- How much will I be able to borrow?
- How much interest will I pay?
The Holistic Approach
- Credit Rating: Unlike a bank, we use credit ratings as just one component when underwriting a small business loan. The credit rating is a mix of your FICO score and your credit history. Because we look to other factors as well, a low credit rating doesn’t disqualify you from getting a loan at IOU Financial or force you to accept an astronomical interest rate. In fact, our rates are quite affordable and about half of what you’d pay for merchant cash advances. Folks can boost their credit ratings by handling credit responsibly, pay back loans on time, and keep your company’s debt-to-equity ratio reasonable.
- Cash Flow: Lenders set interest rates based on prevailing economic conditions and the risk that the borrower will default on the loan. One way to reduce that risk is to have a positive daily cash flow – that is, you collect more money than you spend on a day-to-day basis. IOU Financial considers this to be as important as credit score. You see, we don’t bill monthly the way banks do. Instead, you repay us daily in fixed, manageable amounts. If you show that you are consistently generating daily positive cash flow, we know that you will be a less risky borrower and can offer you more attractive rates.
- Financial Condition: Finally, we take a look at several indicators of your business’ risk. We want you to own the bulk of the company yourself, or share ownership with your spouse. Long-lived companies are less risky, so we want to see borrowers with businesses that are at least one year old. If you run a retail business (online and/or bricks and mortar), we want to see you generate monthly at least 10 bank deposits. Higher volumes can help with loan access and interest rates. It’s also helpful if you earn an annual revenue of at least $100,000, and that you average at least a $3,000 end-of-day balance in your bank account.
