Top Five Peer-To-Peer Lenders

Top Five Peer-To-Peer Lenders
By Tiffany Wright

One new and growing source of microloans (those under $35,000 to $50,000) are peer-to-peer lending networks. Peer-to-peer lending, also sometimes called social lending, providers make direct loans between consumers and investors possible. There is no third party intermediary like at a bank where the bank takes deposits then lends those deposits out as loans. These entities connect those who have money to invest with those who need money. These official networks and companies did not exist ten years ago. Social lending is another example of how people and companies continue to engineer creative legitimate solutions to business financing needs.

Prosper.com – Prosper is the industry juggernaut and lends to individuals and small businesses that typically have credit scores between 620 – 699. This company was founded in February 2006 and essentially hailed the advent of peer-to-peer lending. As of spring 2011 the company had funded ~$219 million in loans. Prosper now sets the interest rates for loans. Previously potential investors bid on the rates. Prosper operates in most, but not all, states. Check the company’s website for details.

Lending Club – Lending Club was the second largest peer-to-peer lending site by volume in the United States, behind Prosper. But in the early 2011 Lending Club surpassed Prosper. Lending Club is, and has been, the largest in terms of loans funded. The company was founded in 2008. Lending Club sets the interest rate for all the loans and has done so since inception. The company’s tag line is “Investors earn better returns, borrowers pay lower rates.” As of February 2011, Lending Club had funded ~$226 million in loans.

Loanio – Loanio is a little different from Prosper and Lending Club. According to Loanio’s website,”all loans are originated by Loanio and then sold to website lenders who are legally considered the loan purchasers”. Essentially Loanio originates and makes the loan to the loan seeker, then sells that loan to small individual investors through its website. Hence, Loanio does act as an intermediary. Unlike a bank, it does not hold loans for long before selling them to the individual investors.

WikiLoan – WikiLoan provides tools, documentation, and other support that enable friends and family to make loans to or obtain loans from one another. Borrowers can also access loans from the WikiLoan community (i.e., from strangers) but on a much more limited basis than the above three entities. Loans range in size from $500 to $25,000.

LendingKarma – LendingKarma is different from the previous four loan providers, although it shares a lot of similarities with WikiLoan. LendingKarma does NOT provide loans to or from strangers. The company strictly facilitates loans between family and friends. Do you need business expansion financing and your brother or accountant has offered to provide you with the funds in the form of a loan? LendingKarma will help. LendingKarma will help clarify loan terms, set up a repayment schedule, and track loan repayment.

Some early entrants into the peer-to-peer lending space such as Zopa, Virgin Money, and Fynanz no longer operate in the U.S. market although they do still exist as companies. Zopa and Virgin Money still lend in the United Kingdom (U.K.) and other countries but no longer lend in the US. Fynanz completely revamped its business plan and now solely provides student loan assistance through credit unions and similar entities.

Tiffany C. Wright is President of Toca Family Business Services, a strategic advisory firm that provides interim CEO, COO and CFO services. She is the author of Solving the Financial Equation: Financing Solutions for Small Businesses, available at Amazon.com, and HELP! I Need Money for My Business Now!, available at http://www.financeyourcompany.com. In the last five years she has helped companies raise over $31 million in funding. For more regular insights on business financing and management, view/subscribe to her blog at http://www.Cash4Impact.com.

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