Overview
It’s a sad reality that many small business owners who are strapped for cash find themselves without a way to really get the funding they need. In many cases, if a company’s credit score or the owner’s personal credit score isn’t excellent, traditional lenders won’t even want to talk to them. Fortunately, the alternative lending space was created for small businesses who fall into the gap, and ForwardLine has been in the business of bridging that gap for a long while now.
ForwardLine was established in 2003 in California with the intent to meet what its founders considered a desperate need in the small business marketplace. To date, they’ve funded more than $500 million in loans to some 15,000 businesses across the US. Their goal is to help businesses on “Main Street” to access the funding they wouldn’t otherwise obtain from traditional lenders, i.e. commercial banks and credit unions, as well as the Small Business Administration. The management at ForwardLine believes that it is America’s small businesses which drive the US economy, by stimulating growth, helping to provide jobs, and growing the tax revenue base. They designed a proprietary algorithm called ForSight to help make a quick decision on an application, sometimes within minutes, with funding possible as soon as 24 hours later.
When they first began operations, ForwardLine offered only merchant cash advances but in the past year or so they recognized that there was a greater need for longer term loans. ForwardLine no longer offers MCAs but they do provide both short and longer-term loans which they believe should meet the needs of most small businesses. While borrower qualifications for the short-term loan is relatively relaxed, they are considerably more stringent for the longer-term loans (though that is pretty standard in the industry), with documentation requirements similarly more complicated. The trade off, though, is that if you qualify for a longer-term loan, the rates are generally competitive among non-traditional lenders.
- Application process very quick from start to funding Soft credit pull won’t negatively impact your credit score
- FICO credit score requirements less stringent than peers
- ForwardLine looks at overall business and growth potential
- No prepayment penalty
- Customer service has a good reputation
- Interest rates charged are generally and comparably favorable
- Loan can be used to (partially) repay existing debt
- Loan can be renewed once 50% of the original balance is repaid
- Collateral not required
- Can only work with established businesses
- Certain industries and types of work are excluded
- Home-based operations are excluded
- Personal guaranty of business owner required
- Certain states only have access to short-term loan products
- Average daily balance in business account may be required
- A tax lien in excess of $50,000 is an exclusionary event
| Types of Loans | Minimum Loan Amount |
Maximum Loan Amount |
Interest Rate | Fee | Terms | Collateral Required |
|---|---|---|---|---|---|---|
| Small Business Term Loans | $5,000 | $5,000,00 | Factor rate of 1.12x to 1.13x (equivalent of 15.50% to 34% APR) | 2.50% | Varies; from six up to 18 months. Repayments daily or weekly. |
Personal Guaranty |
| Line of Credit | $5,000 | $2,000,000 | Interest rate of 14.50% to 26.50% (APR) | 2.50% | Varies; from one to five years. Repayments monthly. |
Personal Guaranty |
*ForwardLine has a maximum amount of $150,000 that they are able to loan to borrowers who meet their criteria. For amounts greater than $150,000 (and up to $2,000,000), the approved loan will be funded by a third-party lender which will be disclosed in the ForwardLine loan agreement.
Though ForwardLine can provide loans in all 50 states, certain states have their own requirements which may limit the term of your loan. When you apply, a ForwardLine consultant will discuss your options with you.
Rates and Fees
After the review of the financial information that the borrower provided, the ForSight scoring algorithm will assign the borrower looking for a short-term loan with one of three possible “grades” which will be the determinant of the factor/interest rates and terms assigned. Of course, these rates and terms are subject to change at any time, at ForwardLine’s discretion.
- Grade 1 borrower would be eligible for terms ranging from 6 months to 12 months, with corresponding interest rates that range from 15.50% to 20.50%.
- Grade 2 borrower would be eligible for terms ranging from 6 months to 12 months, with corresponding interest rates that range from 16.50% to 23.50%.
- Grade 3 borrower would be eligible for terms ranging from 6 months to 12 months, with corresponding interest rates that range from 18.50% to 26.50%
- Borrowers looking for longer term loans will be subject to a similar credit scrutiny, but potential rates have not been disseminated online.
Repayment of the short-term loans are made on a daily basis (each business day, through the Automated Clearing House or ACH) or weekly basis. The short-term loans don’t have a traditional fee structure which uses an APR; instead, each has a factor rate which will range from 1.2x to 1.3x and will be dependent on what rate you are assigned by the underwriter. For example, a $10,000 loan at a factor rate of 1.2x would translate to your owing $1,200 (or $11,200, total), while a $10,000 loan at a 1.3x factor would result in $11,300 being owed.
The longer-term loans have a more traditional fee structure, with interest amortized over the life of the loan and repayments monthly. The rates applied will be heavily dependent upon the information that ForwardLine’s ForSight scoring algorithm has provided, as well as input from the underwriter. Interest rates on the longer-term loans will range from 14.50% to 26.50%, putting them in line with credit card rates. For that reason, if you have fairly good credit and if you aren’t looking at ForwardLine simply because you don’t have collateral you can put up, then you might want to look elsewhere, even among the alternative lenders, for a longer-term loan which can offer better rates than these.
All loans will bear a 2.5% origination fee; it is not clear from the ForwardLine website whether ForwardLine adds this amount to the loan amount or if they deduct it from the proceeds upon the initial disbursement. This is definitely something a borrower should discuss beforehand, as you may have less upon the initial funding than you had previously estimated.
On the ForwardLine website which, in truth, is far too generalized and has very little useful information for a potential client, there is one disclaimer that it is important enough that it be highlighted here. This would be applicable to any loans over $150,000.
ForwardLine does not guarantee the rates, fees, or repayment terms of loans made by our Lending Partners.
Borrower Qualifications
- Minimum annual revenue of at least $150,000
- Borrower must have been in business for at least three years
- Borrower’s in certain industries (namely construction, retail or wholesale), must have been in business for at least 10 years
- Owner of business must have a minimum credit score of 600
- Borrower’s business bank account must have an average daily balance of at least $1,000, with at least seven (7) monthly deposits.
ForwardLine pointed out on the homepage of their website that they are not driven by FICO scores, but that they take a more holistic review of the borrower’s business with a view to sustainability and future earnings.
That criteria is different for a longer term loan, however; ForwardLine acknowledges that long-term loans have a higher standard with a lengthier application process. The documentation required is generally more extensive, and the underwriting requirements include a higher FICO score and evidence of profitability.
Application Process
The process for applying for a loan directly from the ForwardLine website is simplicity in its purest form. Your provision of some very basic information on your needs, your business and yourself starts the process. After you submit, you will have an answer, one way or another, within a few minutes. With an approval, you will hear from a ForwardLine consultant shortly thereafter who will provide you with the details of the offer. If you decide to accept the ForwardLine offer, you will likely need to provide supporting evidence of the information you reported, i.e. bank statements, sales data, state issued drivers license, federal tax ID number, and your social security number, among other criteria. Again, as previously stated, if you are looking for a longer-term loan ForwardLine is likely to have more demands than this basic documentation.
Once ForwardLine is satisfied with the paperwork and information, you can expect your loan to be funded within 24 hours.
Help & Support
While we already mentioned that the ForwardLine website was lacking in information, on the off chance that there were “hidden” pages not obviously accessible, the “search” feature yielded some interesting tidbits of information. For example, a search of the word “fees” came back with a couple of interesting hits. ForwardLine hasn’t touted this on any of their main website pages, but buried in their blog (and with a recent date, so it may not be expired) is information on a specialized offering from ForwardLine called the “Peace of Mind package.” The package is intended to make your management of cash flow a lot less stressful. The package includes, late fee waivers, payment deferrals, a death benefit, and life event deferments; this would definitely be something worth exploring with ForwardLine.ForwardLine’s customer service consultants are available six days a week for clients and prospective clients via email or by phone. They also have an online presence in social media, including on Facebook, Twitter, YouTube and LinkedIn.Each client has access to their online account through a portal on the ForwardLine website. A consultant can help with any account specific or general question. Clients do have the ability to request a renewal of their loan online via the ForwardLine website, provided that they have repaid at least 50% of the original amount. The balance, then, would be rolled into a new loan with new terms and conditions.
User Reviews
The Better Business Bureau has given ForwardLine an A+ rating because it met their own requirements. Reviews are sparse on BBB, with only two, one of which is a quite detailed complaint. To give credit where due, ForwardLine did respond but the reviewer clearly felt he had been duped by the process. On the website Trustpilot, ForwardLine has 159 reviews, with 74% giving them a 5-star ranking, 14% given them 4-star and 11% given them 3-star or worse. Of the 1-star reviews, many users complained about the poor customer service and rude representatives. Those who were pleased by the service were generally happy with the timeliness of the funding, and the quick process overall.
Final Thoughts
Though ForwardLine now only offers term loans, their move away from merchant loans seems not to have diminished their appeal. The company is able to provide funding assistance to small businesses which have a particular problem, namely, they’re profitable but their credit isn’t quite good. Moreover, borrowers who don’t want to or can’t put up collateral, have found potential in ForwardLine. Potential borrowers should bear in mind that ForwardLine does require daily automatic repayments of their loans, so cash flow should be monitored carefully. As with any alternative lender, if your company has the wherewithal to obtain funding from a more traditional source, then that’s the way to go. But if it’s to satisfy an urgent funding need, or simply because you’ve run out of other options, ForwardLine could be the answer to a prayer.
