Overview
Fundera has been in the business of making loans happen since 2013. Based out of New York City, they serve as go-betweens for small businesses owners and credit providers in the alternative lending space. Though there are other companies that also act as a loan facilitators or middlemen, but the difference is that Fundera has vetted all of its credit providers to ensure that they meet certain criteria. Given that exclusivity, Fundera has far fewer partners than its competitors. Nonetheless, Fundera believes that the options they provide are broad enough that most borrowers will be able to find a match to satisfy their credit needs.
The funding products that are available to Fundera’s borrowers are quite varied, running the gamut from the simple short-term installment loan, to the traditional working capital line of credit and on to the less-conventional invoice factoring. Fundera states that most of the loans it is able to facilitate are of a short-term nature of generally, less than two years, though longer-term loans are not unheard of and will certainly be dependent upon the borrower’s qualifications and credit strength.
- Borrower requirements vary depending on lender
- Offers wide range of small business loan products
- Startups are not immediately excluded
- Fundera’s partner lenders are carefully screened
- Terms and fees are transparent
- Strong reputation in the public arena
- Website helpful in understanding borrower options
- Fundera committed to borrower’s bill of rights
- Fundera’s eligibility tracker automatically assesses new products for previously ineligible borrowers
- Application can be completed through QuickBook or Xero
- Interest rates and factor rates can be high
- Additional fees may be assessed, depending on the lender
- Fundera’s pre-qualification is no assurance of a loan approval
- Funding can take as long as two weeks
Services Offered & Types of Funding
As stated, Fundera is not a lender, but acts as the middleman between a borrower and one of many potential lenders. All of those lenders have been carefully screened by Fundera to meet its high standards and to ensure that there is no violation of the Small Business Borrower’s Bill of Rights (which Fundera has signed onto and which essentially states that certain standards of fairness, transparency and borrower’s rights will be paramount in the lending process).
Fundera’s partner/lenders are some of the biggest names in both the traditional and alternative lending space.
Given that the lender/partners are varied, they are able to provide the widest range of products that should satisfy the needs of most borrowers.
Those products include, but are not limited to, the following:
Short-term loan
-
-
- Duration of less than one year
- Typically a flat fee multiplied by the loan amount
- Repayments are more frequent, sometimes daily
-
Installment loan
-
-
- Duration of more than one year
- Interest charged as an APR (typically)
- Repayments are typically monthly but may be weekly
-
Invoice Factoring
-
-
- Lender may purchase up to 80% of eligible invoices
- Rates may be high and charged on a daily rate (factor)
- Repayments are usually quite frequent (often daily)
-
Merchant Cash Advance
-
-
- Rates may be high and charged daily (as a factor)
- Repayment is usually daily and may vary depending
- Opportunity for non-sufficient funds charge high if receivables can’t cover daily payment
-
Line of Credit
-
-
- Maturity of each draw will vary depending on your specific terms and conditions
- Interest charged only on actual amount outstanding, not available
- Repayments typically increase availability of funds
-
Equipment Loan
-
-
- Duration usually longer than one year
- Loans are typically fully amortized with interest charged as an APR
- Loan secured by equipment purchased (which typically lowers the APR)
- Repayments are typically on a monthly basis
-
SBA Startup Loan
-
-
- Can act as lender on behalf of Small Business Administration
- Loans are guaranteed by the SBA
- Start-up loans can be as high as $1 million for eligible borrowers
- Terms can vary from 6 months to as many as 10 years
- Rates and loan terms are generally favorable
-
SBA Loan
-
- Can act as a lender on behalf of the Small Business Administration
- Loans are guaranteed by the SBA
- Borrower requirements are more stringent than alternative lenders
- Interest rates and loan terms are usually very favorable
Rates and Fees
Because Fundera’s partner/lenders set the rates and fees for any offer they make to a borrower, there is no clarity as to how much a borrower will ultimately pay for a loan. Fundera itself does not charge any fee to the borrower for applying for a loan through them. However, they do charge a fee to their partner/lender if a loan is approved and funded. Whether or not those fees are passed through to the borrower is dependent upon the lender, but should be disclosed in the borrower agreement, nonetheless.
When a lender makes an offer to a borrower, they are required to disclose the interest rate to be charged and any applicable fees. Those fees could include the following:
Origination fee
-
-
- This may be a fixed price or else a percentage of the loan amount
- May be deducted from the loan proceeds
-
Documentation fee
-
-
- This is for document preparation, and may include cost for filing liens against assets
-
Maintenance or subscription fee
-
-
- A recurring charge to monitor and maintain the loan
-
Late charges
-
-
- Usually a fixed amount, assessed after a specific number of days of non-payment have elapsed
-
NSF fee (for a returned check)
Guarantee fee
- Applicable to SBA loans over a certain threshold
- May or may not be passed on to borrower
Draw fee
- Applicable to lines of credit, generally
Prepayment penalty
- Usually a percentile charge for repaying your loan early
Borrower Qualifications
While there are no hard and fast rules for a borrower’s requirements, Fundera has put together a snapshot of a typical borrower. Essentially, it is a business which has been in operation for more than two years, with gross monthly sales of around $10,000, and an owner with a FICO score of 620 (or better). Now, that’s not to infer that not meeting that standard is a deal-breaker; every one of Fundera’s network partners will have particular borrower requirements which, in some cases, may be considerably more relaxed.
Fundera says that the lenders it has vetted are typically willing to take on the risks and complexities typically associated with small business funding. As such, the criteria that the underwriters will use to assess a borrower’s creditworthiness are likely to be broad-based and, in some cases, non-traditional. For example, they may look at a company’s social media presence, or whether or not the company uses specific accounting software or have a checking account or banking relationship with one of their own partners. Given that Fundera’s lenders are more willing to take on a relationship that could be deemed higher risk, it will often come with higher rates of interest and/or fees.
Application Process
It’s a 4-step process on the Fundera website to apply for a small business loan product.The first step is creating an account on the Fundera landing page and then self-reporting basic information about you and your company (contact information, credit score, revenue, length of operation, information about the type of business, etc.).
Once submitted, you’re automatically moved onto the second step. Here, a lending specialist from Fundera will contact you to get any additional information to support your request. From there, a list of potential lenders and available options will be provided to you. Fundera doesn’t want to leave you hanging at this crucial juncture, so if you need help in assessing which is the best suited to meet your needs, you’re encouraged to contact your Fundera specialist who will work with you. If you prefer to go it alone, they offer the use a loan calculator which they have on the Fundera website.
The third step is to move forward with your lender of choice. You may be required to fill out an application with the lender you’ve chosen. They, in turn, will be in touch with you if they have additional questions or require specific documentation to support your application. The Fundera FAQ page suggests that that documentation will be largely dependent upon the type of funding the borrower is seeking, and could include the following:
- Several months of bank statements
- Access (read-only) to online accounting software
- Several months of credit card statements
- Copies of federal tax returns
- Copy of your most recent financial statements
- Verification of rental space
- Valid state-issued identification
Once your lender’s underwriter is satisfied with the information you provided, they will move forward with the process and make a formal offer. In some cases, you may even receive offers from more than one lender, especially if you have the creditworthiness to back up your request, in which case you will have to assess which lender offers you the better deal.
That leads us to the fourth step; upon your acceptance of the offer, the loan amount will be transmitted to you in the manner in which both parties had previously agreed.
Help & Support
Fundera’s customer service specialists are available Monday through Friday, by email, phone or live chat via their website. They also have a presence on social media through which you can contact them for questions which are more basic and not account specific. Their FAQ page is exceptionally detailed with answers to many different types of inquiries, while the Fundera blog has a whole host of articles and posts which can help small business owners in formulating a working strategy for their company. They also have guides, how-to’s and tips for still more guidance. In short, they want to ensure that you are getting the most out of your small business loan.
User Reviews
Fundera has an AAA+ ranking with the Better Business Bureau. On the website Trustpilot, of the 463 reviews, 84% have given them a 5-star rating. Of the 4% of 1-star reviews, it is clear that the reviewers did not understand that Fundera was merely the middleman in the process. Most of the complaints were about delays from the lender, or requests for additional information before a decision could be made. Fundera only pledges to connect a borrower with a lender; they cannot compel the lender to make a loan. Some reviewers complained about the pulled credit history; Fundera responded that they only do a soft pull which does not impact a borrower’s credit history; however, once a lender takes over the process a hard pull on your credit is generally a necessity. One of the things most noticeable in all of the negative reviews was the absence of complaints about aggressive marketing tactics and incessant, harassing phone calls; Fundera states clearly that is it not a lead-driven company and does not sell your information to third parties.
Final Thoughts
Fundera clearly seems to be one of the better facilitators in the lending space for small business owners. The fact that it pre-screens both its potential borrowers and its partner/lenders makes the likelihood of a good match that much greater. While there have been some complaints about a borrower’s pre-qualification not moving into the approval stage, that is typical of any lender in the industry; each will have its own underwriting criteria that will need to have been met.
The absence of aggressive marketing tactics is also a nice change of pace from the norm; Fundera pretty much allows the borrower to drive the process without hounding them for a response. The only exception is Fundera’s promise to periodically review the information on an otherwise ineligible borrower with a view to helping with a new product some time in the future.
All in all, the advantages for using Fundera far outweigh the negatives. They don’t come right out and say that they provide one-stop-shopping, but that is what they do and they do it very well.
