Entrepreneurial

Are peer-to-peer loans a good small business Idea?

– Cynthia Hsu is a contributor to FindLaw’s Free Enterprise blog. FindLaw is a Thomson Reuters publication. This article originally appeared here. –

Have you tried to get funding for your small business, only to get met with denials from banks and other big lenders? Peer-to-peer loans, or person-to-person loans, are a new and rapidly growing area where businesses can get some starter funding.

If you’ve heard of microfinance, the idea behind peer-to-peer loans is fairly similar. A large network of “lenders” come together to help borrowers raise money for various purposes.

Hundreds of lenders can ban together to help raise money. Lenders can put up between $25 to $1,000, reports The Wall Street Journal.

Popular sites for peer-to-peer lending include Prosper Marketplace and Lending Club. While most of the peer-to-peer loans on the site are for lenders who are looking to reduce their credit card debt, there is a growing contingent of small business owners, frustrated with the loan process with banks, who are also turning to the site, reports The Wall Street Journal.

Peer-to-peer lender Prosper resumes service after SEC nod

lendingLet the lending begin. Prosper, a popular Web portal that facilitates peer-to-peer loans, announced on Tuesday that it has been given the go-ahead by federal regulators to resume its lending platform in several U.S. states after wrapping up a detailed registration process with the Securities and Exchange Commission (SEC).

The SEC’s approval ends a nine-month enforced hiatus for the company and should come as welcome news to small businesses and entrepreneurs, many of whom are still struggling to find loans amid tight credit markets.

Prosper is now cleared to let lenders in 14 states and borrowers in all but a few use their online auction platform to buy loans and request to borrow money. The approval allows lenders in California, Colorado, Delaware, Georgia, Illinois, Minnesota, Montana, Nevada, New York, South Carolina, South Dakota, Utah, Wisconsin and Wyoming to use Prosper, and more states will gain access soon, the company said in a press release.

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