NEW YORK (MainStreet) -- When John Good, owner of the Bubbles Galore Car Wash in Davison, Mich., went to his local bank last year to get a $16,000 loan to expand into the self-serve dog washing business, he was denied.
First Place Bank, a subsidiary of First Place Financial
That's when Good heard about peer-to-peer lending.
Peer lending is not necessarily new, but there are a growing number of business borrowers turning to them -- in part because, as interest rates remain near record lows, investors are looking for options that will make decent returns.
Lending Club is targeting an average initial investment of $15,000 by year-end.
"The No. 1 reason why borrowers choose Lending Club as opposed to a bank is lower interest rates. We are a peer-to-peer lending network and therefore create a more efficient way of getting funding to borrowers, whether small businesses or individuals," Laplanche says.
How It Works
Lending Club offers a maximum of $25,000 in either three-year or five-year maturities. Borrowers are allowed up to two loans in active repayment.
Money to fund the loans comes directly from qualified investors (withat least $70,000 in annual income and $70,000 in net worth), not lending institutions.
Applicants must be at least 18 years old, with a valid bank account, a FICO score of at least 660 and debt-to-income ratio at most of 25% (excluding mortgage), among other requirements, according to the company.Applicants fill out an online application and are told immediately whether they passed the initial screening. If they pass, they are given loan options and their confidential request is posted to the website for two weeks or until the loan is fully funded.