For business
An IOU is a private loan note with your own rate and schedule. Funding is growth capital repaid from performance instead of a fixed date. Factoring turns an outstanding invoice into cash today. Pick the structure that fits, then track it from signup to final payment.
Choose the right structure
All three run through the same Realfund record: one agreement, one payment ledger, one place to track balances. What changes is how the money is priced and repaid.
A fixed-term note with your own rate and repayment schedule. Best for a known amount with a clear repayment date: equipment, a partner loan, or a bridge to collections.
Capital advanced against future performance and repaid as a share of revenue until a repayment cap is reached. Best when repayment should flex with cash coming in the door: marketing spend, inventory buildup, or hiring ahead of demand.
Sell an outstanding invoice for an upfront advance, minus a discount fee, instead of waiting on a customer's payment terms. Best for closing a cash gap created by 30/60/90-day invoices.
Built for direct agreements
Every instrument on Realfund is a documented agreement between your business and a specific lender, funder, or factor. Nothing is public until you decide it should be.
If your private lender can't cover the full amount, or you want to expand the deal, you can open the same IOU to the public marketplace to raise the rest from other investors — the original private terms and record stay intact.
How it works
Choose IOU, Funding, or Factoring based on how you want to repay it.
Track payments, balances, and terms in one place. Nothing is shared publicly.
Need more funding? List the remaining amount on the public marketplace for additional investors.
Business IOU field guide
For a business, an IOU is useful only when it is treated as a real financing instrument: a defined obligation, a repayment plan matched to cash generation, and a record that stands up to scrutiny. This US-first guide explains the commercial logic, not legal or tax advice.
Explore step-by-step guides for partner loans, family funding, friend loans, client advances, supplier terms, invoice bridges, equipment, acquisitions, and more.
Finance a defined opportunity while preserving ownership and planning around repayment.
Read articleMatch debt service to collections, tax dates, and the actual cash conversion cycle.
Read articleSeparate real tax analysis from tax promises and understand why the facts control.
Read articleBring relationship capital into a documented governance and repayment framework.
Read articleUnderstand the recipient’s claim, yield, monitoring rights, and credit risk.
Read articleKeep the agreement, ledger, amendments, and evidence ready for scrutiny.
Read articleLearn why offering notes to investors changes the securities and disclosure analysis.
Read articlePlan for currency, withholding, governing law, and collection mechanics.
Read articleWork through the questions a careful borrower and lender must resolve first.
Read articleGrowth capital
A business IOU can convert a specific funding need into a dated obligation: inventory ahead of a seasonal rush, equipment that produces measurable capacity, a deposit that unlocks a contract, or payroll during a predictable collection gap. In those situations, the core question is not “can the company borrow?” It is whether the funded use is likely to produce cash before the payment dates arrive.
Compared with selling ownership, debt normally preserves voting control and leaves future upside with the owners once principal and agreed interest are repaid. Compared with an informal advance, a written note forces decisions about amount, rate, maturity, collateral, payment priority, and default. That structure gives management a planning tool and gives the capital provider a defined claim rather than a vague expectation.
The SBA describes financing programs designed to fund or grow a business and notes that eligibility commonly includes the ability to repay and a sound business purpose. That is a useful discipline even when the lender is an owner, customer, supplier, or private investor rather than an SBA lender.
Cash flow design
Profit is not repayment capacity. A profitable contractor may wait for retainage; a retailer may pay suppliers months before selling inventory; a subscription business may collect upfront. The useful IOU design begins with an operating cash map: when cash leaves, when revenue is invoiced, when it is collected, and which costs must be paid first.
Monthly amortization is common, but it is not always the safest design. Seasonal businesses may need interest-only months and principal payments after peak collections. A purchase-order bridge may need repayment from named receivables. An equipment note may need a ramp period before regular payments. The lender should see the assumptions, reporting cadence, and a downside case.
The IRS notes that self-employed individuals, partners, S corporation shareholders, and corporations may need estimated tax payments during the year. Treat those dates as fixed cash-flow commitments in the same model as debt service.
US tax lens
In a genuine borrowing, interest may be an expense of the borrowing business and interest received is generally income to the recipient. But “may” matters: federal rules can limit business interest deductions, related-party rules can affect timing, and entity type and accounting method change the result. Principal is generally different from interest: repayment of borrowed principal is typically not ordinary income to the lender and does not normally create a borrower deduction.
The parties should be able to show a real debtor-creditor relationship: an executed note, an enforceable repayment obligation, a commercially supportable rate, a maturity date, actual payment behavior, and records showing the funds were loaned rather than contributed or gifted. Where owners or related parties are involved, independent advice and arm’s-length documentation matter even more.
A deduction does not make interest free. It changes taxable income subject to applicable rules. The lender may still recognize interest income, and the business needs cash for both the interest payment and its own tax obligations. Discuss Section 163(j), related-party timing, original issue discount, withholding, and state treatment with a tax adviser before presenting any after-tax return.
Owners, partners, suppliers
Owner, family, partner, employee, supplier, and customer advances are often the first available growth capital. They may involve better information and more flexible terms than institutional lending. They also carry relationship risk: unclear expectations can damage governance, create disputes over priority, or blur the line between debt and an equity contribution.
Supplier or customer notes deserve separate care. A supplier advance can protect supply; a customer deposit can finance delivery. Each should connect to an underlying commercial agreement that sets performance, refund, cancellation, and setoff rights. A note should clarify whether it survives if that commercial agreement changes.
A clear note prevents a short-term cash advance from becoming a permanent argument. It gives both sides a shared record of what was funded, what has been repaid, and what happens when performance changes. For a company that may later seek bank or investor capital, that record can make due diligence substantially cleaner.
Lender and recipient outcomes
For a lender, a note can offer scheduled interest, principal repayment dates, a stated priority, information rights, and potentially collateral. That can be attractive where the lender prefers defined cash flows to ownership dilution or wants to support a business without becoming an equity holder. It also means credit risk is central: a fixed coupon does not eliminate the risk that principal is late or never recovered.
Interest generally has tax consequences for the recipient, while the character of a loss depends on whether the debt is business or nonbusiness and whether it is actually worthless. The IRS explains that business bad debt and nonbusiness bad debt are treated differently, and that a lender needs evidence of an actual loan rather than a gift.
Documentation and controls
A workable note identifies the parties, principal amount, currency, interest method and rate, issue date, maturity, payment dates, payment instructions, prepayment rights, late charges if lawful, default events, governing law, notices, and signatures. If collateral is part of the deal, the collateral documents, perfection steps, and priority analysis must be handled correctly for the relevant jurisdiction.
Maintain an executed-document vault, the disbursement record, a payment schedule, balance calculation method, payment receipts, amendments, and communications about any waived or rescheduled payment. Record changes as amendments signed by the required parties, not as informal messages. For recurring payments, reconcile the ledger with bank activity.
Future lenders, buyers, auditors, and tax advisers need to answer basic questions quickly: Was this debt authorized? Is it current? Is it secured? What is the payoff amount? Are there defaults? Can it be prepaid? Strong records reduce transaction friction and help avoid presenting an outdated balance as fact.
Private to public capital
A single private bilateral note and a note offered to multiple investors are not interchangeable. In the United States, an offer or sale of a note may be a securities transaction. The SEC states that every offer and sale of securities must be registered or rely on an available exemption. Which route is available depends on the issuer, the purchasers, marketing, dollar amount, state law, intermediary, and the details of the offering.
Before advertising an IOU, publishing a yield, inviting investors, or accepting funds from more than a known lender, pause for securities counsel. Regulation D pathways have different solicitation and purchaser rules; Regulation Crowdfunding uses an internet platform through a registered broker-dealer or funding portal; Regulation A and intrastate exemptions have their own conditions. Anti-fraud obligations still apply.
Cross-border notes
The commercial logic of a note travels well: define who owes what, when, and under which conditions. The legal and tax consequences do not travel automatically. A US business borrowing from a foreign person, or a foreign business borrowing from a US person, may face withholding, tax residency, treaty, exchange-control, licensing, reporting, sanctions, data, and enforceability questions.
For a worldwide transaction, local counsel should review the actual borrower location, lender location, collateral location, and payment flow. A US-facing page should not imply that a US note template provides the same result elsewhere. The safer product position is: use transparent records and standardized workflow, then localize the legal documents and compliance process.
Decision playbook
Start with the use of funds and the repayment source. Then decide whether debt is appropriate, who can authorize it, what risks the lender is taking, and whether the deal stays private. Only after those questions are answered should the business set a headline rate or consider marketing the opportunity.
The borrower gains a capital plan that respects operating cash. The recipient gains a legible claim, timely information, and documented rights. The business gains a funding record that can be explained during due diligence. That is the core value of disciplined IOU management: clarity before money moves, and evidence after it does.
Create a private IOUSource library