One of the hardest parts of running a small business is getting access to a loan when you need it. Larger businesses with hundreds of employees that make millions of dollars in revenue per year might have access to credit through a bank, but small businesses are often left out in the cold. Especially since the financial crash of 2008, access to loans has been a consistent challenge for the small business owner.
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This all changed just a few months ago in March when Lending Club, one of the largest issuers of personal loans in the country, officially began issuing small business loans of amounts up to $100,000.
They had already been issuing billions of dollars in loans to individuals for the past seven years. Lending Club did this so well because they run completely online. A traditional bank has far more overhead, having to maintain local branches and a huge employee base. In contrast, Lending Club operates completely through the internet. Since their website costs amazingly less to run than the national chain of a major bank, Lending Club passes the savings on to its customers in the form of lower rates.
In summary, Lending Club has become a successful company through offering the lowest interest rates nationwide.
Lending Club offers business loans with lower rates
Lending Club has expanded into business loans while using this same online-only approach. The result is a loan with a lower interest rate than anywhere else. So unlike applying for a loan at a bank, the entire application process is completed online. This includes the initial process where you get quoted for a rate, as well as the verification stage where you are asked to submit documents and information to prove you and your company’s identity.
But the end result is the same: lower rates. For example, here are the interest rates for business loans (source – Lending Club):
As you can see in the chart above, Lending Club offers interest rates between 5.9% and 29.9%. The rate you receive will depend on the credit of your business. The more creditworthy your business is, the closer your loan rate will be to 5.9%.
Origination fees between 1-6%
The other column in the above chart is the origination fees on these loans. What is an origination fee? This is what Lending Club charges for the loan to be issued. Think of it like the activation fee for getting a new cell phone. Basically, it is the main way that Lending Club makes money from these loans. The way they charge it to you is by simply removing it from the lump sum they transfer to your bank account.
This means that if you are approved for a $20,000 loan with an origination fee of 2%, you would have $400 removed from the deposited amount, so Lending Club would deposit $19,600 into your business bank account.
As you can see, the origination fee depends on the interest rate each loan is given. Business loans with lower interest rates generally have a lower origination fee. The amazing thing is, even if you include the origination fee into the interest rate, Lending Club still has lower overall rates than anywhere else.
Lending Club business loan details
Here is the official description of the loan as provided by Lending Club:
- Fixed Rate: 5.9 – 29.9% (never changes, even after a late payment)
- Term: 1-year, 2-year, 3-year, or 5-year loans
- Minimum/Maximum Loan Amount: $15,000 to $100,000
- Unsecured: No collateral required — just your signature.
- Pre-payments: No fee. Pay back the loan early at any time.
- Late/failed payment: $15 fee
Minimum borrower requirements:
- Annual Business Revenue: $75,000 or more
- Ownership: 2+ Years
- FICO (credit score): 620+
It is worth mentioning that Lending Club looks at both the FICO/credit of the applicant and the financial documents of the business during the application process. So if you have perfect credit, yet your business brings in just $20,000 per year, you will likely be denied.
How to apply for a Lending Club business loan
The easiest way to apply is to go to the Lending Club website and check your rate. The initial form is very simple (seen below). Fill out (1) the amount of the loan you need, (2) the purpose for your loan, and (3) click Get Started.
After hitting Get Started, you are taken to the first page of the loan application:
After filling in some information about yourself, you are brought to the second section of the application where you specify your business financials:
That’s all there is to it. Once you click the green Continue button above, Lending Club will calculate whether or not you qualify for a loan, as well as offer you an interest rate. If you decide to accept the loan offer, they will begin the verification process to prove your identity. Once this is complete and your loan is funded by investors, it is officially issued and the money is transferred to your bank account.
Only 45 states allow Lending Club business loans
The majority of the United States, forty-five states in total, allow Lending Club to issue loans. However, applications are not accepted from Idaho, Iowa, Maine, North Dakota, or Nebraska. As of May 2014, the security regulators in these five states still have concerns that forbid Lending Club from operating there.
Lending Club in TechCrunch
All of this may seem new to those of you who have never heard 0f Lending Club. To help, here is an article in Techcrunch about the new small business loan program: Google-Backed Lending Club & Business Loans.
Conclusion: A great business loan at a low-rate
In today’s tough economic conditions, being approved for a loan can mean fresh life to a struggling small business. However, large American banks have often failed to give these people the credit they deserve.
Lending Club’s small business loan program was launched in March specifically to aid this situation, particularly for businesses run by responsible creditworthy individuals. And since Lending Club operates completely through the internet, they are able to offer lower interest rates than any bank. Combine this with the loan’s easy online application, its low late fees, and its freedom to pay off the loan early without charge, and you’ve got a great option for any small business owner nationwide.
For a quick low-rate loan, Lending Club is one of the best options nationwide. You can easily find your rate and apply at no risk of it affecting your credit score.
Check your rate with Lending Club today, and get started toward your loan.
Won’t affect your credit score.
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Karl Thomas says
How do it work to start my own business with a 40,000 dollar loan