The BizFilings blog covering business tips and trends.
Peer-to-Peer Lending is Not Just for Friends and Family Anymore
Published on Jul 13, 2010
Read 'Peer-to-Peer Lending is Not Just for Friends and Family Anymore' at 'Time to Start Up,' the small business blog by BizFilings.
The New York Times reported July 11, that Small Business Administration (SBA)-backed lending plummetted in June. The Robb Mandelbaum blog revealed that "total approved loans in the SBA's guaranteed loan programs fell to just $647 million for the month ... the worst month for SBA lending in years, perhaps decades."
Depressing stats, indeed. But despite this report, there are still credible ways to secure funding even in this current economic climate for budding entrepreneurs and small business owners, including:
The first one mentioned, peer-to-peer lending, also known as social lending networks, has received quite a bit of attention lately. CBS News just yesterday said that this alternative is becoming more and more popular. According to this report, Celent, a notable research firm, estimates that the peer-to-peer market "will climb to $5.8 billion in loans this year, up to 800 percent from 2009."
But what exactly is peer-to-peer lending? "P2P" lending offers another option for people to borrow money without the traditional intermediation of a financial institution. Borrowing from family and friends falls into this category, but there are also formalized lending sites dedicated to peer-to-peer lending. Peer-to-peer lending can be easier, but be warned that lending sites do take your credit history, credit score, income and employment situation into account.
Some popular P2P websites include, Prosper and Lending Club. Prosper enables you to apply for a three-year loan up to $25,000, the Lending Club has a $25,000 limit for loans as well.
For your small business startup needs, P2P may be for you. But like with anything else, there are disadvantages, namely fees, ranging from 0.5 percent to 4.5 percent. After all, that is how they make their money.
Have any of you used Prosper or Lending Club to launch your small business? Or can you describe your experience with peer-to-peer lending?