Getting a loan as a small business or an entrepreneur hasn’t always been easy. Big banks generally don’t care about you and the small community banks that were a pipeline of money for would be entrepreneurs have greatly thinned out after the Great Recession.
Thankfully, microloans financiers and peer-to-peer (P2P) lenders are filling the vacuum and have stepped up with funds for small business owners.
Here’s a look at the best websites for small business lending
P2P lending is a way to cut the banks out of the equation that allows people to go online to borrow or lend money directly to each other. Prosper.com is the granddaddy in the field, but LendingClub.com has been growing nicely in recent times and actually overtaken Prosper as the industry leader.
You get your money fast once you pass underwriting with both Prosper and LendingClub. There’s no waiting as you might with traditional banks that take forever to underwrite a loan. Prosper has helped arrange $6 billion in lending, but rates range from 5.99% to 36.00% APR, according to the website. LendingClub, meanwhile, has similar interest rates and has funded $15 billion in loans to date. But note this well: Interest rates at both lenders are on the rise because of recent market conditions.
Then there are yet other newer players in the field like FundBox and BlueVine. Both will lend against your credit card receivables based on the historical amount of charge volume your business does. They offer credit lines to you with minimal paperwork, and use proprietary algorithms to make lending decisions. FundBox lends in less than an hour! The loans are not cheap, but they are quick. So the issue with them becomes the interest rates you’re charged.
Getting money specifically for online businesses
Are you an existing online business looking for money to grow? PayPal may have a solution for you. The e-commerce business offers a financing option for its business customers called PayPal Working Capital. There is no credit check done of you or your business. PayPal is instead making lending decisions using a proprietary algorithm based on the historical value of your eBay sales and PayPal transactions. So if you have a good revenue stream, they lend you money against future revenue that comes in on PayPal.
As PayPal transactions clear, they siphon off a portion for loan payments. It’s a low-risk loan for them because you have a history and they assume you won’t disappear as a seller. Your maximum loan amount can be 15% of your total sales volume, up to $85,000 annually. ‘You are required to pay at least 10% of your total loan amount (loan + the fixed fee) every 90 days so that you make consistent repayment progress regardless of your sales volume,’ the company notes on its website.
Another similar option to check out is Square Capital. For customers who use their payment-processing devices, the company will now make loans available. Fees will amount to between 10% and 16% of the amount borrowed. Much like PayPal model, Square will take around 10% of each transaction you process through their platform to pay back the loan. Loan term can stretch as long as 18 months, which is twice as long as the typical cash advance, according to The Wall Street Journal.
So what we’re seen are easier, more streamlined ways for small business owers to borrow. Clark has also talked in the past about Kabbage.com as another option. And Amazon actually beat PayPal to the punch doing this kind of lending in an effort to grow Amazon Marketplace to compete with eBay.
Crowdfunding sites offer another route
Crowdfunding sites are another alternative that have popped up in recent years. With crowdfunding, a borrower only gets the money if enough people agree to put up little chunks. If you don’t get 100% funding for a potential project, you get no money at all. Some of the most popular crowdfunding sites include Kickstarter.com and IndieGogo.com. And don’t forget to check out the Forbes list of the Top 10 crowdfunding sites.
Microlending is another alternative to the traditional big bank route. Grameen America makes loans of $500 to $2,500 to clients who have little collateral. Many of their clients are Latinas who have businesses centered around baking, sewing, and cleaning, according to Charlotte’s ABC affiliate WSOC-TV. Borrowers attend weekly group meeting with a Grameen staffer to share tips about having more successful businesses.
If you have an entrepreneurial idea you need to get off the ground, or you need to grow your existing small business, check these sites out!