Another convenient source that small business owners can turn to for unsecured loans are peer-to-peer lending sites, such as Lending Club and Prosper. Also known as marketplace lenders, they match borrowers with investors (although most of the lending is done now by big financial institutions rather than individual investors, or “peers”). The focus is on consumer loans, particularly refinancing expensive credit card debt. But many small business owners have migrated to these sites for their business capital needs. (Lending Club is expanding into small business loans). Loans of up to $35,000 are available. Interest rates range from 6% to 30% depending on credit score, and there is a loan origination fee.
- Loans are unsecured
- Fast and easy process
- Typically lower rates than a credit card
- Must have a credit score of 650 or higher
- No personal connections or mentoring; this is an anonymous financial transaction