Lending Club provides quick access to cash, as well as flexible repayment terms and an annual percentage rate as low as 8% — comparable to that of bank loans for good credit borrowers. It can be a good option for small businesses looking to expand or those who need cash quickly.
But the lender works best for those who have good personal credit and established companies with strong finances, which makes it a good choice for borrowers looking to refinance existing debt.
Lending Club offers business loans and lines of credit up to $300,000. Loans cannot be used for financial investing, gambling or adult businesses.
Reasons to use Lending Club
Less stringent requirements than banks: Lending Club requires a minimum credit score of 600, and collateral only for loans and lines of credit over $100,000. Whereas banks can require personal collateral, such as your home, Lending Club requires only a UCC-1 lien; this allows the company to seize certain business assets if you default. Approval is based on your annual revenue and financial strength.
Competitive rates: The APR for Lending Club business loans and lines of credit ranges from 8% to 35%. APR represents the true annual cost of borrowing, including interest and fees. That cost is a bit higher than that of traditional banks, especially on the upper end; banks often charge 6% to 10% APR, but it’s lower than many online lenders, which can have APRs as high as 108%.
Quick access to cash: You can complete Lending Club’s application online in five to 10 minutes to get prequalified, after which you get a quote with no effect on your credit score. (You’re required to submit documents (three months of business bank account statements, an IRS Form 4506-T, and business tax returns) only if you’ve been approved for financing.
You could be funded within two days, but it may take a week or two depending on the size of the loan and how quickly you submit documents.
No prepayment penalty: You won’t be charged a prepayment penalty for paying off your Lending Club term loan early, and it will also save you on interest. This isn’t always the case with online term loans, which may require you to pay the full fees and interest no matter when you finish payments.
Where Lending Club falls short
High rates if you have poor credit: Although APR for business loans and lines of credit at Lending Club starts at 8%, it can be as high as 35% if your credit and business revenue are less than stellar.
If Lending Club is the right fit, get started: