Fundation Group Appoints Barry Feierstein as Chief Operating Officer

Addition of COO Reflects Company’s Continued Growth & Optimism

New York, NY & Reston, VA – Jan. 11, 2016 – Fundation Group LLC, a leading online direct lender to small businesses, today announced the appointment of Barry Feierstein to the newly created position of Chief Operating Officer (COO). Feierstein will report to Fundation’s CEO, Sam Graziano, and will be responsible for overseeing multiple aspects of the business including: marketing, business development, lending operations, servicing and administration.

Mr. Feierstein is a highly experienced senior executive having spent more than 25 years operating in both financial and non-financial businesses. Prior to joining Fundation, he held executive roles with Apollo Education Group including Chief Commercial Officer and Chief Business Operating Officer. Prior to Apollo, he served as Executive Vice President of Sales & Marketing at Sallie Mae, Inc., reporting to the CEO. Among his responsibilities was the generation of over $26 billion in annual federal and private loan origination volume. Earlier in his career, Mr. Feierstein worked as a management consultant with McKinsey & Company. He holds a B.A. degree from Tufts University and an MBA from Harvard Business School.

Commenting on the appointment, CEO Sam Graziano said Fundation will leverage Mr. Feierstein’s extensive experience in business development, marketing, operations and strategy at a time of rapid growth for the company and rapid evolution of the industry. “We’re extremely bullish on our prospects for 2016 and beyond, and adding a high-caliber, experienced executive like Barry further increases my sense of confidence and optimism about our future,” said Graziano, noting that Fundation’s growth will continue to be fueled by additional partnerships with banks and through other targeted strategic channels.

“I’m excited to be joining Fundation, a dynamic company that is positioning itself as a leading strategic partner to banks and other institutions that serve the financing needs of the SMB market,” noted Mr. Feierstein, “I look forward to joining Sam and the executive team and helping drive Fundation forward as it continues to expand its products offerings and customer base.”

About Fundation

Fundation is a leading online direct lender, providing small businesses with a simple and efficient online borrowing experience that leverages technology to streamline the collection of customer data, expedite the application process and offer customers unprecedented transparency. The company offers conventional term loans to small businesses nationwide for working capital, growth and expansion. The company also develops strategic partnerships that include technology and other service solutions with banks and other large-scale service providers to the small business market. Visit http://5kb.f76.myftpupload.com for more information.


A “Meaningful” Platform-Bank Partnership?

By Ryan Weeks on 6th January 2016

Could Fundation’s recent tie up with Regions Bank be the most impactful on the block?

We’ve seen a fair degree of platform-bank interaction lately – most of it taking place within the small business lending space. The partnership between OnDeck and JPMorgan Chase has garnered perhaps the greatest attention in the press. Under the pilot scheme, Chase – the largest US bank by deposits – will write loans to its c. 4m small business customers using OnDeck’s technology platform and innovative credit scoring capabilities. But the loans will carry Chase branding.

In the UK, we’ve seen the likes of RBS buddy up with peer-to-peer operators Funding Circle and Assetz Capital. These relationships essentially pre-empt the government’s mandatory referral scheme. The high street bank has committed to signposting those SME customers that it cannot work with towards the Funding Circle and Assetz Capital platforms. But for all the bluster, we’re yet to receive detail about how much business is actually being written as a direct result of bank referral.

Direct small business lending platform Fundation tells us that it’s seen quite the uptick in business since joining forces with Regions Bank in early October 2015. To hear CEO Sam Graziano tell it, the Regions deal stands out from the pack as the sole instance of meaningful platform-bank “integration”. Small businesses are able to access Fundation loans directly, via the Regions.com site. Regions’ suite of products sits alongside the Fundation loan option, and the site is co-branded.

Joe DiNicolantonio, head of Regions Business Banking, offered his take:

This unique agreement with Fundation allows Regions Bank to expand loan product offerings and method of delivery for small businesses while also cultivating long-term revenue and loan growth opportunities.”

Regions is a powerful ally, with around $122 billion in assets. The bank provides services ranging from consumer and commercial banking, to mortgages, to insurance products. But in spite of the bank’s clout – and you’d imagine that it must carry a fair bit into negotiations with an upstart online lender – Regions has not shied away from making plain its association with the Fundation platform. Indeed, when selecting the option of a Fundation loan via the Regions.com website, users are confronted with a message which states: "You are leaving Regions and entering an external site". Unabashed referral? Surely not! And although we're lacking hard numbers, the partnership already appears to be paying dividends. Said Graziano:

"It's still early, but we are very pleased with progress as volume is growing rapidly month over month."


Big Banks Embrace Small Lenders Rather Than Compete Against Them

By Peter Rudegeair, Ruth Simon and Emily Glazer

J.P. Morgan Chase & Co.’s decision to tap On Deck Capital Inc. to create an online small business loan for its customers is the clearest sign yet that large banks are choosing the path of embracing up-and-coming lenders rather than facing off against them.

Other banks are also turning to upstarts to boost small business lending. This fall, Regions Financial Corp. partnered with online lender Fundation Group LLC, in part because of its transparent terms. Annual percentage rates on Fundation loans top out at 30%.

Some of these partnerships have been in place much longer. A Wells Fargo & Co. unit that processes credit-card payments for merchants has had an arrangement with CAN Capital Inc. for the past five years in which customers who were declined a bank loan are referred to the online lender.

“We are in discussions about ways to expand the program” with Wells and in talks with “several others,” said CAN Capital chief executive Daniel DeMeo. “There’s a lot more curiosity over the last six months than there had been previously.”

Small-business lending is a natural place for banks to start collaborating with newcomers from Silicon Valley given the amount of ground that they have lost since the financial crisis. Ten of the largest banks offering small loans to businesses extended $44.7 billion in credit in 2014, down 38% from their 2006 volume.

“Every major bank is working on this,” said John Barlow, president of Barlow Research. “This is really just the beginning of a re-engineering of the entire small-business lending process.”

But not every bank will end up enlisting outside help. For instance, Bank of America Corp has no plans to partner with online or alternative lenders in part because of potential dings to its reputation, chief executive Brian Moynihan has told analysts.

In the case of OnDeck, J.P. Morgan determined that OnDeck’s technology, specifically the coding, and compliance operations were reliable and scalable. Its management also had a longer track record than competitors. The bank’s retail chief Gordon Smith and CEO Jamie Dimon were both involved. Mr. Dimon hastened the announcement of the partnership earlier this month when he referred to it indirectly at a conference hosted by the U.S. Treasury.

Many of the details are still under way. J.P. Morgan is planning to begin the partnership in select cities next year before launching in full, a person familiar with the matter said, adding that markets have not yet been chosen. J.P. Morgan will integrate OnDeck’s technology into its checking-account website in order to offer loans to pre-screened borrowers, but the bank is keeping its partner’s name off of the product.

That contrasts with a similar type of loan that OnDeck developed earlier this year for small businesses that use Intuit Inc.'s accounting software. That product, which synced to businesses’ Quickbooks accounts and provided them with quick access to credit lines, was branded as being “powered by OnDeck.”

Meanwhile, Regions decided to put a link to Fundation’s online application on the bank’s website and co-brand the arrangement.

“The product is very simple and easy to understand,” said Joe DiNicolantonio, head of Regions’s business banking group. “We want to make sure our partner is lending in a very responsible and fair way to our customers.”


Liquor Stores & Financing

In today’s somewhat shaky economic climate, running a small business can be tricky, though some industries seem to be able to weather even the worst economic depressions—and the liquor industry finds itself at the top of that list. Owning and operating a liquor store can be more stable than other businesses—and for those who are interested in spirits, it can be an extremely enjoyable job. Getting things off the ground can be a challenge, though, and the more you know about liquor store financing, the smoother running that business will be.

Liquor Store Loans

Because liquor stores tend to do well in a variety of economic climates, it’s not uncommon for banks and alternative business lenders to be more willing to lend and provide liquor store loans to those looking to expand an existing store or to open an additional store. Business loans for liquor stores are also attractive to borrowers: they usually allow for quicker funding, lower interest rates, smaller down-payment and long-term amortization.

Finding the right small business lender can be a challenge: you want to get the best terms and conditions possible. For this reason, searching the Internet and compiling a list of lenders that specialize in liquor store financing is essential. and you should never just go with the first lender you come across, without evaluating your options.

How to Make the Most of Liquor Store Financing

Before you apply for a business loan for a liquor store, you need to decide exactly what you will do with the loan proceeds, so consider the uses of proceeds below.

First is inventory, which you should expect to turn over approximately eight to ten times per year. For this reason, it’s important to determine from the start whether you want to “go big” or carve out a niche as a specialty liquor store, which should depend upon the market that you’re serving. This will help you determine how much capital will be needed for inventory financing. Just remember that there’s more to spend money on than simply inventory, so don’t use your entire liquor store loan just to stock the shelves.

Next, you should start thinking about ways in which to get people through your doors. If the space isn’t up to par, renovations may be necessary, which can be quite costly and should always be handled by a professional contractor. Marketing is also essential: this is what will get people to notice your new store. Print and radio ads can be effective, but they’re very expensive. Digital marketing via social media and a local web presence through local SEO is key to spreading awareness, and you can accomplish this with minimal investment.

Liquor Store Funding: The Bottom Line

The payoff for owning and operating a liquor store can be substantial if you play your cards right. It takes a great deal of planning and a lot of hard work to find success. Start by focusing on your financing options and using your money wisely.

Fundation has experience providing funding for those in the beverage industry, including liquor stores. Contact us for more information on conventional, fixed rate term loans that can provide you with the liquor store funding you need to take your small business to the next level.


Why Word-of-Mouth Marketing Will Never Go Out of Style

Word-of-mouth marketing has been around for a very long time. It happens when people who have had positive experiences with a service or product recommend it to others—making word of mouth a relatively hands-off promotion technique.

This simple marketing approach is a significant part of small business success, especially in local communities. And the Internet has provided a new frontier for word-of-mouth marketing through blogs, reviews and social media, increasing the reach of this highly effective form of small business marketing.

What makes word-of-mouth marketing so effective for small businesses?

People trust their friends and family

A 2013 Nielsen study found that 84% of people trust word-of-mouth marketing over any other form. The reason for this is simple: we trust the recommendations of our friends and family, who presumably have our best interests at heart. Since advertisements always portray a company’s product or service as appealing, many consumers are skeptical. However, friends and family or other consumers with no obligation to promote a product or business are more likely to give their honest opinions. Customers who have unexpectedly positive experiences are more likely to share them with others.

Recommendations are personalized and targeted

Not only do people build a business’ word-of-mouth reputation when they recommend it to a friend, but online reviews and blog posts about a small business can be tailored to the customer who best benefits from them, as they’re relevant to their personalized search queries. Many customers use search engines and trusted review websites to check on a brand or small business, and the information they find can influence their decision to spend money on the product or service. A 2011 study by Google found that online sources are a driving force behind word-of-mouth marketing conversations. Whether through social media, blogs or review websites, customers seek recommendations for products or services they are interested in and, in turn, recommend those products and services to people who may share that interest. This word-of-mouth advertising reaches a more targeted group of customers than generalized advertising and is extremely useful for small businesses with a very specific client base.

Companies and customers can connect

Social media, blogs and online reviews open many doors for small businesses. Word-of-mouth marketing is no longer limited to just the customers in the conversation. Companies can now engage with customers on Twitter, Facebook and forums and respond to reviews and feedback from Yelp or independent blogs. Word-of-mouth marketing is influenced by personal relationships and trust. A small business that interacts directly with customers on online platforms makes them feel more connected. Engaging with customers builds trust, and increased trust makes customers more likely to recommend a business through word of mouth.

When it comes to straightforward tactics for small business marketing, promotion by word of mouth is one of the most effective ways to go. However, it takes more than just a reliable product or service to secure a recommendation. While word-of-mouth marketing is much more cost-effective for small businesses than traditional advertising, it still requires a budget to keep up with online reviews and social media chatter, as well as dedicated employees to manage social media accounts, track keywords, and respond to online reviews. Creating a trusted relationship between a company and its customers takes time and devotion but is rewarded in time.

Read more small business marketing tips from Fundation, provider of online small business loans, by visiting our blog.


Small Business Marketing Tips: 5 Easy Ways to Market Your Small Business

The marketing success of a small business depends on its ability to reach the right customers at the right time with the right message. How can you market your small business in a way that captures the most attention?

Here are 5 small business marketing tips to help your company hit the ground running.

Community outreach

The U.S. Small Business Administration suggests joining community organizations and serving on city boards or committees to better connect with the customers your business is serving or could potentially serve. You can host your own networking events or sponsor community events such as charity drives. If you enjoy public speaking, you can volunteer at schools and other organizations or speak on professional panels. Personalized interaction makes a good impression, and your local community is a great place to grow your roots and gain exposure to a friendly audience.

Engage online

Having a website to provide basic information about your company is important; you can drive traffic to your website by engaging with potential customers online. Social media, Q&A sites and forums encourage interaction and allow you to personalize your brand, connecting with your audience and driving potential future sales. Resources like Hootsuite allow you to manage your business’s social media accounts more efficiently, bringing all accounts under one integrated management platform. In addition, sponsored ads and promoted posts on websites like Facebook and Twitter can help you reach a wider audience.

Networking

Attending conferences, panels and meet-and-greets is a great way to get your business name out. These events will enable you to give your pitch in person, building your referral network and putting your business card in the hands of people who can now put a friendly face on your business’s name.

Offer promotions

People are more likely to spend money on a product or service once they are sure that it is useful or worthwhile. Don’t be afraid to give things away free or for a significant discount. Online coupon codes and giveaways through social media are a significant part of customer engagement, and you can also provide special promotions for partners to distribute to their own customers. Discounts can be an incentive for new customers to try out your product, and once they’ve had their first positive experience, they’re more likely to become repeat customers.

Start a newsletter

To keep your business fresh in the mind of your customers, start an online newsletter to email them periodically. The newsletter can introduce new products or services and updates to your business, and it can discuss trends and news that affect your field. You can even include testimonials and reviews from customers. Email marketing is an effective way of keeping customers in the loop, increasing the likelihood that they will engage with your business in the future.

Deep pockets aren’t necessary for successful small business marketing. A conventional term loan can go a long way in funding your marketing efforts to increase your profits. Fundation offers fixed-rate online small business loans, providing your small business with the flexibility to focus on your marketing initiatives.

Are you considering an alternative business loan to invest in your business expansion? Contact Fundation today to discuss the possibilities.


Business Credit Scores vs. Personal Credit Scores: Why Lenders Need Both

Small business owners have a lot of challenges that need to be addressed in order to find success. Unsurprisingly, many of these are financially based, which is why so many people find themselves taking out business loans to get things off the ground. That being said, some small business owners are often surprised to find that business lenders will often ask for business credit scores and personal credit scores when taking out a small business loan—here’s why.

Your Personal Credit Score Still Matters

Many small businesses are operated by either one or two individual owners. Lenders can therefore learn a lot about the creditworthiness of the business and the financial acumen of the owners by looking at the owners’ personal credit report. A good personal credit score, combined with other factors, may indicate to a lender that the business is likely to be well-managed and successful. Additionally, many lenders require a small business owner to personally guaranty the repayment of the loan, in which case the owner’s credit score would factor heavily in the lender’s determination of whether the personal guaranty would be effective.

The Importance of Knowing Your Personal Credit Score Along With Your Business Credit Score

Since an initial small business loan will most likely be contingent upon your personal credit score, it’s extremely important to know where you stand. Personal credit scores can shift and change over time—occasionally, to a drastic extent, depending on the circumstances. There are many affordable credit score providers online for those who are looking to get small business loans and who aren’t sure of their personal profile.

If you’re willing to spend a bit of money, those companies will not only allow you access to personal and small business credit reports from all three major bureaus, but you’ll be notified of any major changes that occur, as they happen.

What if My Personal Credit Score Is Poor?

This is a common question among those who are looking to obtain small business credit. A poor personal credit score, just like a poor business credit score, can be challenging to overcome, but it’s important to realize that it doesn’t tell the whole story of who you are and what your business is capable of.

It’s possible to improve your personal credit score if you take the right steps to do it. This can be a time-consuming process, and it’s not uncommon for people to feel as if they’re not making any progress. Using a secured credit card, making sure never to miss payments and working with a professional to improve your personal credit score can all be helpful. If you can do this before requesting a small business loan, you’ll be in even better shape.

Have questions about your personal or business credit score and want to discuss your financial situation with a nonbank lender? Contact Fundation to discuss the conventional term loan options suited for your company’s specific needs and situation.


5 Key Elements of Online Marketing for Small Businesses

Growing a small business can be an immense challenge, regardless of industry. This is especially true for small businesses that have a lot of competition, both locally and nationally. The key to finding success as a small business is to work toward improving your marketing strategy in as many ways as possible. Still, many companies focus on the wrong types of small business marketing, which can end up being extremely costly. Online marketing is the future for today’s small businesses, and it’s not nearly as difficult to get started as you might think.

Here are 5 key elements of online marketing for small businesses that you simply can’t afford to ignore.

1. Strong Web Design

While you may not consider your website part of your small business digital marketing plan, it may be one of the most important elements at play. You could have the best products or services out there, but they’re not going to sell if your website is stuck in the past. Also, never overlook the importance of making your site easy to view on mobile platforms, as you have to expect that much of your audience will be on their phones when visiting your website.

2. Blogging / Content Marketing

Blogging is a huge part of small business marketing online. It’s one of the best ways not only to connect with an audience but also to assert yourself as an expert in your field. Starting a blog is completely free, and building followers will happen over time if you’re careful with how you schedule and share each post. Finally, your blog should be connected and linked to and from your website, which will help drive traffic in both directions, boosting your small business’ digital marketing efforts.

3. Search Engine Optimization (SEO)

You could have the most beautiful website in the world, but if people aren’t able to find it, it won’t be anywhere as effective as it could be. This is where SEO, or search engine optimization, comes into play. Improving SEO should be one of the main components of your small business online marketing strategy, as it will make it easier for your audience to find you, regardless of how big or small your business is. What many people don’t realize is that the SEO techniques are constantly changing. For best results, work with a firm that has a deep understanding of SEO and how it works.

4. E-Newsletters

While direct mail may quickly be becoming a thing of the past, it’s beginning to take a more digital form. E-newsletters are the ideal way to concisely help your audience learn about what’s happening with your business and how they might benefit. Starting an e-newsletter is free, and the larger you can grow your list of subscribers, the more effective it will be as part of your small business online marketing strategy.

5. Social Media Marketing

Social media is extremely popular today, and this isn’t going to change anytime soon. Learning how to use social media to your advantage is essential to finding success in digital marketing, and it can be extremely cost-effective. Regularly posting quality, educational content on your Facebook or Twitter profiles and properly tagging your posts will open up a discussion between you and your audience, thus improving the visibility of your company.

Online marketing is truly the way of the future, and ignoring this trend is going to cause your small business to fall behind. It can seem overwhelming at first, but the benefits (and low costs) that come with digital marketing are hard to ignore. Learn the finer points, kick the process off, and watch as your audience and customer base grow.

Be sure to read some of Fundation’s other articles for more small business marketing tips and financing advice.

Need alternative financing to start or improve your small business digital marketing efforts? Contact Fundation to learn about the short-term business loans available to help take your company to the next level!


Loan Overload? Online Lenders Offer Business Debt Consolidation and Refinancing

By Teddy Nykiel

If you’re up to your ears in business debt — whether it’s from one high-interest loan or three — it’s time to re-evaluate.

Having small-business loans or merchant cash advances with annual percentage rates in the double or triple digits can suffocate your cash flow. Refinancing and business debt consolidation are two ways you can cut your interest rates, and online lenders might be able to help. Here’s what you need to know:

Business debt consolidation vs. refinancing

When you refinance business debt, you take out a lower-interest loan to pay off one that has higher interest. Consolidation combines several loans or merchant cash advances into one loan. Of businesses that applied for financing in the first half of 2014, 15% needed debt consolidation or refinancing, according to a survey by the Federal Reserve Banks of New York, Atlanta, Cleveland and Philadelphia.

An increasing number of borrowers with bad credit have multiple high-interest small-business loans and merchant cash advances. This is known as loan stacking and can happen when borrowers fail to qualify for a large, low-interest small-business loan. To compensate, they take out multiple smaller loans with high interest. Jerry Silberman, founder of debt-restructuring service Corporate Turnaround, has seen small-business owners with as many as 10 merchant cash advances.

If you have multiple high-interest small-business loans or merchant cash advances, there’s no way you will be able to qualify for a traditional bank loan to refinance, Silberman says. But many online small-business loans can be used for business debt consolidation and refinancing.

We’ve listed some of your best options. To compare all your loan choices, check out our small-business loans page, where we’ve listed loans based on what you need to qualify.

For businesses that can qualify for the lowest rates: SmartBiz

SmartBiz is an online platform that connects business owners with loans backed by the U.S. Small Business Administration. SBA loans are among the least expensive loan options. You need good credit and a healthy business, and you must meet SBA requirements to qualify for SmartBiz. The lender has noticed more small-business owners using SmartBiz loans to refinance debt than in the past, General Manager Evan Singer said in an email.

SmartBiz:

• Loan amount: $30,000 to $350,00
• APR: 7% to 8%
• Loan term: 10 years
• Approval time: Within seven days of submitting application
• Read our SmartBiz review

For businesses that want a line of credit and refinancing: Dealstruck

Online lender Dealstruck offers a variety of financing products, including small-business term loans, asset-based lines of credit and inventory lines of credit. About one-third of Dealstruck borrowers use the money for debt refinancing, says Chief Strategy Officer Candace Klein. For those business owners, the lender typically extends a term loan to pay off the existing debt and a line of credit to cover ongoing working capital needs, Klein says.

Dealstruck:

• Loan amount:$50,000 to $250,000
• APR: 11% to 28%
• Loan term: 6 months to 4 years
• Approval time:Prequalification in minutes, offer letter in two to three days, average of 10 days to funding
• Read our Dealstruck review

For businesses with at least 3 employees: Fundation

Founded in 2011, Fundation offers online small-business loans with terms of up to four years. The lender has a minimum requirement that most lenders don’t: You need to have at least three employees (including yourself) to be eligible. Up to one-fourth of Fundation borrowers use their loans for debt refinancing, a spokesman for the lender said in an email.

Fundation:

• Loan amount: $20,000 to $500,000
• APR: 8% to 30%
• Loan term: 1 to 4 years
• Approval time: Funding as soon as 3 days after submitting application
• Read our Fundation review

For business owners with a 620 personal credit score or higher: Funding Circle

Funding Circle is a peer-to-peer lender offering small-business loans with terms of up to five years. The lender requires borrowers to have at least a 620 personal credit score, slightly higher than the 600 minimum that Dealstruck and Fundation require. (SmartBiz doesn’t have a minimum credit score but typically doesn’t accept borrowers with scores lower than 600.) Although most Funding Circle borrowers use the loan money to grow their businesses, many also use it to refinance debt, Funding Circle’s head of communications, Liz Pollock, said by email.

Funding Circle:

• Loan amount: $25,000 to $500,000
• APR: 7% to 26%
• Loan term: 1 to 5 years
• Approval time: Less than 10 days
• Read our Funding Circle review

The bottom line

If you’re considering business debt consolidation or refinancing, the online loans listed above might be options. Debt refinancing means taking out a new loan to pay off an existing loan at a lower interest rate. Business debt consolidation is a type of refinancing, but it refers specifically to using one new, lower-interest loan to pay off multiple higher-interest loans.

If you meet the minimum requirements, apply for all of these online loans and choose the one that offers you the lowest APR. Unlike with credit cards, applying for multiple loans won’t hurt your credit score because the credit bureaus recognize the value of shopping around for the best rate. As long as you apply for the small-business loans within a short time frame (about two weeks), all of the credit pulls will count as just one hard inquiry.

Find and compare small-business loans

NerdWallet has come up with a list of the best small-business loans to meet your needs and goals. We gauged lender trustworthiness, market scope and user experience, among other factors, and arranged the lenders by categories that include your revenue and how long you’ve been in business.


Late on a Loan Payment? How To Do Damage Control

It can happen to the savviest of business owners. Unanticipated expenses arise. A customer doesn’t pay on time. External events like the weather drive down sales. As a result, you might find yourself unable to make a loan payment on time.

Late payments can hurt your personal credit score and your business standing with creditors, even resulting in collection efforts in some cases. If you find yourself in this position, follow these 3 steps to minimize the damage and get back on track.

1. Communicate With The Lender.

The most important thing you can do if you know you’re going to be late on a loan payment is to communicate that to the lender before the payment deadline. A lot of borrowers mistakenly avoid the lender. According to Kristin King, Vice President of Rockford Bank and Trust, “There are ways that we can help customers that are experiencing cash flow difficulties, but I caution them to communicate with me early.” Keeping the line of communication open allows you to work with the lender to come up with a repayment plan and possibly avoid consequences, such as penalty interest rates and damage to your credit score.

First, Identify the Problem

The first thing the lender will want to know is why you’re late. Is it a temporary problem? Or has there been a fundamental change in your business that will cause you to continue to miss payments? Whatever the cause, be straightforward about why you will be late on the payment. That will calm the lender’s anxiety, so they won’t be as quick to report the late payment to credit bureaus or jack up your APR.

Then, Suggest a Solution

The next step is to explain to the lender what type of repayment modifications will help you get back on track. Sam Graziano, CEO of online business lender Fundation, says the following options may be available:

1. Defer and repay. For example, if you’re late on a $600 payment, the lender may allow you skip (defer) the payment this month and tack on $200 to your next 3 months’ payments.

2. Forbearance agreements to pay smaller amounts in each installment for the remainder of the loan.

3. Pay interest only for 60-90 days.

There’s no guarantee that a lender will offer you a payment plan, but they will usually be understanding if you haven’t missed payments in the past. If the lender offers a deferral, keep in mind that the missed payment will be added to the loan balance, so you’ll be paying more interest in the long run.

If you can reach some kind of consensus with the lender, the lender most likely will not report a one-time late payment to the credit bureaus. However, if you’re regularly late or are more than 30 days late without a repayment plan in place, most lenders will report you to the credit bureaus. This can hurt your personal and business credit scores. In addition, if you go 90 days or more without paying, the lender may initiate collection efforts (exact time frames for credit bureau reporting and collections depend on your loan agreement).

2. If You Anticipate Missing Payments, Consider Refinancing.

Missing a loan payment every once in a blue moon isn’t too big a deal, but if it happens regularly, that’s a sign that you can’t afford your monthly payments. In that case, you may want to refinance your business loan before you miss more payments.

Refinancing basically allows you to pay off your loan by taking out a new loan with a lower interest rate and/or longer repayment term. Typically, lenders will allow you to refinance only if you have a good credit score, so you should try to refinance before missing too many payments. If you’re interested in refinancing, a good place to start is the lender that gave you the original loan.

Refinancing has pros and cons that should be carefully evaluated. The primary advantage is that you get lower monthly payments if you refinance when there are historically low interest rates (like right now). You also get a longer repayment term to spread out your payments. The refinancing fees are the primary disadvantage, as they can sometimes displace any savings you get from lower monthly payments. In addition, you may be charged a prepayment penalty for refinancing your loan, which could again wipe out any savings you get from lower monthly payments.

If you can refinance at the right time and without paying a lot of fees, that can lower your monthly payments and save you money on interest.

3. Don’t Be Late Again.

A single late payment won’t do much harm, but if you regularly miss payments, lenders will report that to the credit bureaus. In addition, lenders will charge a higher penalty APR and late fees for tardy borrowers. Paying on time going forward will help fix those problems.

Minimize Damage to Your Credit Score

According to Credit Karma, payment history accounts for about 35% of your credit score, making it one of the most important factors in calculating your score. A late payment can stay on your credit report for up to 7 years. However, by paying bills on time going forward, you can slowly lessen the impact. A good way to force yourself to stay on track is to set up automatic monthly loan payments. That encourages you to keeps expenses low and your bank account as full as possible.

Try to Get Rid of the Penalty APR and Late Fees

Late payments often trigger late fees or an increase in interest rates (called penalty APR). I recommend asking the lender if they can waive these penalties, particularly if this is your first ever late payment. Some lenders may have internal policies regarding penalty APR. For instance, many lenders will restore your original APR if you make a certain number of consecutive on-time payments (there is a law requiring lenders to restore your original APR after 6 consecutive on-time payments, but this law only applies to consumer credit cards, not to business loans).

Consider Changes to Your Business Finances

Even if this is your first time missing a loan payment, you should carefully examine your business finances and figure out what happened to prevent a repeat occurrence. There are some changes you might be able to make:

• Set aside some “emergency business funds” each month to use when unexpected events happen.

• Cut business costs and overhead wherever possible.

• Regularize your cash flow. In Kristin King’s experience, “most business owners experience timing issues between collecting on accounts receivable and the due date of payments.” By requiring upfront payment or enforcing payment deadlines, you can stabilize your cash flow. Doing business with habitually tardy clients could be hurting you more than helping you.

• Choose financing that suits your business. Some types of financing, such as invoice factoring, are specifically designed to stabilize cash flow. We can help you find financing that fits your business needs.

Making changes to the way you do business now will prevent problems in the future.

Bottom Line

It’s not the end of the world to be late on one loan payment, but it’s best to nip the problem in the bud so it won’t happen a second or a third time. Regain control by communicating with the lender, refinancing if the monthly payments are too high, and paying on time going forward. Selecting the right form of financing for your business is also key, and FitBizLoans can help you make an informed choice.