IOU Financial Review
Need help finding a loan?
- Phone Number
- Date Established
- Kennesaw, GA
- Suited for small business
- Relaxed credit score requirements
- Transparent terms and fees
- High origination fee
- Some additional fees
IOU Financial is a short-term lender serving small, profitable businesses. The Georgia-based company has provided nearly $500 million worth of funding to businesses throughout the country since 2008. As a short-term lender, IOU’s processes are quick, its credit criteria lenient, and its rates expensive.
We like to caution prospective customers of these types of companies to go in well-armed with information. Most of the funders are above-board, but the terms they offer can be quite punishing for the unprepared (you’ll be making daily repayments). Take full stock of your options with our short-term funding comparison chart before you commit to anything.
As for IOU in particular, the company seems pretty decent as short-term, online funders go. They offer a lot of information on their site and are mostly transparent about their process. Perhaps most importantly, their rates aren’t completely off the charts. Be prepared, however, for some additional fees.
Table of Contents
IOU Financial offers the following:
To qualify, 80% of your company’s ownership needs to sign personal guarantees. For example, if there are three owners, each owning 33% of the company, all three owners would have to sign. On the other hand, if there were five owners with a 20 percent stake each, only four would have to sign. You’ll also need to have made 10 or more deposits per month into your business bank account.
Additionally, you must meet these prerequisites:
|Time in business:||12 months|
|Revenue:||$100,000 per year and $3,000 avg. daily balance over a 3-month period|
Terms & Fees
IOU’s website errs on the side of transparency, which is always welcome when it comes to comparing financial products. Here’s what their terms look like:
|Borrowing amount:||$10,000 – $500,000|
|Term length:||6, 9, 12, 15, or 18 months (minimum $80,000 for 18 months)|
|Flat fee/interest rate:||x1.15 – x1.31|
|Origination fee:||7.8% – 8.8%|
|Effective APR:||Learn more|
You’ll be able to derive most of the information above from IOU’s website. Short-term loans like those offered by IOU use a different system than what you might be used to. The loans use combination of fixed fees and simple interest to calculate your payment. You can save on the latter by paying off your loan early, although you’ll still owe the fixed payment costs of your loan.
IOU reduces the fixed fees if you agree to a shorter term. This has the effect of keeping IOU’s effective APRs within a relatively narrow (and fairly reasonable) band relative to other short-term funders, where triple-digit APRs aren’t unheard of.
If you want a closer look at how much money you can get at what cost, IOU’s loan calculator is a very useful tool. It doesn’t provide a factor rate per se, but you can figure out a rough estimate by dividing the Loan Amount by the Total Payback.
You’ll be making a fixed daily debit via an automated clearing house (ACH). Be aware that the daily schedule can be pretty punishing for the unprepared. IOU offers a bit more flexibility for its $70,000+ and $85,000+ loan tiers, allowing borrowers to make weekly payments instead.
IOU is unusually transparent in the sense that they also reveal most of the costs you’ll encounter, including their fees. Unfortunately, these fees are substantial. IOU charges:
- An origination fee (see above). However, unlike most of its competitors, IOU does not deduct this fee from the amount of money you receive from them. Instead, it’s built into your payback amount.
- A $349 administration fee
- A loan guarantee fee
- Additional, convenience fees for things like paying by check or modifying the loan. Most of these are avoidable.
All IOU products are unsecured, so you won’t be putting up collateral in the traditional sense, but you do have to sign a personal guarantee. If you currently have a loan with IOU, you can renew your loan if you have paid at least 40% of your current loan.
IOU advertises a “3-minute application” and the idea that you can be pre-approved in seconds, with funding in your pocket in as few as five to eight hours in ideal circumstances. (The company reports that most loans close in 48 hours, however, usually due to applications missing required documents).
If you want the process to go as quickly as possible, you’ll want to have the following documents on hand when you submit:
- 3 months of bank statements (6-12 month loans)
- 6 months of bank statements and full tax returns (15-18 month loans)
- Voided checks
- Drivers license
You can begin your application online or give sales a call. Likewise, if you stick around the website long enough, you’ll be prompted to chat with an IOU representative over the site’s built-in messenger.
Note that IOU will do a soft pull on your credit.
Sales & Advertising Transparency
As I mentioned above, IOU does a pretty good job disclosing the terms of its loans, going so far as to break down their fees and offer a loan calculator. Just be aware that you may have to click around a bit to find all of the information you want.
The site’s resource page isn’t quite as useful, but if you’re willing to take a critical eye to some of the posts and guides that double as advertising, you can glean some useful information from them.
Customer Service & Technical Support
The IOU staff seems hit or miss with regards to knowledgeability, however. The reps manning the chat messenger weren’t able to answer too many questions. One gave me a number to call, but I wasn’t able to connect with the individual I was referred to. Most clients seem satisfied with their customer support, however.
Customer reviews of financial companies tend to be polarized: either people are very happy with the experience or find it near intolerable. IOU is accredited with the Better Business Bureau, where it maintains an A+ rating. There’s only one customer review on the site, and it’s negative. The company has a 3/5 star average on Google, with a total of eight reviews. On TrustPilot, where user reviews tend to trend positive, IOU has rates a 9.6/10, with a total of 293 reviews.
Negative Reviews & Complaints
- Results may vary: Consider the 24-hour funding cycle a best-case scenario. Some users reported that the process took over a week.
- Expensive: Expect to pay a premium for short-term funding, a trait not unique to IOU.
- Aggressive sales tactics: A number of complaints to the Better Business Bureau describe aggressive sales tactics.
- Unclear terms: Some customers say they were caught off guard by changes to their account, which could result in complications like late charges.
Positive Reviews & Testimonials
Most customers had a satisfactory experience with IOU. The BBB rates IOU Financial at A+, with only four complaints on record. This funder also rates well on Trustpilot, with an 8.9 rating out of 10. Nice things said about the company include:
- Professional: Users reported that you can expect IOU staff to do what they say they will, within a reasonable amount of time.
- Fast: If you’re in need of money quickly, it’s hard to argue against the allure of 24-hour (hopefully) funding.
- Semi-reasonable rates: Expensive though IOU is, their rates take into account faster payoffs, so they more closely resemble the logic of a traditional loan. They’re also subject to state caps on loans, which keeps their maximum factor rates in check somewhat.
IOU Financial is one of the more transparent alternative lenders out there, offering decent rates overall. The high origination fee and supplemental fees can really stack up, though, so make sure you’ve accounted for the full cost of borrowing before you agree to anything. With relatively higher borrowing criteria, there’s a strong possibility that anyone who qualifies for IOU may qualify for a better deal elsewhere.
Business Loan Rating Criteria.