- No prepayment penalties
- Excellent customer service
- Only lends to businesses in 23 states
Overview
Located in California and founded in 2013, LoanMe's goal is to provide otherwise ineligible borrowers an opportunity to meet their company’s financing needs. LoanMe states that they can provide loans for a variety of business-related needs, including expansion, payroll, invoices, inventory and equipment, start-up costs and as a bridge loan. Unlike many other small business loan providers, LoanMe does not restrict the types of businesses they can work with; they state on their website that they can work with start-ups, home-based entities, sole proprietorships, and other businesses that often have a hard time finding funding. Despite that positive news, LoanMe is only able to do business with borrowers from certain states (specifically, only 23 states).
PROS:
- Application process takes only minutes
- Funding upon approval can occur within hours
- Borrowers with poor credit history not excluded from borrowing
- No penalties for early repayment
- Fixed monthly payments
- California-based borrowers have “worry-free guarantee
- Responsive customer service
- Reports to credit bureaus to help improve credit history
Cons:
- Interest rates are among highest in the industry
- Origination fees are also very high (in some cases, as much as 33% of loan)
- Only borrowers from certain states are eligible to use LoanMe
- Only one loan at a time is permitted
LoanMe offers both personal and business loans; for the purposes of this review, only the business loan aspect has been reviewed. With LoanMe, the loans available are based first on the borrower's location and then on their credit strength.
This is a typical example of their available products (this example is applicable to a borrower who is located in Indiana).
| Types of Loans |
Minimum Loan Amount |
Maximum Loan Amount |
|---|---|---|
| Type of Loan | Working Capital | |
| Loan Amount | Minimum Loan of $3,500 | Maximum Loan of $100,000 |
| Loan Terms | Minimum of 6 months | Maximum of 12 months |
| Interest Rate | Varies, from 24% to 149% | |
| Type of Loan | Fixed Payback Loan | |
| Loan Amount | Minimum Loan of $4,000 | Maximum Loan of $60,000 |
| Loan Terms | Minimum of 24 months | Maximum of 120 months |
| Origination Fee | Varies, from 14% to 35% | |
| Personal Guaranty | Required | |
| Type of Loan | Prime Loan (for California Borrowers) | |
| Tier 1 Loan Amount | Minimum Loan of $76,000 | Maximum Loan of $250,000 |
Of the 23 states that LoanMe serves, all but one (California) are limited to working capital and/or fixed payback loans. California borrowers have a third funding option, which is a prime business loan, as well as the working capital and fixed payback loans. The minimum amount of the loan will also vary by state; it is either set at $3,500 or $6,000, up to $250,000. A drop-down box on their website will help you determine your options.
LoanMe can provide a borrower with fast response and turnaround time for a loan to satisfy emergencies or to meet an upcoming need. A borrower might turn to them if they needed a quick response and turnaround time, or if their credit strength was so minimal that they are unable to get a traditional business loan elsewhere. Having said that, given LoanMe's relatively (to the industry) high interest rates and origination fees, this lender might best be considered one of last resort.
In addition to the standard loan options mentioned above, California borrowers can consider the LoanMe prime business loan, which comes in three tiers. These prime business loans have a term of 10 years (120 months) with loan amounts that range from $76,000 to $250,000. Interest rates are on the high end, ranging from 14.90% to 24.90% all with a flat origination fee of 15%. The tier which will be assigned will be dependent upon the borrower's FICO score and whether or not they own a home.
To their credit, LoanMe does clearly show on their website what the costs might be to a borrower under a few different scenarios. One example shows that a borrower who has a loan for $15,000 will have paid a 10% origination fee. The $1,500 fee is deducted from the proceeds. Over the life of the loan (in this case, 10 years or 120 months), the borrower would make minimum payments of $498.23 monthly. At the end of a10-year loan, the borrower will have repaid $59,787.67, with total borrowing costs of 332.48% (remember, this is for a $15,000 loan!). Even in that example, LoanMe does encourage its borrower to make every attempt to repay the loan sooner.
Besides the interest rate charged for each loan, LoanMe has also has an origination fee, which is not uncommon for online lenders. That fee varies from as little as 5% to as much as 10% for most of the loans it offers. Regardless, there is a minimum origination fee of $500 for any loan from LoanMe. For prime loan packages for California borrowers, the origination fee is a flat 15% of the loan amount. That fee is deducted from the loan proceeds, so the amount disbursed to you will be the loan amount minus the origination fee costs. LoanMe does not charge a fee for early payment of the loan, whether in part or in full. As is typical of the industry, a late fee will be assessed if payments are late by a specific number of days as stated in the contract. LoanMe encourages its borrowers to reach out to them early on in the process if they know there will be a problem with a future payment
Borrower requirements:
- Borrower must be at least 21 years old
- Valid ID required (state issued driver's license or other valid form of identification)
- Borrower must have a minimum credit score of 500
- Proof of income/revenue may be required
- Company must have been in operation for at least two months
- Must be a for-profit entity
- Borrower must have a business checking account for a minimum of two months
- LoanMe will require a copy of a voided check
- Company must use online banking
- Last three months’ worth of bank statements required for review
LoanMe has a straightforward pre-qualification application process which is available online and takes only a few minutes to complete. You will need to provide answers to basic questions such as what is your full name, home address, cell phone number, monthly income? Lastly, they will ask if you've ever needed debt counseling and if you own your own home. Alternatively, for those who prefer the personal touch, a customer service rep can handle the application over the phone. For those who prefer the process even more streamlined, a borrower can get pre-qualified via text, as well
LoanMe will attempt to verify your income in order to gauge whether you can afford the monthly payments. If they can verify the income you self-reported and you are pre-qualified and agree to move forward with the process, they will pull a hard credit report on you.
If everything looks good, LoanMe will make a formal offer. With your acceptance and your timely submission of any required documentation (bank statements, voided check copy, etc), LoanMe says they can provide you with funds via wire transfer on the same day.
A glimpse among the online reviewer websites shows that LoanMe generally has a good reputation for responsive customer service, provided the customer is in good standing. User reviews have painted a negative picture of customer service in cases where the customer is trying to get clarity for a problem they're having, in which case many claim it is hard to reach a person who can provide answers. More negatives have been meted out for those who have had difficulty making their payments, in which case they claim they are being continually harassed by LoanMe staff.
For existing customers, they can reach out to LoanMe's customer service seven days a week and via online chat five days a week. Their social media presence is predominantly on Twitter and Facebook, and more generalized questions can get responses to questions there.
Each borrower is provided with access to an online portal where they can view the details of their loan. Payments for the loans can be made directly via ACH from the business checking account, by check, or with cash (via Western Union Speedpay).
LoanMe is accredited by the Better Business Bureau, which means that it has met its criteria for inclusion; there, it has an A+ rating. Nonetheless, there have been numerous complaints about LoanMe's business practices at the BBB website as well as many others. In many cases, those complaints centered around what users deemed as harassing phone calls from LoanMe reps or collections agents of their behalf when payments were late or delinquent. Second to the harassing nature of contact, there were complaints about the high interest rates; in LoanMe's defense, even a quick review of their website one can see that they are being very open about the rates that they may charge, citing several examples of even worst-case scenarios.
On a positive note, LoanMe has a majority of 5-star reviews on the Trustpilot website. Of the 1,243 reviews there, 78% of the reviewers gave LoanMe a 5-star rating, with only 5% giving them 1 or 2-stars. Of the reviews with low ratings, the majority complain about the high interest rates. Where possible, LoanMe has responded to the reviews and suggested that they always encourage early repayment because of the high rates. Some reviewers who left a 1-star rating admitted that while they appreciated the way LoanMe was able to help them in a pinch, in the long run it wasn't worth the effort or the money. On the website Supermoney, 186 reviewers left their opinion of LoanMe practices; more than 90% did not recommend using the company.
Without having looked at the user reviews, my first inclination was to run away from this alternative lender. Granted, they do provide a service to small businesses who are mighty desperate, but those borrowers are taking a greater risk by taking a loan with this company, especially if there is even the slightest chance that they might not be able to make a loan payment or repay the loan in full.
On the flip side, if an immediate response and quick funding is an absolute necessity and provided it will only be a very short-term loan, then LoanMe might be the way to go. Even so, this type of loan might be best suited for those absolutely desperate for funding. LoanMe's example of repayment within 10 days of the disbursement is a prime example of how expensive they can be. With a $15,000 loan, repaid in full within 10 days, you will have repaid $1,662.50; that is the $15,000 principal, the origination fee of $1,500 plus $12.50 in interest. The total cost as a percentage is 12.31%.
On the whole, if you have other options available to you, take them. If you can't afford to repay a loan from LoanMe within a truly short-term frame, then you may at the end find that your loan costs were significantly higher than you had anticipated.
