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Reviews, Small Business

LendingClub Small Business Loan Review

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

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Updated September 8, 2015

You might be familiar with LendingClub already, as it’s one of the leaders in the peer-to-peer lending industry. It’s well known for personal loans, but last year, it added small business loans to its product offerings.

Lending Club is also known for keeping rates down through its use of technology-based algorithms when determining when to lend. Human underwriters are barely touching the loans. As a result, savings in the form of lower rates are passed down to consumers and small business owners.

Let’s take a look.

LendingClub Small Business Loan Details

LendingClub allows you to borrow up to $500,000 with APRs ranging from 9.77% to 35.98% on terms of 12 to 60 months.

Fixed monthly payments are offered to help you manage your cash flow better.

Here’s a payment example from its website: if you borrow $50,000 on a 3 year term at 7.90% interest, and you have a 1.99% origination fee (totaling $995.00), you’ll actually receive $49,005.00 in your bank account and your monthly payment will be $1,564.51.

The Pros and Cons of a LendingClub Small Business Loan

Pro: LendingClub offers a great range of repayment terms – most small business loans offer 1 or 2 year repayment terms. This gives you a little more breathing room and might allow for lower monthly payments. LendingClub also presents its APRs as actual interest rates, rather than factor rates, which makes understanding your loan easier.

Con: LendingClub’s origination fee is on the higher side, depending on where you fall within the range. Many lenders have origination fees of around 3%. You’ll need to do the math to make sure that the loan is worth it if you have a 3.49% - 7.99% origination fee.

Pro: Unlike traditional loans with banks, LendingClub has a simple process. For example, it doesn’t require collateral for loans under $100,000, there are no appraisals done on the business, and visits to your business aren’t necessary.

Con: Only monthly payments are offered. While LendingClub says this helps businesses manage cash flow better, you need to analyze whether or not your business can handle such a big hit once a month. Sometimes, daily payments are less disruptive to cash flow as smaller payments are easier to handle.

Pro: LendingClub takes a more personal approach than other lenders, possibly because of its background in personal loans. If your business is experiencing a down period and you can’t afford to pay, it encourages borrowers to reach out to Client Advisors to work on alternative solutions.

What Businesses Are Eligible For a LendingClub Loan?

Your business must have two years in operating history, at least $75,000 in annual sales, and have no bankruptcies or tax liens within recent years. You must own 20% of the business and have fair or better personal credit to guarantee the loan.

LendingClub can’t loan to businesses in Iowa and Idaho.

There are no specific industries excluded on its website, but the ones it works with the most are: professional and personal services, retailers, restaurants, manufactures, automotive, health and wellness providers, wholesalers, and contractors.

Application Process and Documents Needed

When you apply for a small business loan with LendingClub, you’re getting a prequalification first. The application takes minutes to fill out, and you’ll receive multiple quotes upon completion.

The good thing about LendingClub is that it uses a soft credit pull at first to see if you’re eligible for a loan. That means your credit won’t be impacted. Only if you choose to move forward with an offer will a hard pull be used.

LendingClub states that once you’ve accepted a loan, you’ll be provided with a list of documents needed, and you can be funded in as little as 5 days total.

Only one guarantor can be on the loan, so if you own the business with someone else, decide who’s going to apply. Typically, it can help for the owner with better credit to apply.

You should have the following documents ready during the application process:

  • Bank statements from the last 3 months (include all business bank accounts used regularly)
  • Most recent business tax returns
  • IRS form 4506t (to verify you filed taxes)
  • Driver’s license/Photo ID
  • Business tax ID

LendingClub doesn’t specifically say what documents it might ask you for, but it pays to be prepared. The sooner you submit documentation, the sooner you’ll get funded. Documentation is usually what slows the process down.

The Fine Print

There are no prepayment penalties or hidden fees with LendingClub. There is a one-time origination fee of 3.49% - 7.99% to be aware of, though. You can see how origination fees correlate with interest rates on this page of its website.

If you’re late making a payment, a late fee of $15 or 5% of the unpaid amount (whichever is greater) will be charged to your account.

If a payment is unsuccessful, you’ll be charged a $15 fee for each failed attempt to get the payment.

If your loan is under $100,000, LendingClub doesn’t require any collateral. Loans over $100,000 require a UCC lien on the business’ liquid assets.

Also, keep in mind that you can’t withdraw your request for a loan once it has been issued.

Which Businesses Benefit the Most from a Loan With LendingClub?

Businesses that meet the minimum requirements – 2 years in business and $75,000+ in annual revenue – will benefit the most from applying with LendingClub.

Businesses that can handle one large payment per month might also benefit more, due to LendingClub’s monthly payment structure. If your business has been having a rough time, or is in a slow season, evaluate whether or not you can handle the payments.

It’s also worth analyzing the return you want to get with this loan. What are you planning on using it for? Are you expanding? Hiring new employees? Purchasing inventory or equipment? You want to make sure the rates and terms offered to you make sense depending on what the purpose of the loan is.

Lending Club

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on LendingClub’s secure website

Other Alternative Small Business Lenders

LendingClub is a bit unusual considering it’s a peer-to-peer lender. Institutional investors are responsible for funding these small business loans, not actual banks.

If you’d like to take a look at other peer-to-peer lenders, you can check out Dealstruck and Funding Circle.

Funding Circle is LendingClub’s closest competitor, offering loans from $25,000 to $500,000 on 6 to 60 month repayment terms. Its origination fees range from 3.49% - 6.99%, and interest rates range from 4.99% to 24.99%.

FundingCircle

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on Funding Circle’s secure website

Dealstruck is offering loans from $50,000 to $500,000 on terms of 12 to 48 months.

Dealstruck

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Would you rather be funded by a single institution? OnDeck and Fundation are two other alternatives worth checking out.

OnDeck offers loans between $5,000 and $250,000 on terms of 3 to 12 months. Its origination fee is 2.50% - 4.00%, and you only need one year in business and $100,000 annual revenue to qualify. OnDeck loans come with fixed daily payments.

OnDeck

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Fundation offers loans up to $100,000 for working capital, and up to $500,000 for business expansion. 12 – 48 month terms are available for its working capital loan, while 2, 3, and 4-year terms are available for its business expansion loan. APRs range from 8.99% to 29.99%. Fundation allows for twice a month payments.

Fundation

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Shopping Around Can Be Worth the Trouble

As a small business owner, you’re probably low on time as it is. The thought of applying with a bunch of different lenders to chase down the best rates and terms might not seem appealing. However, if you really need the money and are low on reserves, then you should be thinking about the financial health of your business.

Lower interest rates have the potential to save you thousands. It’s worth shopping around to find the best deal for you and your business, and if you do so within 30 days, your credit score is minimally affected. Applying with lenders like LendingClub is even better because you can receive quotes without having your credit impacted.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Small Business

Should You Lease, Finance or Own Your Small Business Equipment?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

ChexSystems BigOpening a new small business is an exciting yet daunting adventure for many entrepreneurs. Typically fueled by the idea of opportunity and the adrenaline of ambition, small business owners may find that the paperwork and financial implications of opening their business is more than just a speed-bump on the road to opening day: it’s a journey that tests one’s perseverance and determination.

Indeed, one of the biggest financial decisions small business owners will face right off the bat is how they’ll be acquiring their new equipment. Whether you’re opening a mechanic shop, diner, bakery, or any other type of small business, you’ll need to stock your establishment with the proper equipment to pass code requirements and to perform the tasks needed for your business to be successful. There are two primary ways to purchase your equipment: leasing/financing or owning. With each comes a host of potential benefits and downfalls that can influence your business both in the short- and long-term.

Depending on your available funds, your needs, and your goals, choosing between leasing, financing and owning small business equipment can be a confusing task. Here are some tips to keep in mind when acquiring equipment for your small business:

Leasing or Financing

While the ideal situation involves a location stocked with new, state-of-the-art equipment, the reality is that many owners will be scratching their heads trying to tally the numbers to a figure that fits their budget. Many opt to lease or finance in order to furnish their new business, but what’s the real difference between leasing and financing in the first place?

  • Leasing: The main difference between leasing and financing is that with leasing, you’re making payments on your equipment until the end of the lease term wherein you need to sign a new lease agreement or return the goods. Consider this like renting an apartment.
  • Financing: With financing, you’re making payments on your equipment, and at the end of your payment term, you own that equipment outright. Every finance payment builds equity, and in the end, you own that equipment free and clear.

With either option, you’re opening yourself to a host of benefits – and let’s face it, many of us would not have the financial means to fully furnish our new business without these options anyway! You can choose your terms and pay over time, giving you a larger sum of working capital while paying off your equipment. In the end, you’ll own your equipment (if you financed) and have paid it off in an economical way. J.D. Rothberg, co-owner of the small restaurant chain Wild Eggs, says, “When it comes to kitchen equipment, knowing how to make informed purchases that are both cost-effective and long-standing can help retain your working capital while reducing headaches in the future.”

Owning

We’d probably all like to purchase our equipment in full right from the start, as then we don’t have to worry about continual payments over time. New businesses are especially susceptible to the swings of economical changes, and when traffic is slow, some may struggle to pay a monthly payment towards their equipment. Owning equipment takes out those payments over time, freeing up your finances for focusing on growing your business.

The downside is that when you choose to purchase your equipment outright, you’re putting yourself at a greater risk of loss. If your business should falter or fail quickly, then you must find a way to sell all of your equipment in order to close up shop. You’ve invested a ton of starting capital into your equipment, and this leaves many with a smaller working budget at one of the most sensitive times for business: the first few opening years.

New vs. Used Equipment

Another point to take into consideration when you decide to lease, finance or own equipment is the state of the equipment itself, as many businesses choose to opt for used equipment from the get-go.

For those who are refurbishing old establishments like restaurants, many pieces of equipment can be transferred from the old kitchen and into the new with little to no effort. While this poses its own risks with life expectancy of the unit, cleanliness, and reliability, it can be a good option for some minor pieces of equipment that can also shave money off of your budget.

The benefits to new equipment are numerous, as you’re likely to have less maintenance right off the bat and will hopefully get more usable life out of your units as opposed to purchasing used equipment. Many pieces of new equipment come with warranties as well. Keep in mind that units that directly affect products (refrigeration units and car lifts, for example) put higher-grossed items at risk than the cost of the unit itself. Chad Coulter of LouVino wine bar says, “I am not willing to risk $5,000 of product when it only costs $2,500 to get a new unit.”

All things considered…

A combination of leasing, financing and owning your equipment is likely the key to successfully furnishing your new business. Take into consideration what equipment is available in new and used forms as well as what types of loans are available to you, as these options will all differ from business to business (and owner to owner).

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.