Small business owners often need working capital to help maintain and grow their businesses, but many struggle to meet approval requirements from traditional lenders. Fora Financial is an alternative lender specializing in small business financing with lower approval requirements than many competitors. The company’s offerings include a term loan and a merchant cash advance.
However, before seeking Fora Financial business loans, you should know the costs, benefits, and risks. In this guide, we’ll help you determine if it’s right for your business.
In particular, we will answer these questions and more:
Fora Financial is a NY-based online business lender focused on small business financing. Launched in 2008, the company has distributed over $3 billion in business funding to over $35,000 companies. Its loan offerings provide working capital to help businesses invest in themselves and grow.
Fora is a direct lender. The company’s financing products are viable for small businesses that won’t qualify for a traditional loan or need fast funding. Fora Financial’s process is straightforward.
Fora Financial is an online lender meaning business owners apply through their website, although they offer a printable version of the application you fax or email. They offer two products: a short-term loan and a merchant cash advance.
The available range of borrowing amounts is the same for both products: between $5,000 and $1.4 million.
The Fora Financial business loan product cannot exceed 15 months, making it short-term financing. Instead of a traditional interest rate or APR, Fora charges a factor rate between 1.1 and 1.3.
When using a factor rate, you multiply the borrowing amount by the factor rate to get the amount you repay. That amount is then divided by the terms to determine how much you pay.
Fora’s short-term loans require either daily or weekly payments. For example, let’s say you borrowed $50,000 at a factor rate of 1.2 for a 12-month or 52-week term. The total amount you repay is $50,000 x 1.2 = $60,000. Your total borrowing fee is $10,000. If you repay that weekly, it works out to $1,154 (rounded up).
Fora Financial’s merchant cash advance product is actually a “Revenue Advance.” It works the same way as a merchant cash advance, except it requires more proof of revenue to get approved.
With a merchant cash advance, you’ll repay the loan from a fixed percentage of your daily credit and debit card sales. The borrowing fee is also a factor rate between 1.1 and 1.3.
So, if you borrow a cash advance for $25,000 at a factor rate of 1.3, you’d repay a total of $32,500. However, instead of that repayment being a fixed monthly amount, it depends on your credit or debit card sales.
For example, let’s say the holdback rate is 20%. That means 20% of your daily card sales go to repaying the advance. On days with higher revenue, you pay more toward what you owe, and lower revenue days mean lower payment amounts.
The amount you repay fluctuates with your daily revenue, so there are no set terms for when you must pay off the advance. Tying the repayment amount to daily card sales helps businesses with seasonal or inconsistent revenue make payments without straining their cash flow.
Before applying to Fora Financial, you should know the required qualifications and documents.
Fora Financial doesn’t publish credit score requirements, but most reports indicate you need a minimum credit score of 550 to qualify. However, some suggest a 500 credit score is enough for the revenue advance.
Other requirements include the following:
Be prepared to provide:
It’s possible to get approved within 24 hours and receive funding within 72 hours. Fora Financial loans do not require collateral, and they only file a UCC-Lien in case of default.
Fora Financial loans carry an origination fee between 1%-4%, with the average being 2.5%. Your origination fee depends on factors like the strength of your business, credit history, and cash flow. There are no additional fees besides the origination fee, which comes from the loan amount.
One thing that sets Fora Financial apart from similar lenders is that they offer a prepayment discount on both short-term loans and merchant cash advances. The company doesn’t publish the exact discount available, but some reviews suggest $0.10 on the dollar.
You can use the funds for most business needs, such as buying equipment, supporting payroll, and purchasing inventory, but you cannot use the money to acquire a new business. However, you can refinance existing debt with up to 50% of the loan amount.
The factor rate sometimes makes it difficult to compare costs to loans using a traditional APR. Some tools can help you with that conversion, however.
For example, let’s say you borrow $250,000 at a factor rate of 1.2 for the full 15-month term. The total repayment amount is $300,000, meaning you effectively pay $50,000 in interest. Over 15 months, that’s the equivalent of a 29.71% APR. The same loan on a 12-month term is equivalent to a 37.02% APR.
While Fora Financial serves most business entities, it does not provide funding to the following industries:
Small business owners can apply online or print the application form and send it via email or fax. It’s also possible to apply over the phone.
You’ll complete the same initial online application whether you’re applying for the term loan or revenue advance. You’ll provide basic information like your name, business contact info, and annual revenue.
Next, you’ll upload the previous three months’ business bank statements for the short-term loan or the previous three months’ credit card statements for the merchant cash advance. Uploading these documents completes the initial application submission.
Fora Financial will review the application and perform a soft credit pull, which shouldn’t impact your credit. If approved, the company sends you a loan offer.
The short-term loan offer will include the borrowing amount, factor rate, origination fee, terms, and whether it’s a weekly or daily payment schedule.
The revenue advance offer will include the borrowing amount, factor rate, origination fee, and holdback rate for daily card sales.
Once you accept an offer, your application moves to the underwriting process.
At this point, you might be asked for additional information, including:
Fora Financial then performs a hard credit inquiry for final approval, which will most likely impact your credit. It usually takes about 24 hours or less to get final approval.
Once you receive final approval, Fora Financial will distribute the funds to your business bank account. In most cases, you’ll receive the funds within 72 hours of applying or 48 hours after final approval.
When you receive funding, you’ll get an online account to check your balance, monitor transactions, and track your progress on repaying the loan. You can also process payments to pay ahead of schedule.
You’ll repay short-term loans with a fixed daily or weekly payment for the loan term. Revenue advance borrowers repay the advance with a fixed percentage of daily sales.
There are no early payment penalties for either financing product. In fact, the company offers prepayment discounts if you pay off the loans early.
After paying off 60% of the existing debt, borrowers can apply for renewal. The company’s Relationship Management team facilitates the renewal process. You can upload any additional paperwork needed for renewal through your online account.
Fora Financial’s approval requirements are laxer than most traditional and alternative lenders. They don’t list a credit score requirement and only require six months in business. For comparison, many other lenders require at least a year in business and a minimum credit score of 600-620. Traditional lenders, like commercial banks, require a minimum of two years in business and credit scores of at least 675.
While it’s not the fastest, Fora Financial’s funding time is fairly quick – borrowers receive funds within 72 hours. For a business in urgent need of funding, that fast access to working capital can be a lifesaver.
The application process is fast and easy. You don’t need to submit endless paperwork or have a ton of back-and-forth with the lender. In most cases, you can complete the process and receive a determination within 24 hours.
Perhaps the most significant advantage is the opportunity for a prepayment discount. Most short-term lenders don’t offer any discount or even charge a penalty for early repayment. In particular, a prepayment discount on a merchant cash advance is rare.
Another great advantage is that you don’t have to offer any collateral to get approved. Many businesses like unsecured loans since it doesn’t put their business assets at risk.
The main disadvantage is the cost. Short-term loans and factor rates tend to cost more than long-term loans and traditional interest rates – especially since paying off the loan early reduces the interest paid.
Another drawback is the limited loan offerings. The company only offers short-term business loans and merchant cash advances. The lack of long-term financing options is a significant drawback.
The repayment frequency also strains a company’s cash flow. In addition, Fora Financial charges an origination fee, which adds to the total cost of the loan.
Pros:
Cons:
Yes, Fora Financial is a legitimate online lender. The Better Business Bureau has accredited the company since 2011, where it has an A+ rating.
Fora Financial reviews are mixed but lean towards the positive side. The company has a 4.4 out of 5 rating on TrustPilot, a 3.4 out of 5 rating on Google, and a 4.5 out of 5 rating on Best Company.
Positive reviews talk about the ease of the application process and quick funding time. Several users commented on exceptional customer service, calling out their representatives by name.
The main problems discussed in negative reviews center on the high borrowing costs and frequent repayment requirements. Most short-term financing and factor rate loans carry higher costs than traditional long-term financing. In addition, the short repayment terms (no more than 15 months) and payment frequency can strain a business’s cash flow.
Some negative comments also said that customer service is slow to respond or difficult to reach. Others complained of being bombarded with sales and marketing offers from Fora Financial and its affiliates.
That being said, Fora Financial does actively respond to negative customer reviews in an attempt to resolve any issues.
Fora Financial does not report on-time payments to any credit bureaus, so paying off your loan won’t help to build or repair your personal or business credit. The company does state that on-time payments are essential to securing future financing with the company at better rates.
The initial application process includes a soft credit pull, which won’t impact your credit. If you accept an offer and move to finalize the loan, the company pulls a hard credit inquiry, which can impact your credit score.
While Fora Financial approval is easier than many alternative lenders, there are several reasons why it might deny a loan request. Fora Financial examines a business’s financial strengths when determining approval.
If the company sees cash flow issues that could prevent repayment, it might deny a loan. Other issues could include recent bankruptcies or being in a restricted industry.
The company should include the reason in its denial letter. If not, or you need more information, you can call them to discuss the issue.
Fortunately, plenty of lenders offer quick access to working capital loans and merchant cash advances. Other small business loans to consider include:
Fora Financial is best suited for younger small businesses needing quick funding but also have the cash flow to ensure on-time or even early repayment. Companies with solid credit scores or those that can wait a little bit for financing can find less expensive business loan options.
However, if you pursue a business loan or revenue advance from them, you can help lower your costs with the prepayment discount. The lower approval requirements and borrowing amounts of up to $1.4 million certainly make it an attractive option for businesses that can’t qualify for long-term or traditional business loans.
That being said, know that the cost of short-term loans generally runs high, but if you can use the funds to grow your business, it might be worth it. Based on user reviews, the costs, and limited loan products, we rate Fora Financial at a 3.75 out of 5 and only recommend them if you can manage the repayment schedule and take advantage of the early payoff discount.
