B
Received a "fixed-fee price as low as 8.99%". After looking at it ended up being between 40% and 60%
I received an email stating that my business met their criteria and they were offering me an "exclusive, short-term opportunity: a business loan from ForwardLine at the unbeatable price of as low as 8.99% fixed-fee. So I called to ask for an example. I was told that for a $100,000 loan, their best rate was for 6 months term, with daily equal payments via ACH (automatic debit from a Bank account) only on business days, with total repayment between $109,589.00 and $113,611.00. I wasn't told how would they choose between the lowest and the highest repayment. If you draw a chart of the amount owed, you would start at $100,000 the day you receive the loan and end up at zero the day after the last payment. So you could consider that on average you received a loan of $50,000. If the total interest paid is $9,589 and $13,611, then the interest paid for the 6 month loan is between 19% and 27%, which annualized is 42% to 62%. This is a simplified way of calculating interest but illustrates more or less how much are you really paying. I don't blame this or any Company offering this type of loans for charging such a high interest, considering that they don't ask for any collateral and are a good alternative to Banks. As a matter of fact, I have received similar offers in the past and the real annual interest paid was much higher. And, whenever a business needs short term cash and there's no way to get a Bank loan, it is still a good alternative. Even with the high interest, many business can still pay it if it helps them survive a low season or an unexpected expense. I only wish they (and all other similar companies) could be more straightforward and mention the real APR when they make offers to potential customers. Update in response to the Company's reply on 5/22: I don't think an APR calculation would "confuse" the Customers. It would just enlighten them. I don't think it is wrong to charge an APR of 100% or 1000%, as long as the Customer is aware of what he/she is really paying. I do think that the real APR should be visible and mentioned upfront.
Response from BriteCap FinancialMay 22, 2015
Thank you for your review. ForwardLine merchant loans are designed to be repaid quickly, and thus use a fixed-fee—a set percentage to repay over the life of your loan. For example, on a 12-month loan, the fixed fee is 12.99%, which means if that customer were to borrow $10,000, they are going to repay $11,299, or $1,299 in interest. APR calculates the amount of interest paid as an annual rate relative to the average loan balance during that annual period. For example, if you borrowed $100,000 for 1 day, and repaid the $100,000 plus $1,000 in interest after that one day, that represents a fixed-fee of 1%, but an APR of 365%. That’s because an APR calculation annualizes the interest amount and therefore states that you paid 1% interest per day, which translates into 365% interest over a year. The APR calculation is not wrong, but it can cause confusion. It’s important to recognize that smaller loans as well as shorter term loans will tend to have higher APRs because there are minimum transaction costs in originating any loan that must be priced into the repayment, regardless of how big the loan is, or how long it is outstanding. Ultimately it’s up to business owners like yourself to determine if access to funds will provide a meaningful return versus the cost of funds. ForwardLine prides itself on being the low-cost industry leader for short-term alternative financing. We strongly believe that pricing should be transparent, and we hope that you found that to be true with your experience with ForwardLine. Regards, Kate Manager, ForwardLine