News & Resources

Using peer-to-peer lending to fund a small business

Jun 29, 2011 Brian Bradley

As the economy struggles to recover from the financial crisis, many small businesses have had difficulty securing credit decisions in order to grow, while a significant number of entrepreneurs have faced similar troubles in trying to start a business. Some owners have turned to nontraditional financing methods, such as launching a firm solely with a personal credit card. However, a move such as this is not always advised, nor is it always successful. Another trend that has grown popular is peer-to-peer lending. According to Reuters, websites such as Prosper Marketplace and Lending Club allow groups of lenders to band together, offering as little as $25 per person to support a venture or other cause. "A peer-to-peer loan could be a good idea for businesses, since most loans are still tight and difficult to get given the current state of the economy," Cynthia Hsu wrote for the source. "If a bank turns your business down, it might be worthwhile to check out a peer-to-peer lending site." However, peer-to-peer lending isn't without fault, either: It's notoriously difficult to get accepted - Lending Club turns away approximately 90 percent of its applicants.