In November, Nansee Kim-Parker raised $20,000 on LendingClub.com in less than two weeks to open TokyoMoto, a San Francisco motorcycle-repair shop. After clearing a prescreening process, she posted details of her background and her business idea and attracted hundreds of small lenders from around the country. Her loan has a three-year fixed interest rate of 9.85%.
"It's like a village, gathering support here and there," says Ms. Kim-Parker, who calls traditional bank credit "unaffordable" for small businesses.
Lydia Hamilton-Monnie says she was turned down by three banks before raising $25,000 on Prosper last year to open a plus-size women's apparel store in Milwaukee. With a three-year fixed rate of 12% on the loan, Ms. Hamilton-Monnie says she is on track to pay back her nearly 1,000 lenders by December 2012.
Peer-to-peer lending sites, which first appeared in the U.S. five years ago, charge borrowers a fee for connecting them to a network of lenders, who put up anywhere from $25 to $1,000. Lenders are paid back with interest, with the rate set on the basis of a site-assigned credit rating, minus the site's fee. Most loans are for less than $10,000, but they can exceed $30,000.
Forget the banks, or even funding from local quasi-public/private funds, get you startup up and running with a peer-to-peer loan. Have you looked in to or used peer-to-peer loans? What do you think?
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