Business Advice for Arizona

By JANE J. KIM,  Wall Street Journal

When Jeff Walsh wanted to refinance the small-business loan on his coin laundry, he didn’t want to take a chance that his bank would reject his application. “I just bought a house in 2007 and was a little nervous about what the bank would say about my debt-to-income ratio.”

Instead, the 31-year-old from Schaumburg, Ill., recently borrowed $22,500 on Prosper.com, an online lending network that matches individual borrowers and lenders. The interest rate on Mr. Walsh’s loan: 10.25% — several percentage points below what he says he would have had to pay at a bank.

As the credit crisis spurs traditional lenders to tighten credit standards and raise fees, more small-business owners and entrepreneurs are turning to so-called person-to-person lending networks — with names like Prosper, LendingClub.com and Zopa.com — to help keep their businesses going. The unsecured loans are tiny, usually no more than $25,000. But borrowers say they are able to get loans more quickly and with less paperwork than at a bank. And people with good credit are able to lock in lower rates — often 8% to 12% — than they would otherwise have to pay on credit cards or unsecured bank loans.

Person-to-person lending is a small but fast-growing corner of the Web economy. New sites are jumping in, including Virgin Money USA, majority-owned by Sir Richard Branson’s Virgin Group PLC. Roughly $100 million in new P-to-P loans was issued in the U.S. last year, a number that is expected to jump tenfold by 2010, according to Online Banking Report. Recently, some larger financial institutions have begun to take notice of P-to-P lending, saying that offering loans through the sites is a way to bring in more deposits and reach more consumers.

And, I would be remiss if I didn’t remind you that Arizona Business Funding is an alternative source of funds, if your bank can’t make the loan.

Here’s how it works:

• Client talks to IFG
• Completes paperwork
• Client notifies his customer to pay IFG
• IFG purchases invoice
• 4-5 days to fund first invoice
• 24 hours to fund second invoice
• Cost depends on time invoice is outstanding

Customer comes back to your bank for traditional lending when he has “outgrown” IFG because he has never left your bank.

Posted by prector under small business funding |