SmallBizResource Blog -- SmallBizResource

A P2P Lending Alternative

Posted by Judy Mottl Tuesday, Dec 18, 2007, 10:09 AM ET

There are banks and credit unions and loan sharks. Now you can add a new funding option to the list and it's one that small businesses, with good solid credit, may find extremely beneficial.

Simply, the Lending Club uses social networking to hook lenders and borrowers together. It's like the Match.com of credit. Those with good credit reports can borrow at lower rates, and those looking to make a good return on an investment can lend out funds and get a bit more than current savings or CD interest rates.

As the company's site explains, P2P lending isn't really new: Back in 5,000 B.C. people loaned grain and the borrowed grain was repaid (often with interest) at harvest time.

"We actually think it takes us back to the way things used to be: both lender and borrower are known to their given communities; the borrower had a credit history (the lender would know how many fields the borrower could plant); and, they would both have a mechanism to exchange the grain (a basket to carry the grain)."

Lending Club's interest rates for borrowers are nothing to sneeze at (ranging from 7.62-17.86%) and lenders average a bit over 12% in interest.

Launched six months ago on Facebook, the company uses homebrewed technology in matching borrowers and lenders on factors from credit rating to personal connections such as where they went to college, their occupation and social connections.

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