Lending Club Is Now Offering Business Loans

You likely know Lending Club is a peer-to-peer lending site that offers personal loans to individuals as well as the chance for personal investors to invest by lending money to individuals.

Now, however, Lending Club is expanding their services and offering business loans.  This is of particular interest if you own a business.

If You’re Looking to Lend Money to a Business

If you’re already investing in Lending Club, you may want to lend money to a business as well.  However, ordinary investors cannot yet do that.  “For now. . .the program is limited to institutional investors such as hedge funds, insurance companies, and family offices that manage wealth for the very rich, but eventually the company plans to let anyone invest” (Bloomberg Businessweek).

How to Qualify for a Lending Club Business Loan

Business funding can often be very difficult to get, so Lending Club’s business loans offer businesses a nice alternative to traditional funding options.  In order to qualify for a loan, a business must meet these minimums:

  • At least $75k in annual sales,
  • a personal guarantor by at least one 20% or greater owner of the company, and
  • the guarantor’s personal credit must be at least “Fair”

What Are The Loan Details?

Businesses that apply for a loan can borrow up to $100,000 for 1 to 5 year terms.

The interest rate is fixed for the life of the loan and can be as low as 5.9% to as high as 29.9%.  The rate your business gets depends on a variety of factors including:

  • how long your business has been established,
  • how financially strong your business is, and
  • the credit worthiness of the business, among other factors.

“Lending Club Chief Executive Officer Renaud Laplanche says the average interest rate will be 12.5 percent” (Bloomberg Businessweek).

Lending Club offers a “check your rate” button on their website.  Simply enter how much you need and what you plan to use it for and then you’ll be taken to a form to fill out that will check your potential rate.  (Filling out this form does not affect your credit score in any way.)

One of the best perks of the Lending Club Business Loan is that you can pay it off early with no pre-payment penalties.

The Fine Details

When borrowing, checking the fine print is always best.  There are a few other fees attached to the loan.

Borrower Origination Fee

The origination fee can range from 1 to 6%.  That money will be taken off the top of the loan.  If you borrow $10,000, for instance, and your origination fee is 3%, you will receive $9,700 because the $300 origination fee is taken off immediately.

The borrower must pay the origination fee to cover the cost of issuing the loans as well as the screening process.

Unsuccessful Payment Fee

If your automatic payment fails, you’ll be charged $15.

Late Payment Fee

A borrower is given a 15 day grace period.  If your payment is later than that, you will be charged either $15 or 5% of the unpaid monthly payment, whichever is greater.

Check Processing Fee

If you opt to pay via check, you’ll be charged a $15 fee.  If you use direct debit, you are not charged a fee.

Funding your business can be difficult, especially if you go through traditional channels.  Lending Club is expanding their business to offer business loans, which is one more way you can potentially find money for your business, whether you’re using it for debt consolidation, marketing, or another purpose.

If you have a business, would you look at Lending Club as a potential lender?  If you invest in Lending Club, would you like to invest in their new business loans?

5 Ways a Better Credit Score Leads to Better Finances

BookkeepingEverybody knows that you want to have the best credit score you can.  Why?  Because the better your credit score, the better the rates you can get on your loans, of course!  But, did you know that there are other reasons to try and improve your credit score?  In fact, here’s five ways that having a better credit score can lead to better finances.

  1. More money.  This is the obvious one.  A better credit score leads to better rates on loans (see above), and better rates lead to less interest paid over the life of the loan.  And less interest paid leads to…  (wait for it) a  better bank balance!
  2. Better rentals.  It’s a sad fact that many landlords are doing credit checks on prospective tenants these days.  They’ve got assets to protect, so it’s a smart move for them, but the fact that there are so many landlords out there getting burned that it’s become necessary is sad.  But, having a good credit score can help make sure you don’t get turned down for that great apartment down by the beach!
  3. Quicker payoff.  This one goes really closely with the first point.  With those lower rates, and lessened interest also comes the ability to pay the loan off quicker.  And, of course, a quicker payoff means a much better financial situation.  Especially if you avoid any new loans afterward.
  4. Any loan you like.  If you must loan money, at least do it smartly.  With the current state of affairs, you can’t just walk in and get a loan that has a pulse as it’s only requirement.  In fact, many banks and credit unions are cutting way back on their sub-prime lending for anything.  (P.S. the term “sub-prime” doesn’t just apply to mortgage loans) If you have poor credit, it’s much more likely, today, that you’ll get turned down for a loan altogether.  Better credit means that if you really need a loan, you probably can have one.
  5. Less fees.  We all hate fees.  Well, all of us except the financial institutions.  A growing number of them are making a growing amount of their revenues from fees.  And many have moved to an account structure that is based off of risk.  And risk is determined by credit score.  A lower credit score could mean an account with higher fees, or with monthly fees that some accounts might not have, while a higher credit score might qualify you for a different account without those fees.

So, you see, having a good credit score can really send your finances in the right direction.  And, having a bad credit score can really send them into the dumps in a hurry too!  Unless you’re very dedicated to the extreme frugaler lifestyle, and never plan on really using money, it still pays to have a good credit score.  It doesn’t take much to build it, and you might be glad you did someday.

photo credit: o5com

We’re All Financial Optimists, and It’s Hurting Our Bottom Line

Are you an optimist or a pessimist?

Do you see the glass half full or half empty?

No matter your answer, I have a secret for you.  We’re all financial optimists, and it’s hurting our bottom line.

Don’t believe me?

I didn’t expect you to.

You might say, my finances are a mess.  I have debt; I’ve pulled money out of my 401(k).  I’m definitely not a financial optimist.

But, I’d argue that you are.  When you look into the future, you don’t see bankruptcy and years of the same financial mess.  You likely think that eventually things will get better, and you make decisions based on that.

If your financial situation isn’t that bad, you’re probably even more of a financial optimist.  Say you’re getting ready to buy a house, and you know that your limit is a house that costs $250,000.

You find the perfect house.  The problem?  It costs $270,000.  Still, you decide to buy it, even though you know you can’t afford it.

What do you tell yourself?

  • It’s in a good neighborhood, and the house will appreciate.
  • In just a few years, inflation will make your now nearly unmanageable payment much smaller, and paying it won’t be such a hardship.
  • You’re just starting your career, and in a few years you’ll be making a lot more money, so the house payment will be easier to afford.

Sound familiar?

Just a few years ago, millions of people thought their houses would appreciate, and then they were caught up in the housing crisis.

Houses don’t always appreciate, but we optimistically think ours will.

Sure inflation will make your house payment more manageable, but you’ll have other expenses in a few years that you’re not thinking of because you’re thinking optimistically.  In a few years, maybe you’ll have a few kids to fill that house, and they’ll cost a lot of money.  You’ll be spending more on food, health care, transportation and day care, just to name a few things.  Suddenly, having a manageable house payment doesn’t really make a financial difference because you’ll have so many other expenses competing for your money.

If you’re lucky, your career will soar, and you’ll make more money, but that doesn’t always happen.  You might get laid off and have to find a job that pays less.  You or your spouse may decide to quit so one person can stay home with the kids.  Or, maybe you do get raises, but at the same time your health care premiums go up every year so your pay essentially stays stagnant.

Of course, thinking optimistically is beneficial to our mental health, but for our financial health, recognize that thinking optimistically hurts your bottom line.  When you get ready to make a large purchase like a house or a car, don’t forecast into the future.  Determine if you can afford the item now, in your current situation.  If you can, you’ll tie up less of your future money and benefit from this.  If you can’t, it’s best to pass it up.