Need a loan? Turn to your (online) peers

RennekeBrent Renneke, associate editor, Boating Industry – The worst of the recession has passed (or at least we hope so), and most marine businesses have welcomed the transition of thought from survival mode to a search for new ways to grow. But, much like surviving the recession, growing in today’s market is not easy.

According to a Pepperdine University study, more than 60 percent of small business’s loan applications are being denied. So, what do you do when you call on the bank that has always been there for you only to be turned down? It is a question many small companies in our industry and others are forced to answer.

One solution a growing number of organizations are now exploring is peer-to-peer (PtP) lending. For example, Lydia Hamilton-Monnie was turned down by three banks before raising $25,000 on the PtP site last year to open her plus-size women’s apparel store, according to this Wall Street Journal article.

WSJ reports that Hamilton-Monnie is not alone in turning to websites like, which have seen a “sharp upturn” in personal loans used for small businesses. And PtP sites are not only for start-ups. If you’re looking for funding to expand your showroom, launch a new product line or invest in a new software program, PtP lending could be the answer.

You may be skeptical about an option that seemingly turns your business into an eBay listing, which is a reasonable concern. However, websites like provide an attractive option that is both economical and safe. Here’s how they work. has you submit your personal information and acquires your credit score. This information is then used to score you as a borrower based on Prosper’s internal rating system. The interest rate paid on the loan and the closing fee is dependent on your assigned rating (ranging from an AA rating and a 7.43% APR to an E rating and a 31.99% APR).

In the listing, you explain why you want the loan and why your business is worthy of the investment. Multiple borrowers can then choose to lend as much as they want until your loan is fully funded. Once the money is deposited into your account, the site will take automatic monthly withdrawals for the amount you agreed upon in your listing and pay your lenders.

In the Wall Street Journal article, Hamilton-Monnie received a three-year loan (which was funded by nearly 1,000 lenders) at a fixed rate of 12 percent. The interest rate is higher than the current national average of 8.38 percent for loans under $100,000.  But, with banks apprehensive to make any loan they deem even the least risky, it is an option that deserves some consideration.

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