Staying with the theme of money, another alternative for small businesses is peer-to-peer loans. Two such companies are the Lending Club and Prosper.
Lending Club is a social lending network that connects investors and borrowers. The loans are provided at rates that are usually better than regular banks, and loans can be for as little as $1,000. The club only approves US credit worthy borrowers, which they define as people with a FICO score of at least 660 with a debt-to-income ratio (excluding mortgage) below 25%.
If you are approved for a loan, it will be for a fixed rate with a life of 3 years. You will post your loan request online and lenders will agree to fund your loan in varying amounts. It may take up to 2 weeks to get fully funded.
Prosper Loans is another peer-to-peer lending company. It is similar to Lending Club in their approval process and their loans have a life of 3 years and are repaid at a fixed rate.
When you post your loan request with Prosper, you also choose the maximum interest rate you're willing to pay. Your listing displays a summary of your credit history, and a personal note to the lenders telling them about yourself, your business, and how you plan to use the loan. Lenders read all of this and then bid on your listing. Subsequently, your interest rate could be driven down by the auction bidding.
This service (for both companies) is unavailable in some states, so check their FAQ pages. I really love what these companies are doing. Obtaining a loan has become difficult, but there are alternatives out there.
Peer to peer lending is another facet of the emerging social lending movement. It will be interesting to see how this trend evolves. I will share information on any new opportunities as they are created.
