By Clark Howard, ClarkHoward.com
MARCH 27, 2014 – Getting a loan as a small business or an entrepreneur isn’t easy. Thankfully, microloans financiers and peer-to-peer (P2P) lenders have stepped up with funds.
P2P lending is a way to cut the banks out of the equation that allows people to go online to borrow or lend money directly to each other. Prosper.com is the granddaddy in the field, but LendingClub.com has been growing nicely in recent times and actually overtaken Prosper as the industry leader.
Funding a Direct-pay Medical Practice
The recent growth is a definite reversal from where the P2P industry started. The Wall Street Journal reports Prosper did such a bad job of underwriting risk during their first three years that one in five loans went bad. Today, it’s more like 3%, which is right in line with typical bank-vetted borrowing. LendingClub, meanwhile, rejects 90% of loan applicants now!
You get your money fast once you pass underwriting with both Prosper and LendingClub. There’s no waiting as you might with traditional banks that take forever to underwrite a loan. Prosper has nearly 2 million members and has helped arrange $613,000,000 in lending. They tout investor returns of around 9%, while borrowers with good credit can borrow at fixed rates of 6.73% APR, according to their website. LendingClub, meanwhile, has funded $2,396,897,400 in loans.
Crowdfunding sites are another alternative that have popped up in recent years. With crowdfunding, a borrower only gets the money if enough people agree to put up little chunks. If you don’t get 100% funding for a potential project, you get no money at all. Some of the most popular crowdfunding sites include Kickstarter.com and IndieGogo.com. And don’t forget to check out the Forbes list of the Top 10 crowdfunding sites.