IOU Financial Review
- Borrower qualifications are lower than what banks offer
- High borrowing amounts
- Financing is suitable for quick business financing
- The application process is fast and easy
- Website advertising is clear and informative
- Rates can be expensive
- Some additional fees are charged
- Frequent repayments are required
- No long-term financing options available
IOU Financial Overview
IOU Financial is a short-term lender serving small, profitable businesses. The Georgia-based company has provided nearly $700 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 short-term 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. It offers a lot of information on its site and is mostly transparent about its process. Perhaps most importantly, its rates aren’t completely off the charts. Be prepared, however, for some additional fees.
Table of Contents
Services Offered By IOU Financial
IOU Financial offers the following small business financing product:
- Short-Term Loans: The borrower is given a lump sum and must immediately begin paying back the loan plus a flat fee as daily or weekly installments. They typically last less than a year.
Rather than end-users, IOU is currently marketing its lending services mostly to resellers that want to provide business financing for their small business clients. If you are a small business owner interested in obtaining an IOU loan for your business, IOU may instead refer you to one of its partnered lenders.
IOU Financial Borrower Requirements
To qualify for an IOU Financial loan, 80% of your company’s ownership will need 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% stake each, only four would have to sign. You’ll also need to have made ten or more deposits per month into your business bank account.
Additionally, you must meet these prerequisites:
|Time In Business||12 months|
|Business Revenue||$100,000 per year and $3,000 average daily balance over 3 months|
|Personal Credit Score||600|
IOU Financial Interest Rates & Fees
IOU’s website errs on the side of transparency, which is always welcome when comparing financial products. Here’s what its terms look like:
|Term Length||6, 9, 12, 15, or 18 months (minimum $80,000 for 18 months)|
|Borrowing Fee||15%-31% of the borrowing amount|
|Origination Fee||7.8%-8.8% of the borrowing amount|
|Effective APR||Learn more|
You’ll be able to derive most of the information above from IOU’s website. Short-term loans such as those offered by IOU use a different system than what you might be used to. The loans use a 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 narrow (and fairly reasonable) band relative to other short-term funders, where triple-digit APRs aren’t unheard of.
Regarding repayments, 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 it also reveals most of the costs you’ll encounter, including its fees. Unfortunately, these fees are substantial. IOU charges:
- An origination fee (see the table above). However, unlike most of its competitors, IOU does not deduct this fee from the amount of money you receive from the company. Instead, it’s built into your payback amount.
- A $595 administration fee.
- A loan guarantee fee.
- Additional administrative and post-servicing fees for such things as 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 existing loan.
IOU advertises a “3-minute application” and the idea that you can be preapproved 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:
- Three months of bank statements (six to 12-month loans)
- Six months of bank statements and full tax returns (15-18 month loans)
- Voided checks
- Drivers license
Note that IOU will do a soft pull on your credit.
IOU Financial does not currently have a loan application on its website, but it does have a phone number, a chat option, and an online portal for existing customers. It looks like IOU is currently directing new applicants to work with one of its preferred lenders, and there is a brief form on the website for small businesses that are interested in receiving funding from one of IOU’s partners. As mentioned, IOU is mostly gearing its lending services toward companies that want to offer IOU funding to its small business clients. You can find an application to become a partner on IOU Financial’s website.
Sales & Advertising Transparency
IOU does a pretty good job of disclosing the terms of its loans, going so far as to break down at least some of its fees. 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 helpful information from them.
Customer Service & Technical Support
The IOU staff seems to be hit or miss with regards to knowledgeability. 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 the company’s customer support, however.
IOU Financial Reviews, Complaints, & Testimonials
Customer reviews of financial companies tend to be polarized: People are either very happy with the experience or find it near intolerable. The same is generally true for IOU Financial reviews, though there seem to be more positive than negative reviews. IOU is accredited with the Better Business Bureau, where it maintains an A+ rating. There are three customer reviews on the site, and only one is negative. On Trustpilot, where user reviews tend to trend positive, IOU rates a 4.7/5, with a total of 433 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, such as 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 a 4.7 rating out of 5. 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 need money quickly, it’s hard to argue against the allure of 24-hour (hopefully) funding.
- Semi-Reasonable Rates: Expensive though IOU is, its 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 the maximum factor rates somewhat in check.
IOU Financial is one of the more transparent alternative lenders out there, offering decent rates overall. The high origination fee and supplemental fees can 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. Also, IOU Financial is not currently advertising its lending products directly to small businesses and may refer interested borrowers to a partnered lender instead.