National Funding Review
Operating in all 50 U.S. states, National Funding specializes in providing small businesses with the capital they need to enhance their success. An alternative lender, National Funding started out in 1999 with a core focus on equipment financing. Over the years, it has expanded its operational scope to include merchant cash advances, working capital loans, and other forms of small business financing.
As of October 2020, National Funding has originated more than 50,000 business loans with a combined value of over $3 billion. All customers get exclusive access to a dedicated loan specialist to help them service their borrowing, and its flexible eligibility standards make National Funding financial products available to a wide range of customers. This includes business owners with high debt loads and low credit scores.
Let’s take a closer look at National Funding by examining how its loans work, how its terms stack up, and what borrowers can expect to encounter when using their services.
National Funding was founded in 1999 and is headquartered in San Diego. It serves businesses in a wide range of industries, but places a particular emphasis on agriculture, construction, medical, shipping, professional services, and hospitality services. It works with borrowers in higher-risk industries, with most of its loan programs designed for short-term borrowing.
As of October 2020, National Funding offers loans in two main categories:
- Small business loans: Borrowers can use these standard loans for a variety of purposes including capital expenditures, business expansion, bill payments, and other day-to-day financing needs. National Funding also operates specialized programs for borrowers with bad credit, unsecured business loans, and female entrepreneurs.
- Equipment financing and leasing: Instead of paying cash for expensive pieces of specialized equipment and machinery, businesses can finance them with loans and pay them down over time.
National Funding also offers merchant cash advances (MCAs), which are available exclusively to retail businesses. MCAs function as alternatives to regular loans and allow businesses to pledge a small percentage of their daily credit card sales in exchange for cash up front. National Funding will collect its daily cut of your card-based sales until you repay the balance of the loan in full.
National Funding’s website is light on specifics regarding maximum loan amounts, repayment terms, and interest rates. This is because these details will depend on many factors, including the size of your business, how long it has been in operation, and its overall level of financial health.
However, external consumer information sites report that National Funding typically operates within the following loan terms:
- Loan amounts: $5,000 to $500,000 for small business loans, up to $150,000 for equipment financing, and up to $250,000 for MCAs
- Loan terms: 6 months to 15 months
- Interest rates: Variable, depending on the loan type and amount
- Origination fees: 2% of loan amount
- Borrowing fees: 17% to 36% of loan amount
Many loans also require borrowers to secure their funding via a personal guarantee. This means that you will not have to offer collateral up front, but you pledge your personal assets when you borrow from National Funding. Thus, these may be at risk if you default.
Note that National Funding charges borrowing fees and origination fees for most of its loans, which can combine for as much as 38% of your loan proceeds. While these levels are quite steep, they are also in line with prevailing industry standards for alternative lenders that work with credit-challenged businesses.
On the plus side, National Funding delivers a rebate of up to 7% to borrowers who repay their loans in full ahead of schedule. This feature represents one of the company’s most appealing propositions.
National Funding’s Eligibility Standards and Borrower Requirements
National Funding offers a quick, easy-to-navigate application process that makes it simple to collect rate quotes. Borrowers can also contact the company by telephone to receive personalized loan offers.
Eligibility guidelines vary, depending on the type of loan you’re seeking and the amount you’re looking to borrow. However, in general, you should meet the following criteria to receive serious consideration:
- Your company should have been in business for a minimum of 12 months
- The principal borrower should have a minimum credit score of 500
- The principal borrower must not have any bankruptcies on record from the 12-month period immediately preceding the loan application
- Annual revenues should be at least $100,000 per year
- You should maintain an average daily bank account balance of at least $1,500
- If you want an MCA, you should generate monthly credit card sales of at least $3,000
Also, note that many National Funding loans require daily payments. This is true of MCAs as well as other small business loans and equipment financing solutions. Thus, borrowers should ensure that they have the necessary cash flow to meet their repayment obligations before finalizing their loan.
Pros and Cons of National Funding
Here’s what reviewers and actual customers like about National Funding:
- The company offers quick processing times and delivers loan proceeds in a very timely manner, making it an excellent option for situations requiring fast solutions
- Customers have the option of calling National Funding for quotes and loan information
- The 7% early payment discount is an innovative and valuable benefit
- Borrowers do not have to forward any collateral
- Credit-challenged customers have access to a wider-than-usual range of financing options
However, there are also some caveats to consider:
- Origination and borrowing fees are in line with industry standards, but nevertheless remain quite high
- You must submit a formal loan application to get a specific interest rate quote
- Borrowers must make daily payments on most loans
- Businesses with relatively low daily cash flow levels may struggle to keep up with frequent payments, which can potentially put their personal assets at risk
The general consensus is that National Funding is great for the speed of its funding, but isn’t the best option for borrowers with strong credit.
What Others Are Saying about National Funding
The Better Business Bureau (BBB) notes that National Funding has been in business for more than 20 years. National Funding has been accredited by the BBB since 2013 and holds the organization’s top rating (A+) as of October 2020.
Because National Funding has been around for such a long time, the company has built up a sizable footprint on Trustpilot. As of October 2020, National Funding had more than 1,320 Trustpilot reviews, which combined to give the company an average score of 4.5 out of 5.
Notably, 86% of National Funding’s Trustpilot reviews gave the business a perfect 5 out of 5, while 94% scored it at 4 out of 5 or higher. Given the large volume of reviews, these metrics indicate very strong levels of borrower satisfaction.
The Bottom Line
National Funding’s strengths are many, but its downsides are also considerable. Its origination and borrowing fees bloat customers’ costs, and borrowers who have strong credit ratings and businesses on sound financial footing will likely be able to find more competitive terms from another lender.
However, securing business capital can be very difficult, especially in the COVID-19 economy. Many companies are feeling the pinch, and many thousands of entrepreneurs are seeing their once-strong credit scores drop, disqualifying them from badly needed funding from mainstream lenders.
If you fall into this category, National Funding is a great asset to have on your side. This is particularly true if you have the means to pay off your loan early and pocket that valuable 7% rebate for doing so.