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Fundation Review: Best Alternative Lender for Working Capital Loans

After conducting much research and analysis, we recommend Fundation as our 2017 pick for the best alternative lender for working capital loans. 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.

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.

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 upfront to help determine if you have a reasonable chance of being approved for a loan, including the following:

  • 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 organizations 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 similar businesses.

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

  • 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 online application is easy to fill out and can be completed in less than 10 minutes. Final approval decisions are typically made within 24 hours.

Depending on the size of your loan request, Fundation may ask you to link the application to your bank account. Doing that allows the company to instantly review the last 90 days of your transaction history. This can expedite the approval process.

If you don't choose that option, Fundation's proprietary application software will instead automatically capture additional information from credit, public record and government database sources to see if you might be a good fit for a loan.

Editor's Note: Looking for information on business loans? Fill in the questionnaire below, and alternative lenders ready to discuss your loan needs will contact you.  

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Businesses that get preliminary approval then work with a loan specialist, who gathers more specific financial data. Among the items Fundation asks 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.

The loan specialist also tries to get a better understanding of your business and how it operates. The specialist wants to learn the story of your business so he or she can advocate for you if an underwriter has questions. We like that these specialists take the time to get some context for 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, typically within 24 hours. 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.

A lot of variables determine who qualifies for loans. A business's profitability, how much debt it has, how much money is needed 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 you must meet to even be considered. You must …

  • Have been in business at least one year.
  • Have at least three employees.
  • Have annual revenue of at least $100,000.
  • Have good personal credit.

Note that Fundation does not offer loans to businesses in North Dakota, South Dakota and Nevada.

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. Some of the other lenders we looked into have 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 is 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.

There are also no prepayment penalties with Fundation. If you want to prepay your loan, you just pay the outstanding balance plus accrued interest.

While Fundation does not require any specific collateral, you do have to provide a personal guarantee. In addition, a UCC-1 is required for most borrowers. This allows Fundation to collect a business's assets should the loan not be repaid.

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

Each time we contacted Fundation, a friendly and helpful loan specialist immediately answered our calls. We liked that the representatives we spoke to didn't try to gather information about our business before we asked our questions. 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.

The loan specialists thoroughly answered all of our questions. They left us with a clear understanding of how the application and underwriting process work, how you repay the loans, and how quickly you can get approved and receive funding. 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.

These loan specialists were also the only ones we spoke with who encouraged us to investigate other 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 invite us to investigate other options.

Fundation is an accredited member of the Better Business Bureau with an A+ rating. There have been no complaints filed against the lender over the past three years.

The biggest limitation of Fundation is that some businesses might not meet the lender's minimum requirements. If your business hasn't been open for at least one year, 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 encourage businesses that don't meet these criteria to check out our second-place winner in this category, OnDeck, which only requires $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.

Another downside is that if you are in North Dakota, South Dakota and Nevada, you are not eligible for a Fundation loan.

Ready to choose an alternative lender? Here's a breakdown of our complete coverage:

Editor's Note: Looking for information on business loans? Fill in the questionnaire below, and alternative lenders ready to discuss your loan needs will contact you.  

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Chad Brooks

Chad Brooks is a Chicago-based writer who has nearly 15 years' experience in the media business. A graduate of Indiana University, he spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including, local and state government, crime, the legal system and education. Following his years at the newspaper Chad worked in public relations, helping promote small businesses throughout the U.S. Follow him on Twitter.