Lending Club Small Business Loans
Lending Club has been around since 2007; their goal is to connect investors with borrowers. This peer-to-peer lending platform allows small business owners to look for one or many lenders that can offer fair rates and manageable monthly payments. Lenders can look for borrowers that are worth investing in.
Lending Club offers fast and easy application processes and funds can be in your hands within days. Your interest rates depend on your credit history and the lenders that are interested in investing. If you have good credit you can get fixed rates as low as 5.9%. If you qualify you can get a loan of up to $300,000 for your business. You can choose a repayment term from one to five years.
Lending Club also offer a business line of credit. The business line of credit is free to open. You can use it anytime for equipment, flexible cash flow, inventory, receivables financing or any other business use. Funds must be paid back over 25 months or less.
With the business line of credit, there are no monthly maintenance or inactivity fees. For funds used, you will pay a 1 – 2% draw fee each time you access funds, and an interest rate from 6% to 21.6%, only on the balance of funds borrowed.
Lending Club claims to include no hidden fees and one of their biggest selling points is that their pricing is transparent and forthright. You can also choose a payment plan that best suits your income; you can choose a repayment term between one and five years. Plus, if you are able to pay off your loan before the end of your term, there is no prepayment fee, which some lenders charge.
You can get a quote in minutes that won't lower your credit score. You can start the process from their business loan landing page. There is a three field tool to get started. Just indicate your preferred term, how much you wish to borrow and the purpose of the loan, and click get a quote. The whole process of generating the quote takes just several minutes. Should you choose to proceed accept a loan offer, or sign up for the line of credit, you'll be asked to provide documentation.
You'll proceed to fill out three screens, the first for basic business information, the second to create a password, that the third for information on sales and profits, as well as monthly expenses and outstanding debt payments. After the third screen, click through for your business loan quote.
Business borrowers have their own, dedicated US-based Client Advisor, available Monday to Friday between 6am - 5pm PT. Lending Club is upfront about fees, disclosing all fees and terms at their user friendly site.
Note that there is a loan origination free from 0.99% to 6.99%, depending on the specifics of the loan. Lending Club deducts the origination fee from your loan before turning the loan proceeds over to you. They are upfront in listing a few other fees. Late payments, insufficient funds and check processing fees (if you pay by check instead of automatic debit), are the other fees you'll face.
What Lending Club Wants in a Borrower
Lending Club requires borrowers to be established at least 24 months in business, with a minimum of $75,000 in annual sales (startups might want to try them in the personal loan category). Recent bankruptcies or tax liens are deal killers here. Borrowers need to own at least 20% of the business and have decent credit. It's worth noting that for their consumer loans, borrowers must have credit scores above 660. The business loan underwriting requirements for a Lending Club are a bit strict compared to most online lenders.
Business owners do not have to put up collateral for loans of less than $100,000. They won't ask for business plans, revenue projections, appraisals or title insurance, and they won't require a visit to your business. Lending Club loans are not available in Iowa or Idaho.
Pros and Cons of Lending Club business Loans
For small businesses with excellent credit, Lending Club is a great option, particularly if you would like to get an unsecured business loan quickly. Lending Club's application and funding processes are faster and more convenient than those of banks. Keep an eye on those rates, as they can go up quickly if you don't meet Lending Clubs standards for a top tier borrower. That being said, their rates stack up well against the online competition. If you are focused on getting a better rate, a traditional small business loan from a bank may bring a lower interest rate, but you will need the time and inclination to face the bank application and underwriting process.
Lending Clubs fee structure and rates tend to be better than other alternative, peer-to-peer and online lenders, allowing you to consider a slightly higher interest rate if you really need the funds for your business.
While no collateral is required from Lending Club on business loans of less than $100,000, they do ask that borrowers sign a personal guarantee. If you default on the loan, your assets could still be in play, and your credit will take a hit.
A Bit of Lending Club History
Founded in 2007 by Silicon Valley veteran Renaud Laplanche, Lending Club has established itself as the premier player in the peer-to-peer lending market. The company uses a proprietary algorithm to match lenders and borrowers designed to minimize risk. Since its founding, the Lending Club has generated more than $11 billion in loans, giving credence to their claim as America's #1 lending marketplace. They began offering small business loans in 2014, and added the business line of credit product in 2015.
Lending Club's ease of use and transparency are a breath of fresh air in the world of finance. They are an excellent choice for a business owner or entrepreneur with good credit. However, someone with medium to low credit my find better rates with a bank or even a federal lender.