LoanMe is a relative newcomer to the nontraditional lender space. They were founded in 2013, and in addition to providing personal loans, they also lend to small businesses and sole proprietorships. While they don't offer the same market presence or range of services as their much larger competitors (like Bank of America or Wells Fargo), they may be a good alternative for businesses that have had difficulty securing funds through traditional channels.
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|Reviewed by Expert Market:||11/28/2016|
LoanMe Loans Offered
Working Capital Loans
Working capital loans are available for amounts ranging between $3,500 and $75,000 for well-qualified borrowers. Those with significantly lower credit ratings may find their loan amount capped at a lower number. Origination fees range from five to ten percent, with loan terms ranging between 24 months to as much as 120 months.
Fixed Payback Loans
As with working capital loans, the amounts available for fixed payback loans, origination fees, and loan terms are determined by credit rating. Here, the loan minimum is $4,000 with excellent credit and $5,000 with subprime credit. Loan maximums are $50,000 with excellent credit and may be much less for those with subprime credit. Origination fees start at 14% and go up from there.
The terms and conditions of these loans can vary from place to place. In New Jersey, for instance, LoanMe will only lend to those with credit ratings of A or B. It's also worth noting that the company will only issue one loan at a time, and that loan must be repaid before another will be issued. On the brighter side, repeat borrowers may qualify for more favorable terms.
Who Qualifies, and How to Apply
Qualifying for a loan from LoanMe is relatively simple. In many ways, in fact, their criteria are looser than comparable nontraditional lenders. Your business only needs to be a minimum of two months old (versus two years with other lenders), must show a profit, and must have a business bank account. The applicant must have a source of personal income and a minimum credit score of 500 (which is lower than the 600 credit score required elsewhere).
Similarly, businesses that other lenders shun -- web-based companies, home-based businesses, and sole proprietorships -- are welcome here. There is something of a catch, since there are 21 states in which LoanMe is ineligible to lend; these include (but are not limited to) Colorado, Connecticut, Florida, Massachusetts, Michigan, New York, Pennsylvania and Texas.
Like the eligibility requirements, the application process is simple. You can apply by phone or online. In either case, it takes between five and ten minutes. You should have your SSN, business tax ID, business and personal income numbers, and contact information close at hand. Once approved, funds may be disbursed the same day.
LoanMe assigns letter grades based on your credit rating. Interest rates start at 24% for well-qualified grade "A" buyers (i.e., those with excellent credit) and go up from there. For those with an "E" credit rating, the interest rate is 149%. If that number gives you pause, there's still more to consider. Viewed in terms of Annual Percentage Rate (which factors in not only your interest, but also any applicable fees), it's closer to 166%. At that rate, an initial loan of $50,000 can cost more than $372,000 over a ten-year repayment period, though it appears that the company is shortening repayment periods for higher-interest loans.
To be fair, LoanMe is transparent about their terms, conditions, and fees. It should also be noted that there are no penalties for early repayment. Therefore, if your business is in a position to take on a shorter loan term, make more than the minimum payments, and/or repay early, the scenario above may not apply to you.
Other Services Offered
If you're looking for support services like those offered by a traditional lender -- payroll service, payment processing, assistance with employee benefits, or small business resources -- you won't find them here, since LoanMe concerns itself solely with the origination and servicing of loans. This need not be an issue; it simply requires a bit more research if your business requires those services.
Running a small business brings with it myriad challenges, especially in the early going when finding your footing can be difficult. The fact that traditional lenders shun businesses with low or no credit can add to those difficulties. When viewed in that light, LoanMe provides a useful service. However, the loan comes with its own pitfalls, especially since businesses that have fallen on hard times or that have lower cash flow will be on the receiving end of interest rates that could make a difficult situation harder still. In light of that, LoanMe may be considered a fallback option rather than a first stop for some businesses, the exception being if your business has good credit but is in an industry that would not be served by a traditional lender.