Forward Financing Review
- Few restrictions on use of funds
- Allows loan renewals after 6 months
- Relaxed borrower qualifications"
Every small business owner has hopes and dreams and aspirations – face it, if they didn't, they'd be working for someone else! Many times, however, while they have the desire and the will, they don’t have the means or money to turn a business dream into reality. So where does a business owner go when his own personal credit is far from good, but he has a viable plan of action and a decent revenue stream? To the alternative lender market for small businesses, that's where. And that's where Forward Financing comes in.
Forward Financing caters to small businesses of a certain nature:
- Some start-up or fairly-young businesses (operations of one year are acceptable)
- Businesses whose owners have only mediocre credit scores (FICO score of only 500 is not unusual)
- Businesses that might have a greater cash need (maximum loans of $300,000 which is more than many other lenders offer)
- Businesses with an otherwise exclusionary loan purpose (there are very few restrictions on use of funds)
- Businesses which have a need for as much upfront cash as possible (the upfront fee, though tiered, is less than the percentage origination fee charged by many rivals)
Forward Financing sets itself apart from other alternative lenders in that is it intended to be an outlet for small businesses, and, in some cases, start-ups, which might a less than stellar credit history. The company is one of only a few in the industry that has effectively provided relief for cash-strapped companies which don't have good credit; the drawback, of course, is that the fees are generally much higher than traditional lenders. But during this Forward Financing review we found that its borrowers usually understand their precarious predicament and generally do speak very highly of the company (despite the high fees), as evidenced by online reviews.
Another thing that we found interesting during this Forward Financing review is that the lender offers loans in every state, while many lenders exclude some states. Still, there are some businesses that will not be eligible for a Forward Financing loan, including gambling, casinos, cannabis dealers, weapons dealers, janitorial services, financial services companies and cell phone companies.
Forward Financing was established in Boston, MA in 2012; since then, the company has financed more than $300 million across the United States and has had over 6,000 borrowers. Not long ago, Inc. Magazine said ranked them the 15th fastest growing entity in America, and the 3rd in the sector. From 2014 to 2017, the company grew nearly 13,000%, generating annual revenues of $28.3 million.
Forward Financing offers only two types of loans; a short-term loan (up to 12 months, only) and a merchant cash advance loan (also, of a relatively short duration). Because the terms are so short, the catch is that their rates are generally on the higher end. The company touts itself as being able to fund a loan quickly, sometimes in as little as 24 hours. That's great when you're in desperate need of fast cash but there's a caveat, of course. The short-term nature of either loan means repayment will also be quick, but perhaps not painless. Both types of loan require daily repayments, either through an automatic debit of your checking account (in the case of the short-term loan) or else against your future receivables (in the case of the MCA).
- Loans up to $300,000
- Funding available for newish businesses
- Borrowers with a “poor” credit score are still under consideration
- Few restrictions on use of funds
- Permits loan renewals after six months
- Willing to take a subordinate lien position (in cases where collateral is required)
- Willing to work with borrower with negative average daily balance in bank account
- Maximum repayment term is 12 months
- Factor rates are higher than the industry average
- No interest forgiveness on loan renewals
BlueVine offers two types of funding for small businesses:
|Types of Loans||Minimum Loan Amount||Maximum Loan Amount||Interest Rate||Processing Fee||Repayment Terms||Collateral Required|
|Short-term Loan||$5,000||$300,000||Factor rate: ranging from 1.3x to 1.5x||Tiered*||4 to 12 months; fixed rate repayment automatically, each business day||None Personal Guaranty|
|Merchant Cash Advance||$5,000||$300,000||Factor rate: ranging from 1.3x to 1.5x||Tiered*||4 to 12 months; pre-agreed percentage of daily credit card sales “held back” then repaid next business day||UCC-1 Lien on a case-by-case basis|
Rates, Repayment and Fees
Forward Financing charges a “factor” rate on its loans, which ranges from 1.3x to 1.5x. To determine your actual cost, multiply your loan amount by the factor rate. The amount over the original loan amount is your cost. For example, a $5,000 loan at a factor rate of 1.3x would be a total repayment of $6,500 while a factor rate of 1.5x would be $7,500. In the former, you're paying $1,500 extra in interest while for the latter, you're paying $2,500 in interest. Remember, this is over a maximum of 12 months, and it doesn't include the processing fee.
Repayment terms of the loans depends on the loan type. If you opt for a short-term loan, repayment will be a fixed amount and will be repaid daily from the designated bank account. In that way, the amortized loan will be fully repaid at the end of the agreed term.
If you take a merchant cash advance, the daily repayments will vary, and will depend upon the previous day's sales. A percentage of those sales will be agreed upon prior to the first payment, and that amount will be “held back” and repaid on the next working day. In this case, the amounts repaid daily will vary; when sales are higher, the repaid amount will be higher, while lower sales will mean a lower payment. Given that, the actual repayment of the loan could be sooner or later than the 4 to 12 months duration.
The processing charged by Forward Financing is an upfront flat fee (similar to an origination fee). However, unlike some lenders that charge a percentage of the loan amount, Forward Financing's processing fee is tiered and dependent on the amount of the loan as follows:
|Loan up to $10,000||$300|
|Loan up to $25,000||$495|
|Loan up to $50,000||$795|
|Loan up to $100,000||$995|
|Loans > $100,000 up to $300,000||*Contact Forward Financing for fee|
Forward Financing does have a prepayment penalty if you decide to pay your loan off before the agreed upon deadline. Their website does not disclose this amount but understand that the fee could be significant enough to wipe out any potential benefits you might have gotten from prepaying.
Forward Financing's borrower qualifications are among the most “lenient” in the industry, which is a boon for borrowers with “iffy” credit.
- Minimum credit score of 500 for the business owner
- Company in business for at least one year
- Annual revenue of $150,000 required
- Monthly minimum of $10,000 in deposits into business bank account
- Maximum of eight days with a negative ending balance in the most recent month (as confirmed by recent bank statements)
For any loan from Forward Financing, the first step is completion of a few online questions which should take less than 10 minutes or so. It begins with you providing the following information:
- How much money do you need?
- When did your business begin operations?
- Are you the business owner? (If there is more than one, you will need to specify that.)
About the Business:
- What is your business' legal name?
- What is the contact information, i.e. address and phone number of your business?
- Do you have a company website and if so, what is the link?
- What industry is your business identified with?
- What is your Federal Tax ID number?
- What are your monthly revenues?
About you (and other owners):
- What is your full name?
- What is your date of birth?
- What is your contact information; i.e. home address, phone number, email address, phone number
- What is your Social Security number?
About the Loan:
- What is the purpose of the loan?
- Can you upload recent business bank statements (last three months)?
Once you've submitted the application, it moves to the review stage which takes about an hour. In making a loan determination, the company uses a revenue-based model, focusing on cash flow. Depending on the type of loan, they will also consider either the average daily balance of the business checking account (for the term loan) or the average sales (both debit and credit cards) for a merchant cash advance. Given their focus, a poor FICO score is usually not a deal breaker.
If approved, you'll be contacted by a representative of Forward Financing who will give you the offer terms of your loan. You will have to review your options and can choose to accept the loan (or not). If you accept, Forward Financing will move forward with the loan agreement and other documentation for your signature. Once everything is signed and neat and tidy, they will arrange to fund the loan (minus the applicable processing fee).
BlueVine has various fees which are product-driven. The lines of credit will, of course, have a pre-determined interest rate which will be charged either on a weekly or monthly basis, depending on the term of the line of credit (Flex6 or Flex12). Moreover, each advance of the line will have an applicable draw fee attached to it. Miscellaneous fees under the lines of credit include late fees which are $15, or 5% of the amount due, whichever is higher. For those borrowers who do not make automatic repayments through an ACH debit, BlueVine will assess a check processing fee of $7. A check returned for non-payment will attract a $15 fee. Last but not least, and negotiable to a great extent, BlueVine charges a $50 annual fee.
The invoice factoring aspect also has several associated fees. Besides the factor rate, which will be agreed upon by both parties prior to the first funding, there is also a late fee of between 2% and 3% of the invoice amount due. Once the grace period elapses, a daily penalty will be assessed. In order to encourage the borrower's use of ACH (or, more accurately, to discourage other forms of payment), BlueVine will charge $15 for each wire transfer (and given potentially daily remittances of paid invoices, that could add up substantially).
Help & Support
After the loan has been approved, Forward Financing will assign each borrower a dedicated advisor who can help smooth out any wrinkles in the process of funding and repayments. The Forward Financing website is very “vanilla,” meaning it has very little useful information. However, the team of employees at Forward Funding is often given very high marks for their knowledge and assistance, so any questions should be directed to them, either over the phone or by email.
On the website Trustpilot, 89% of Forward Financing's 397 reviews were “exceptional,” and given a 5-star rating; another 9% considered the company, “great,” while 1% said they were only “average.” Another 1% gave Forward Financing a “poor” or 1-star rating. Most reviewers of the “exceptional” ratings cited the ease of the process, the quick turnaround to funding, great customer service, and joy at being approved despite having poor credit. There are a number of “verified orders” which could provide some legitimacy except for the fact that in most of the cases they were invited to write the testimonial by Forward Financing. Of the bad reviews, Forward Financing reached out in each instance to connect with the reviewer in an attempt to get some clarity.
It's difficult enough to find funding when your credit is decent, and even more difficult when you've had financial or credit difficulties in the past. But if you've reached a stage in your business that you just need a leg up, regardless of the costs, then Forward Funding might be the boost your business needs. Yes, their factoring rates are higher than the industry average, and granted, their loan duration is significantly shorter, but for those businesses who need money yesterday, this might be your only shot. As an advantage, finishing with the loan payments quickly will free up your money for future expenses. The good reviews by their borrowers on their turnaround time, transparency and funding times suggest they're in the game to stay, so if you can handle the terms, Forward Financing might give you the step forward your company needs.