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Online Marketplace Lender

Online marketplace (peer-to-peer) lenders connect borrowers with institutional and individual investors. This type of loan is more akin to a bank loan with fixed, multi-year loan terms and APRs. These lenders strive for transparency in pricing and overall process, and generally offer a better deal for small businesses than MCAs and other online lenders.

There are 2 main types of marketplace loans:

Consumer loans for business use

  • Unsecured, no collateral required
  • Focus on personal finances and credit score
  • They don’t look into your business

Business loans

  • Secured, collateral required
  • Similar to a small business bank loan
  • They look into your business and personal finances

Leading lenders in this category include Lending Club, Funding Circle, Kiva and DealStruck.

Pros

  • Quick application, approval and delivery of funds usually in under a week
  • Fixed monthly payments
  • Better rates than a credit card, especially for those with good credit
  • Transparent pricing and process
  • Populist appeal: often other people lending to you, rather than a big bank
  • No prepayment fees

Cons

  • Higher interest rates than banks
  • Individual lenders have increasingly given way to hedge funds, big banks and other peer-to-peer platforms
  • Your account is turned over to collections if you default
  • Most online lenders require access to your bank account