3 Good Options for Peer-to-Peer Business Lending

If you’ve shopped for small-business loans online, you’ve likely come across companies that specialize in peer-to-peer business lending, also known as marketplace lending or P2P lending. It’s still a relatively small slice of the small-business financing pie, but a brief by the U.S. Small Business Administration found that peer-to-peer business lending was increasing while bank lending continued to struggle after the recession.

Peer-to-peer lenders underwrite borrowers but don’t fund the loans directly — they’re an intermediary between you and the individual investor or institutional investor such as a hedge fund or investment bank. P2P marketplaces offer similar benefits to other online alternative lenders, including a shorter application process and quicker access to cash. Their loans, compared with those from traditional banks, tend to have higher annual percentage rates, so make sure you understand the total cost of borrowing before taking out a loan.

To help ease you down the P2P path and connect you with lenders that best fit your needs, we’ve compared three popular peer-to-peer options that offer small-business loans: Lending Club, Funding Circle and StreetShares.

For businesses that want more options: Lending Club

For established businesses looking to grow: Funding Circle

For newer businesses: StreetShares

For businesses that want more options: Lending Club

Lending Club is the only one of these peer-to-peer lenders that offers both a term loan and a line of credit, and its financing can be used for practically any business expense, including inventory, equipment, renovations or refinancing old debt.

Term loan: Loan amount: $5,000 to $100,000. APR: 8% to 32%. Loan term: 1 to 5 years. Approval time: Funding as fast as two days but typically in a week or two. Read our Lending Club review.

Get started at Lending Club Before you apply for a Lending Club loan, find out whether you meet the minimum qualifications. 600+ personal credit score 2+ years in business $75,000+ in annual revenue Own at least 20% of the business No recent bankruptcies or tax liens Provide collateral for loans and lines of credit of more than $100,000 Lending Club is currently unavailable to borrowers in Iowa and Idaho. Do I qualify? ▾

 

Line of credit: Loan amount: $5,000 to $300,000. APR: 8% to 32%. Loan term: Repaid up to 25 months. Approval time: Funding as fast as two days but typically in a week or two. Read our Lending Club review.

Get started at Lending Club Before you apply for a Lending Club line of credit, find out whether you meet the minimum qualifications. 600+ personal credit score 2+ years in business $75,000+ in annual revenue Own at least 20% of the business No recent bankruptcies or tax liens Provide collateral for loans and lines of credit of more than $100,000 Lending Club is currently unavailable to borrowers in Iowa and Idaho. Do I qualify? ▾

 

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For established businesses looking to grow: Funding Circle

To qualify for Funding Circle’s small-business loans, you need to have been in business for at least two years and profitable for at least one of those years. The loans can be used for growth expenses including equipment, renovations and refinancing debt.

Loan amount: $25,000 to $500,000. APR: 8% to 33%. Loan term: 1 to 5 years. Approval time: Pre-qualification in minutes, offer letter in 2 to 3 days, average of 10 days to funding. Read our Funding Circle review.

Get started at Funding Circle Before you apply for a Funding Circle loan, find out whether you meet the lender’s minimum qualifications. 620+ personal credit score 2+ years in business $150,000+ in annual revenue Profitable at least one of the last two years No bankruptcy in the last seven years Personal guarantee required Do I qualify? ▾

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For newer businesses: StreetShares

StreetShares offers a personalized twist on the P2P lending space. The company puts your loan request in front of lenders with similar backgrounds or interests. For instance, veteran-owned companies are promoted to investors who are also veterans. According to StreetShares, lending and borrowing within one’s “affinity group” helps decrease default rates and in turn lowers risk, which results in lower APRs for borrowers.

Loan amount: $2,000 to $100,000. APR: 8% to 40%. Loan term: 3 to 36 months. Approval time: 1 to 5 days. Read our StreetShares review.

Get started at StreetShares Before you apply for a StreetShares loan, find out whether you meet the lender’s minimum qualifications. 600+ personal credit score 1+ year in business $25,000+ in annual revenue No bankruptcies in the past three years StreetShares is currently unavailable to borrowers in North Dakota or South Dakota. Do I qualify? ▾

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Want to compare other small-business loans?

NerdWallet has come up with a list of the best small-business loans to meet your needs and goals. We gauged lender trustworthiness, market scope and user experience, among other factors, and arranged them by categories that include your revenue and how long you’ve been in business.
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Teddy Nykiel is a staff writer at NerdWallet, a personal finance website. Email teddy@nerdwallet.com. Twitter: @teddynykiel 
Jackie Zimmermann is a staff writer at NerdWallet. Email: jzimmermann@nerdwallet.com. Twitter: @jackie_zm

This post was updated June 9, 2016. It was originally published Sept. 29, 2015.