention.

We’ve attracted a lot of attention for an industry that is sort of a rounding error in the scheme of the banking system. And I think it’s because it’s an early manifestation of what digital technologies can do to the lending markets in terms of the type of experience they can offer consumers and small businesses, the number of consumers and small businesses that can be served more effectively. So it’s almost like an incubation ground for the banking industry at large so it deserves a lot of attention, but nonetheless the industry is small. We need to be careful of and mindful of that to some degree because I think there’s probably only so much attention we’re going to get from the people making decisions in Washington.

by Fundation

Fintech Ideas Festival Rapid Fire Emerging Tech Panel

Fundation’s CEO, Sam Graziano, spoke at the Financial Services Roundtable’s FinTech Ideas Festival on Tuesday, January 10, 2017 as a participant on the Rapid Fire Emerging Tech Panel. Other panel participants included Anil Arora (CEO of Yodlee) and Bo Lu (CEO of BlackRock-owned FutureAdvisor). The panel was moderated by Deirdre Bosa of CNBC.

Click the image below to watch the full panel.

by Fundation

Fundation CEO Sam Graziano to Present at Financial Services Roundtable’s Inaugural FinTech Ideas Festival on January 10, 2017

January 9, 2017 09:00 AM Eastern Daylight Time

What: Fundation Group CEO Sam Graziano will be speaking on the “Rapid Fire Emerging Tech” Panel at the Financial Services Roundtable’s inaugural FinTech Ideas Festival. The panel discussion will focus on how FinTech companies are partnering with banks to change the financial landscape and help banks meet the evolving, complex needs of their customers. The panelists will also discuss their views on the future of the FinTech Industry.

Who:
• Sam Graziano, CEO, Fundation
• Anil Arora, CEO, Yodlee
• Bo Lu, CEO, Future Advisor
• Moderator: Diedre Bosa, CNBC

Why: Fundation Group LLC is one of the nation’s leading digitally-enabled small business lenders and credit solutions providers that offers conventional term loans and lines of credit for small businesses through its banking and other strategic partnerships. Mr. Graziano will share his unique perspective on the industry and describe Fundation’s innovative approach, which has enabled it to become the leader in bank partnerships, with long-term agreements now in place with top banks and financial institutions, including Regions Bank, BancAlliance and, most recently, Citizens Bank.

When: The panel will be held in San Francisco, CA and live streamed on CNBC.com from 11:45am-12:15pm ET (8:45am-9:15am PT) on Tuesday, January 10, 2017.

About Fundation
Fundation Group LLC is a digitally-enabled lender and credit solutions provider. The Company develops integrated small business lending solutions with banks, enabling them to deliver credit online, drive cost efficiency into their lending programs and maximize customer retention by providing a positive customer experience and meeting the needs of the small businesses they serve. The Company also partners with a wide array of organizations that serve the small business market in various capacities to deliver credit products to the business community nationwide. For more information, please visit www.fundation.com.

Media Contact:
Barry Feierstein
[email protected]
571-418-6387

by Fundation