The Current State of True “Small Business” Lending

Posted by Robert Gloer

Last month, a subcommittee on Economic Growth, Tax and Capital Access held a hearing titled, ”Where Are We Now? Examining the Post-Recession Small Business Lending Environment.” As I listened to witnesses explain to our policymakers the current state of small business lending in our country, I realized just how deep the REAL problems are.

For banks, compliance and regulation are staggering, making it cost prohibitive for them to make ”small loans to small businesses.” I quoted that because I agree with the CEO of Dun & Bradstreet, including his comment that we need to all ”get on the same page” when it comes to the definition of small business. Look up the SBA’s definition and you’re labored down by employee count, NAICS Code lists, annual revenue standards by SIC code, etc.

When most of us think of a ”small business,” we think of the dry cleaner or coffee shop down the street, or that favorite lunch spot. We don't think of a small business as a manufacturer that distributes products to 14 different countries or the wholesale auto parts company that distributes warehouses of parts to thousands of smaller stores. There’s a marked difference in the definition of a small business to banks and the perception of it to the ”rest of us.” To a bank, a ”small business loan” can be $250,000 to up into the millions. But to many people, a small business loan is more in the neighborhood of $30,000 for inventory or $20,000 for a new piece of equipment. In the banks’ defense, they just can't make ANY money on a loan that size. In fact, I’d estimate that with the cost of compliance and the manual process a bank goes through to underwrite commercial loans, they can't charge the truly small client enough to make back their cost.

What’s also compounding this problem are bank acquisitions. That’s right. Bank consolidations mean the balance sheets and deposit totals have gone up. By extension, this means to be ”meaningful,” loans to small businesses have to be LARGE ones. A bank would much rather make ten $1 million dollar loans than process, underwrite, close and service 400 $25,000 loans. Wouldn't you? It’s much more cost-effective. Just to close 400 loans you’d probably have to underwrite and process 2,000 applications or more!

On the flip side of this, think of IOU Central. We have the ability to leverage technology to go through those 2,000 applications. We can then automatically filter those 2,000 applications down to a manageable 800 - and then close 600 of those requested loans. We’ve reduced the process from 14 touches and 45 days down to four touches and four days. All this enables efficiencies and allows us a scalable way to deploy capital to ”true small business” owners via the Internet. This is exactly why we’re continuing our rapid growth. We feel strongly that the real small business owners need capital to grow and to thrive, which is why we’re here and successful. We’re fulfilling a need that traditional banks currently just aren’t able to do.

Tag small business loans, small business lending, iou central, loans

Small Business Owners: Know the Repayment Terms of Your Loan

Posted by Robert Gloer

 For small business owners, understanding repayment terms before applying for a loan is critical. For instance, most lenders these days offer pre-computed interest rates, which means they calculate the interest payment for the entire length of the loan and add it to the principle when the loan is issued. And yes, this does provide a clear picture of exactly how much interest is charged. But, what happens if the borrower pays off the loan early, expecting to save the interest they would have accrued?

In reality, most lenders will still require borrowers to pay the full amount of interest, even if the loan is paid off early.
 
Here at IOU Central, we don’t really think that’s the best way to do business. We offer a different approach that actually rewards our borrowers for early loan pay-off. Unlike most other lenders, our simple interest process calculates the interest due by the loan’s principle balance that is outstanding each day. Therefore, as the loan amount decreases, so does the interest payment. It’s that simple!
 
To help small business owners plan out their loan repayment – and as a result, save money – we’ve created a new loan savings calculator that provides a complete picture of the total cost of a loan, as well as options for paying it back in the most cost-effective timeframe possible.
 
We believe knowledge truly is power, especially when it comes to something as important as a small business loan.

Tag iou central, small business lenders, small business owners, loan savings calculator

Why Small Businesses are Turning to Alternative Funding Sources

Posted by Robert Gloer

According to the Small Business Administration, more than half of Americans own or work for a small business. In fact, small businesses create about two out of every three new jobs in the United States each year, making them an integral part of our economy. Despite this importance, many small businesses continue to have a hard time securing the funding they need to grow and thrive – at least through traditional banking. If you’re a small business owner, you may have already learned this the hard way. Why is it so hard for a small business to get a traditional loan? Let’s take the example of a small retail boutique owner who needs a loan but has little to offer in assets to secure it. Say this owner goes to her local bank and applies for a $20,000 loan. The odds are she won’t get a loan approval, but will instead walk away with a credit card application. This is because from a bank’s perspective, that’s about all they can do. Loans of this size simply are not profitable. The cost and considerable manpower required to process them don’t really move the needle for the bank. In contrast, more agile online lenders such as IOU Central leverage technology to cost-efficiently process thousands of applications a month. This makes it entirely feasible for us to work with small business owners whose loan needs aren’t as large. In fact, we strive to deliver the best alternative to traditional bank loans by making our terms fair and our application process as easy, fast, and straightforward as possible.

Tag iou central, small business lending, business loans

Behind the Scenes: Technology Makes it Possible

Posted by Robert Gloer

 Most often, the small business owners that come to IOU Central for a loan have already been painfully exposed to the fact that banks are much less likely to lend to them. These owners come seeking alternative lending options out of necessity, but also end up finding out that the process of working with IOU Central is so much easier and faster. What they don’t know is that behind the scenes, it is our technology platform and APIs (application programming interfaces) that make our paperless application and approval process possible. 

While traditional banks typically touch an application several times as the loan moves from data entry to processing and eventually to underwriting, we use technology that streamlines the entire process, relying on data we gather automatically through the third-party APIs instead of manual steps. For the borrower, this means less paperwork, fewer pieces of documentation to physically provide and a quicker, more efficient loan application process. Today, we have developed connections to nearly a dozen APIs including Equifax and the Office of Foreign Assets Control (OFAC), as well as eBay and several social media sites. The latter allows us to also consider non-traditional loan criteria, such as Yelp! ratings, in the decision-making process.
 
IOU Central is raising the bar for technology in the lending space, which is why we can process and approve loans in a matter of days compared to the weeks or months that are most often the case for traditional lenders. And, as we continue to add more API connections, we will be able to automatically gather data from even more data sources. Our expectation is that in the future, these and other technology advances will allow us to go from application to funding in just minutes or hours.
 
IOU Central continues to grow, and we truly believe it is technology that is driving our business.

Tag iou central, small business lending, iou technology, api integration

IOU Central Partners with Biz2Credit

Posted by Robert Gloer

It’s official and we wanted you to know: We’re pleased to announce our new partnership with Biz2Credit. The partnership will bring IOU Central’s technology-driven small business loan application and approval process to Biz2Credit’s network of over 1.6 million small businesses.

As we’ve often discussed on this blog, traditional banks are struggling to fulfill the capital needs of small businesses, leaving many owners searching for alternative lending sources. In fact, according to the 2012 Federal Reserve Bank of New York Small Business Borrowers Poll, 36 percent of respondents cited access to capital as a barrier to growth. Both IOU Central and Biz2Credit aim to reduce this obstacle by bringing more small business owners a cost-effective lending option.

According to the Small Business Administration, more than half of Americans either own or work for a small business. In fact, small businesses create about two out of every three new jobs in the United States each year. They clearly are the backbone of our economy. We’re excited about our partnership with Biz2Credit and believe that through them we can help even more small businesses achieve their goals. To read more about our partnership with Biz2Credit, you can access the press release here.

Tag iou central, small business lending, small business loans, alternative lenders, online lending, biz2credit

Bridging the Gap Between Banks and Online Lenders

Posted by Robert Gloer

I recently participated on a panel with several bankers during the PayNet event in Chicago, so this article in American Banker about banks needing a strategy around small business lending was especially interesting to me. Its author, Andy Peters, brings up a good point that is also one that has been discussed around our office for years: Where is the bridge in the gap between banks and small business lenders like IOU Central? 
 
Bankers, of course, feel as though they are lending to many or most of the qualified candidates that come through their doors. But the reality is that many of those candidates don’t even make it halfway. Take the example of a small retail boutique owner who needs a loan but has little to offer in assets to secure it. Say this owner goes to her local bank and applies for a $20,000 loan. The odds are that she won’t get a loan approval, but will instead walk away with a credit card application. 
 
From a bank’s perspective, loans of this size simply are not profitable. The cost and manpower required to process them don’t really move the needle for the bank. In contrast, however, lenders like IOU Central can process thousands of applications a month by leveraging our technology over traditional manpower, which is exactly why we can extend services to small business owners needing capital to grow and succeed. 
 
As it relates to small business owners seeking loans, community banks in particular should be thinking, “what happens to our relationship with this candidate if we don’t approve the loan?” and “where will the small business deposit the money it borrows?” For banks that want to retain these local clients (and reap the related benefits), there is obviously a lot at stake here.
 
The key is figuring out how traditional banks and small business lenders can best co-exist to create the most optimal long-term solution for the small business owner, while still meeting their own, unique objectives. As the article suggests, finding this solution can open up new opportunities for virtually everyone involved. 
 
Stay tuned…

Tag iou central, small business loans, online lenders, iou technology

The Right Move to Small Business Lending

Posted by Phil Marleau

 You may not know this, but the company IOU Central was born from was the first peer-to-peer lending company to launch in Canada.  We then opened an IOU Central office in Atlanta to service the U.S. market.

Not too long after the launch, however, I decided to change direction and instead pursue lending directly to small businesses. I’d been studying the market and I realized that many small business owners were struggling to secure the capital they needed to take advantage of growth opportunities, such as adding inventory or expanding to a new location. I genuinely wanted to help support small business (and taking advantage of what I saw as a great market sweet spot wasn't so bad, either).

In December 2009, we issued our first business loan. From that point on, it's been steady, strong growth for us and we've been able to help a multitude of small business owners grow their businesses, too - to the tune of $11.5 million in new loans in 2012. It looks like the move from p2p lending was not a bad one!

Tag iou central, small business loans, lending activity

Still Growing Strong

Posted by Robert Gloer

 Well, we've wrapped up the first quarter of 2013 here at IOU Central with substantial growth that clearly indicates the gap between small business owners and traditional banks isn’t closing. The banks aren't bad guys – the return simply just isn't there for them to justify smaller loans. And, as small business owners continue to feel the pain of this, more and more are realizing the benefits of turning to loan providers like IOU Central.

Compared to the first quarter of 2012, we processed over three times the amount of loan applications and the amount of loans funded increased over five times – great news for all of the small businesses out there seeking capital! Based on where we are today, we anticipate funding more loans in the first half of 2013 than in all of 2012. These milestones not only speak to the state of traditional small business lending in the United States, but also to our success in bringing small business owners the capital they need to seize growth opportunities.

We strive to deliver the very best alternative to traditional bank loans by making our application process as easy, fast and straightforward as possible. The success we’re seeing is because our team has invested a tremendous amount of time in developing a technology platform that allows us to do this – resulting in a small business loan application and approval method that is extremely effective and efficient. As always, we’re here to serve you, our valued customers.

Here's to an equally significant second quarter!

Tag iou central, small business loans, growth

Proposed Credit Union Small Business Job Creation Act – Will it Help?

Posted by Robert Gloer

I read this article recently about the Credit Union Small Business Jobs Creation Act, H.R. 688, which would raise the cap on loans credit unions can make to their small business members from the current 12.25 percent of assets to 27.5 percent of assets. Sounds like good news for small business owners, right? While the article applauds the efforts as do I, I wouldn’t give it a standing ovation. Rather, it is more along the lines of a polite Masters Golf Tourney Clap. While I agree that anything the government can do to make progress and loosen the regulatory vice grip on banks and credit unions, they absolutely should move forward in doing. However, the numbers represented in the article do not tell the whole story. For example: According to the article, there are 140 credit unions bumping into the business lending "cap." My guess (from the government support) would be that those are probably on the east and west coasts. There are another 400 that are either somewhat near or not even close to the cap. Therefore, raising the cap isn’t going to push a credit union with a loan ratio of 4% up to the cap of 27.5%. So, while raising the cap to 27.5% and also getting credit unions to lend up to this number, would put another $13 billion on the street, the truth is – it won’t happen. On the bright side, it may free up a few additional billion to small businesses, which again deserves an applause. But small businesses are so undeserved that a couple billion over the course of a year is really like buying a pack of energy efficient light bulbs for your house and expecting to solve the world’s energy problems.

Tag Credit Unions, Jobs Creation Act, Small Business Lending, Regulation, Compliance,

SMALL BUSINESS OWNERS FIND ALTERNATIVE SOLUTIONS FOR CAPITAL

Posted by Robert Gloer

A recent USA Today article, featuring IOU Central,examined the unconventional lending sources for small business. As we know from our work every day helping small businesses, even for healthy businesses, those with positive cash flow and strong financial history, getting loan approval from a traditional bank is difficult. Whether the size of the loan is too small or the cost to process and fund it is too expensive, there is a gap between the needs of the small business community and the ability of banks to fulfill them. Today, small businesses have more alternative options than ever before; however, the cost associated with these can be prohibitive. As highlighted in the article, many small businesses have the desire to grow but need the capital to take advantage of the opportunity. We see viable businesses every day that have positive cash flow, a solid customer base and rave reviews but lack the traditional assets or collateral needed to secure funding from a bank. What has made our work with small businesses so rewarding as the best bank alternative, is that they can move forward on achieving their business goals much more quickly with our easy, secure, online application and approval within days instead of weeks or months. Tailored for retail type businesses, IOU Central is able to make low-cost loans at low risk through advanced technology that makes fast, accurate and fair assessments of all applicants giving small businesses the alternative they need to seize growth opportunities fast. Small businesses drive the American economy, and we’re honored to help fuel their ambition.

Tag small business loans, business lending simplified, loans, small business owner, alternative capital solutions

Is change always difficult? Some Small business owners say not so much!

Posted by Madeline Wade

Most people find change to always be challenging, stressful and in some cases even painful. This may not be true in most cases where small businesses are concerns. The key to change with a small business is having a customer centric focused business. Those small businesses that are in tune with their customers’ needs can make change happen smoothly. Within IOU Central’s review of small business loan applications we see changes in cash flow and or income. The overwhelming responses when questioned as to why there is a change in these areas are 12-24 months ago a company’s focus was on a particular product or service however due to a change in the local economy or change within the industry they have switched focus to a different product and service and or supplementing revenues with other products as needed. These small businesses are not only agile enough to make this change happen but more importantly they have customer loyalty that allows them to weather the tough times and adapt to the change more quickly. The ability to adapt quickly to change is key to the success and longevity of small businesses in today’s economic climate. Staying in tune with your customers’ needs remains the number one focus of any small business looking to grow and expand their businesses and keeping customer loyalty.

Tag small business loans, business lending simplified, loans, small business owner

Reaching out… What are our customers thinking?

Posted by Madeline Wade

Recently our President, Robert Gloer, made the initiative to reach out to our small business customer base to thank them for their service to America as a small business owner as well as making sure that their experience with IOU Central’s service and products are exceeding their standards and needs. The feedback has been great which allows us to look at the process and product through our customer’s eyes. We have had great suggestions on different topics as well as commendations regarding our process and operations team. When asked what motivated this customer connection Robert Gloer stated “I wanted to get inside the head of our business owner customers and make sure we are inspecting what we expect. We are building and fostering long term relationships with our clients and want to make sure we stay in tune with their needs.” We continue to fine tune our product and process to ensure that we offer the very best financing options possible. We understand that 22.9 million small businesses in the US are located in virtually every neighborhood and those small businesses make up more than 99.7% of all employers according to the SBA’s Office of Advocacy. These are staggering numbers which only solidifies the purpose and mission of IOU Central as our goal is making Business Lending Simplified.

Tag small business loans, business lending simplified, loans, small business owner

IOU CENTRAL TO EXHIBIT AT 100th THOMAS HINMAN DENTAL SHOW Mar 22-24

Posted by jnickell

The Hinman Dental Meeting is the South's premier dental convention, open to all dental professionals. Come celebrate a century of excellence at the 100th Hinman Dental Show March 22-24 http://www.hinman.org/ IOU Central Business Lending is proud to have been selected as an Exhibitor to this great show. COME VISIT IOU AT BOOTH # 1758 Our Simple Interest Business Loan program seems to be an excellent fit for Practice Owners and has helped numerous Dentist clients grow their revenues. Here are few more reasons our Dentist clients love IOU: • Low Cost to Borrow o On average we save clients $1250 per $10,000 borrowed vs. MCA’s • We don’t require pay off of other loans to get our loan • We do not have a fixed amount of repayment like a factor rate product o Early payoff actually reduces a borrowers overall cost o Early payoff is like paying off a mortgage – only pay the principal owed • Fast, easy online application process • This is a Simple Interest Business loan and is typically tax deductible. • Loans underwritten based on business cash flow and credit and we do not use Tax Return income. This method allows for higher loan amounts that many other non-traditional lending resources. www.IOUCentral.com

Tag Hinman Dental, Hinman Dental Show, Dentist Loans, dental practice loans, IOU Central, business loans, MCA, credit card cash advance, credit card cash advances, low cost business loans, simple interest business loans.

Simple Interest Loans vs Factor Rates

Posted by jnickell

Please tell me you don’t think IOU Central and our ‘OwnerCentric’ lending product is a factor rate product?!?! A factor rate sets a fixed amount a borrowing business is a locked in to repay. You borrow $50,000 the factor rate is 1.38 the borrowing business repays $69,000. The tough part is that is figured to be within about 7-8 months. This is almost regardless of your credit scores. Depending on the risk, a qualifying borrower getting $50,000 at IOU only pays between $8,000 – $12,500….OVER 12 MONTHS. An simple interest rate comes with a rate but every day you make a payment you reduce the amount you pay interest on. AH HA! This is why our interest rate loans come at a much "lower cost to borrow’ than any factor loan. The other “catch” is most of our loans are 12 mos and set a lower payment than any slow day on a factor loan. We all know small business have their “busy” days to match up those slow days. How about having to cough up 20% of your credit card sales on Super Bowl Sunday or Black Friday? Wow! AND…we don’t have a fixed set amount of repayment. AND…we don’t have a prepay penalty AND…we don’t build ANY extra fees into our payment If you ever need to check a payment and to compare a cost on dollar at IOU you use our Loan Calculator at this link. We Dare you to Compare! https://www.ioucentral.com/offers/live_preview

Tag IOU Business Lending, IOU Central Website, New IOU Central Website, IOU improves process, IOU New Website; IOU Business Lending, Business Loans, Best Business Loan, Best Business Lender, Low Cost Business Lender, best 12 month lender, Small business loans

3 Things You MUST Know Before Seeking Business Capital

Posted by Madeline Wade

No matter where you get your loan, there are certain variables that determine whether the loan is good or bad for your business. The good news is that if you consider these variables – you will be educated and make the right loan decision that fits your business needs. When you are ready to apply for a loan, make sure you consider these three issues: 1- Cost of Capital Understand your true cost of capital. It is one thing to compare this interest rate to that. However, there are MANY other factors to consider in truly understanding your TRUE COST OF CAPITAL. For example: most lenders charge points or fees or both upfront. Make sure you consider these fees when understanding your cost of capital. If you take your payment and multiply it by your term you will have your “total of payments”. Add your “total of payments” to your points and fees to get a more accurate picture of your true cost of capital. Example: IOU Central / Merchant Cash Advance MCA Amount Sought $20,000 / $20,000 Term 6 or 12 month fixed term / 6-8 month repayment period Payment Type Fixed / Variable Average Cost on Dollar 1.18 / 1.38 Total Cost of Capital 3,576.00 / 7,600 With IOU Central you pay back $3,576 over 12 months instead of $7,600 in 6 – 8 months. If you do want to payoff your IOU loan early you will pay less interest. If you payback your MCA early, you will still pay the full amount. 2- Processing fees. Most lenders charge up-front loan or processing fees. Make sure you ask your potential lender to define these fees up front so you won’t be surprised by hidden processing fees or balloon payments later on. 3- Say NO to Prepayment Penalties Believe it or not, many banks will actually penalize you for paying your loan off early by charging you a pre-payment penalty. Imagine your business takes off and you want to save yourself some interest and pay your loan off before its due date. Make sure that your loan agreement gives you the flexibility to pay your loan off early without any ridiculous penalties. Most small business owners make the common mistake of thinking that a bank is the safest, smartest place to obtain a loan. But when you start to educate yourself on all the lending choices out there – you’ll soon learn that a bank isn’t always the best choice when it comes to a small business loan. Benefits of an IOU Central small business loan: No Application fee’s Origination Fee of only 4.95% (only fee charged as long as loan is paid as agreed) No Pre-payment Penalties From your online access you can watch your account balance and interest charges drop daily. Fast…. Easy…. and headache free…. Visit www.IOUCentral.com and apply today. Pre-approval is immediate and your loan can be funded in as little as two days. Source: Key Business Loan Issues from Dun & Bradstreet Credibility Corp. http://smallbusiness.dnb.com/business-finance/business-loans/451-1.html

Tag business capital, cost of capital,