Crowdlending – Another Source of Funding for Small Businesses

Now you really can do almost everything on the Internet. With the rise of crowdsharing, crowdfunding, and crowdsourcing comes crowdlending. Most often called peer-to-peer lending, it’s a way for individuals and businesses to get loans online relatively quickly and easily. Online lending platforms facilitate funding the loan through institutions directly and from individuals who’ve decided to invest, so they eliminate the middle man—the banks. After the borrower submits an application, it’s graded and then some platforms post the application for a few weeks to let investors review it to determine if they want to invest. Other companies have a pool of blind investors that they draw money from which expedites the process. The draw of online lending is that the borrower pays lower interest rates than they would from traditional lending institutions, while the lenders receive fixed returns at higher rates. Peer-to-peer lending may be right for funding your business or may even help with personal loans as well. Loan amounts vary but average between $3,000 – $500,000 and terms are typically about 3-5 years.

Here is an overview of some of the top platforms.

Kabbage – http://www.kabbage.com/

• Should be in business for one year and have $50,000 in annual revenue or $4,200 per month over the last three months
• Offers unsecured small business loans, secured small business loans, industry-specific loans, and minority loans
• Offers business lines of credit up to $100,000  

Lending Club – http://www.lendingclub.com/

• Focused on small businesses that have been in business for at least two years
• Offers business loans and lines of credit from $5,000 – $300,000
• Loans are funded as fast as two days but typically take a week or two

Upstart – http://www.upstart.com/

• Offers business and personal loans from $1,000 – $50,000
• Terms are offered at 3 and 5 years
• Consideration based on FICO score, years of credit, education, area of study, and job history 

Prosper – http://www.prosper.com/

• Offers one of the lowest beginning APR rates available
• Loans are capped at $35,000
• Offer a variety of personal options for debt consolidation, home improvement, auto, green, adoption, and military loans

Funding Circle – www.fundingcircle.com

• Focused on small businesses that have been in business for at least two years
• All loans are secured and range from $25,000 – $500,000 over 1-5 years
• Loans are funded in about 10 days

Does it sound like it’s for you? Since many of the platforms require minimum FICO scores of about 600, it’s often a good alternative to asking friends and relatives for money, using traditional bank loans, or using credit cards. Many of the platforms are transparent about their terms, and if you have questions most of them offer multiple options for contacting their customer service representatives.