Lending Club Business Loans: Peer to Peer Business Solutions

Overall, Lending Club is a good option for small businesses with fair to better credit scores or businesses that need funds quickly.

Editor's Rating

4.5

Good for

  • Borrowers with fair or better credit scores
  • Businesses that need funds quickly
  • Businesses that want a monthly repayment schedule

Bad for

  • New businesses
  • Businesses in certain industries
  • Businesses in Iowa

Lending Club Business Loans: Peer to Peer Business Solutions

Overall, Lending Club is a good option for small businesses with fair to better credit scores or businesses that need funds quickly.

Good for

  • Borrowers with fair or better credit scores
  • Businesses that need funds quickly
  • Businesses that want a monthly repayment schedule

Bad for

  • New businesses
  • Businesses in certain industries
  • Businesses in Iowa

Editor's Rating

4.5

Lending Club Business Loans: Peer to Peer Business Solutions

Editor's Rating

4.5

Good for

  • Borrowers with fair or better credit scores
  • Businesses that need funds quickly
  • Businesses that want a monthly repayment schedule

Bad for

  • New businesses
  • Businesses in certain industries
  • Businesses in Iowa

Lending Club is a peer to peer marketplace that offers loans or lines of credit to residents in all U.S. states, except for Iowa. If your loan application has been rejected from banks or credit unions, Lending Club could be a good alternative to fulfill your small business financing needs. Like traditional lenders, Lending Club requires a minimum of two years in business to qualify for its loans or lines of credit, but businesses only need $75,000 in annual revenue to be eligible. In addition, businesses with strong credit scores can benefit from single digit APRs offered by this lender.

Lending Club Review: Should You Apply?

Overall, Lending Club is a good option for small businesses with fair to better credit scores or businesses that need funds quickly. Lending Club offers business loans and lines of credit up to $300,000 with terms up to five years. Using data released for 2015, we found that the average amount borrowed for small business loans was $16,297, and most businesses took out loans for either three or five years. APRs at Lending Club range between 7.77% and 35.11%. Although the upper range of these rates is higher than rates from traditional lenders, they are lower when compared to rates from other online lenders, where APRs can sometimes exceed 90%. Borrowers with good credit scores may be able to benefit from single digit APRs.

Good for...Bad for...
  • Businesses with fair or better credit scores
  • Businesses that need funds quickly
  • Businesses that want a monthly repayment schedule
  • New businesses
  • Businesses in certain industries (e.g., financial services)
  • Businesses in Iowa

To qualify, your business must be at least 2 years old with annual revenue of $75,000 and no recent tax liens or bankruptcies. The borrower must be a U.S. citizen who is at least 18 years old and owns at least 20% of the business. While there is no required credit score, Lending Club prefers if at least one owner has a credit score of 620 or above. Personal guarantees are also required. If you want to borrow over $100,000, you will need collateral. Even without a 620+ credit score, you may still qualify if your business is financially healthy and has strong sales.

If you make early payments, Lending Club is a good choice for your business. Borrowers who pay off their loans early can save money on interest since Lending Club doesn’t charge prepayment penalties or interest after a loan has been repaid.

Even though there are no prepayment penalties, there are other fees associated with Lending Club loans. An origination fee between 0.99-6.99% of the loan amount will be deducted from your funds before Lending Club deposits them into your account. There is also a $15 fee for unsuccessful payments or payments made by check. If you make a late payment, you will also have to pay the greater of $15 or 5% of the payment.

You can receive funds into your account anywhere from two to 14 days, depending on the amount you request. This is faster than typical processing times at a bank, but slower than at other online lenders. This lender is also a good option if you need to take out multiple loans. You can take out a second loan while still repaying your first if you have a record that proves you can make on-time payments.

Lending Club is also a great choice if you’re looking to build your business’ credit score. The lender will report the timeliness of your payments to Experian, which can help build your business credit. However, if you default on your loan, Lending Club will also report to Equifax.

Lending Club will never disclose your information to any third parties besides the credit reporting bureaus, and investors and borrowers will never discover each other’s identities. Lending Club does not lend to businesses in certain industries, including financial investing and gambling, and cannot provide loans to businesses in Iowa.

Lending Club Business Loans and Lines of Credit Features

Lending Club lists fixed interest rates between 5.9-25.9% on its website, and APRs range from 7.77% to 35.11%. From May 2015 to May 2016, the average fixed interest rate was 13.44%. Lending Club will only charge interest on the remaining loan balance, so paying early will save you on interest.

In October 2015, Lending Club launched a line of credit product for small businesses. It has the same requirements as the loan but allows for more flexibility since you can choose the amount to borrow as needed. The cost for this flexibility is a 1-2% fee every time you draw from your line.

How Do I Qualify for a Lending Club Loan or Line of Credit?

  • Minimum age of business: 2 years
  • Minimum annual revenue: $75,000
  • Preferred minimum credit score: 620
  • Borrower owns at least 20% of the business
  • Need a personal guarantee
  • Must be a U.S. citizen or permanent resident and at least 18 years old

Loan and Line Amount Range

$5,000 - $300,000

APR Range

7.77% - 35.11%

Fees

  • Origination fee: 0.99-6.99%(for loan)
  • Non-sufficient funds fee: $15
  • Payment by check fee: $15
  • Late payment fee: Higher of $15 or 5% of payment
  • Line fee: 1-2% of amount drawn (for lines of credit only)

Loan and Line Terms

  • Loan: 12 - 60 months
  • Line of credit: 25 months

Repayment Options

Monthly

Lending Club Application Process

Lending Club has an automated application process, using its technology platform to analyze business data and determine a business’s risk. With this information, the lender will give you a loan offer. Once you accept the offer, Lending Club will verify your identity, and you’ll need to provide business bank account statements for the past three months, an IRS Form 4506-T and business tax returns. During the application process, Lending Club will also conduct two credit checks: the first is a soft pull during the pre-qualification stage and the second is a hard pull at the end of the application.

Screenshot showing application process at LendingClub

WebBank, an FDIC-insured bank established in Salt Lake City, Utah, issues loans on behalf of Lending Club. Even though Lending Club is a marketplace lender, investors never directly invest in loan products. Instead, they buy Member Dependent Notes, and Lending Club acts as the middleman in the process of creating loan offers.

How Does Lending Club Compare to Other Online Lenders?

We compared to Lending Club loans and lines of credit to other top online lenders that may offer more lenient eligibility requirements, fewer fees or larger loan amounts.

Lending Club vs. Kabbage

If you can’t meet Lending Club’s requirements, Kabbage is a comparable choice for a line of credit up to $100,000. Kabbage only provides lines of credit up to $150,000 with 6- or 12-month terms. You won’t be able to save a significant amount on interest if you prepay your outstanding balance since the initial payments are higher than the remaining ones. However, Kabbage has fewer requirements than Lending Club as it only requires a business to be 1 year old with $50,000 in annual revenue to qualify for up to $100,000 (there is no minimum credit score required). To qualify for more, you'll need to be in business three years with $500,000 in annual revenue. If you need more than $100,000, we suggest a Lending Club line of credit.

Lending Club vs. OnDeck

If you own a newer business, OnDeck is a better option. OnDeck offer both business loans up to $500,000 and lines of credit up to $100,000. OnDeck requires businesses to be at least one year old with a minimum annual revenue of $100,000 and business owners to have a minimum credit score of 500. OnDeck requires either daily or weekly repayment, which could disrupt your business’ cash flow.

Lending Club vs. Prosper

If you’re looking to borrow a smaller amount through a personal loan, Prosper is a good choice. You can borrow an unsecured personal loan from Prosper to use for business needs up to $35,000. However, if you apply online for a business loan, Prosper will direct you to their partner, OnDeck.

Comments and Questions