A recent Wall Street Journal article on peer-to-peer lending for small businesses really caught my attention.
I guess it was just a matter of time until the concept of social networking melded into the business finance area.
WHAT THE HECK IS PEER-TO-PEER LENDING?
In short, instead of getting a traditional loan or line of credit from a bank, your small business could approach a network of potential investors via an online marketplace.
While still very small in the scope of small business financing, the Wall Street Journal article indicates that peer-to-peer lending sites have generated more than $500 million in loans in the past five years.
WHO ARE THE PLAYERS IN THE PEER-TO-PEER LENDING MARKETPLACE?
As with all things internet related, there are many players in this space. Two of the most prominent ones are Prosper Marketplace and Lending Club Corp.
Just imagine these firms as matchmakers - they use the power of their marketplace to match people looking for loans to those who are looking to make loans.
Thus, the peer-to-peer concept.
YOUR FINANCES STILL HAVE TO BE IN ORDER
Just because this type of lending is not driven by bank guidelines, there is still a screening process that borrowers have to go through at these peer sites. Your credit score plays a big role in the overall rating you receive from them and the ultimate interest rate assigned to your loan.
The process of how peer-to-peer lending works in these marketplaces is very simple. Naturally, you will want to do your homework on these funding sources relating to terms, fees and other criteria.
IS THIS SOMETHING YOUR BUSINESS WOULD CONSIDER?
Is this concept too "out there" for your small business to even consider? Have you had any experience with any of the peer-to-peer lending sites, either as a borrower or an investory?
Please share your thoughts in the comments section below - would love to hear them!
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