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How to Get a Small Business Loan.
What are They?
Provider of short-term personal loans and 1 to 5 year small business loans.
How popular is it?
Lending Club has facilitated over $7.6 billion in primarily personal loans since its founding in 2006. Their business loan division is new.
Who will qualify for a loan?
More than 2 years in business, approximately 620 or higher credit score, and at least $75,000 in annual sales revenue.
Who are they right for?
Businesses that need fast access to large loan amounts and cannot qualify for a traditional bank or SBA loan.
Financial investing, gambling, and adult businesses.
Personal Guarantee required?
No, but for loans over $100,000, Lending Club places a lien on your liquid business assets.
The approval and funding process typically takes around 7 days.
Where do they lend?
All states except Iowa, Idaho, Maine, North Dakota, and Nebraska.
How much do they lend?
From $15,000 to $300,000.
For how long?
1 year to 5 years.
Cost/Interest rate of loan?
The effective Annual Percentage Rate averages around 14 % to 19 % (see cost section for more details).
How do payments work?
Fixed automatic deduction from your business account each month.
Your most recent business tax returns, 3 previous months of bank statements, IRS form 4506t (this verifies that your tax returns were filed). Additional documents, such as W-2 forms, may be needed.
Lending Club is a good option for businesses that may not qualify for traditional loans and need to borrow $300,000 or less with a quick turnaround.
Among the lenders we reviewed, Lending Club is most similar to Funding Circle. Both are peer to peer providers that connect investors with borrowers and that lend relatively large loan amounts with short repayment terms. However, Lending Club stands out for a couple reasons as more borrower friendly. Its annual revenue requirements are half of what Funding Circle requires. Also, Lending Club places a lien on liquid business assets only for loans over $100,000, while Funding Circle requires a more onerous blanket lien for all loans.
Another benefit of Lending Club is the ability to have two business loans at once if you need to borrow more than $300,000. Once you establish a good track record of payments on your first loan, you can qualify for a second loan.
On the downside, one frequent complaint from applicants is that Lending Club requires too much paperwork, even more so than a bank. However, you can get funded from Lending Club within 7 days, compared to the weeks or months the process can take at a bank.
The APR on Lending Club loans range from 14% to 19%. Again, this is very similar to Funding Circle’s APRs. They are lower than what other alternative lenders (OnDeck, CAN Capital, and Kabbage) charge, but higher than what SBA lenders and banks charge.
- Personal Credit Score: Approximately 620.
- Years in Business: At least 2 years.
- Revenues: At least $75,000 in annual sales revenue.
- Industry Exclusions: Financial investing, gambling, and adult businesses.
- Other Qualifications:
- Business owner(s) must be a U.S. citizen or permanent resident, or hold a valid long term visa.
- Business owner(s) must be at least 18 years old.
- No unpaid liens or recent bankruptcies.
Collateral Required? Specific collateral is not required, but Lending Club places a lien on your liquid business assets (e.g. cash, inventory, accounts receivable) for loans above $100,000. If you do not pay back the loan, Lending Club can sell off those assets to satisfy the loan.
Does the loan require a personal guarantee – From who? Yes. Lending Club requires a personal guarantee from any individual who owns 20 % or more of the business. This means you are personally responsible for the loan, even if your business closes down. If you don’t pay the loan back, Lending Club can take your personal assets (e.g. your home or car). Your personal credit score will only be affected if you default on the loan.
Upfront Fees: Origination fee of 0.99% to 5.99 % of the loan (can’t exceed $9000). This is taken out when the loan is made. As the screenshot below demonstrates, your origination fee will be lower if you qualify for a low interest rate. This is charged by Lending Club’s lending partner WebBank.
Servicing Fees: None.
Are interest rates variable? No. Interest rates are fixed and range from 5.9 % to 25.9 %.
How Loan Costs Work With Lending Club
A loan from Lending Club comprises two costs:
- Origination fee between 0.99 % to 5.99 % of the loan amount. Exact amount depends on the interest rate that you qualify for, as shown in the table below.
- Annual interest rate charged by Lending Club between 5.9 % to 25.9 %.
We used the calculator below to convert the cost of a Lending Club loan into an Annual Percentage Rate (APR). The APR takes fees and interest into account to give you the total cost of the loan over one year, expressed as a percentage. Having an APR makes it easy to compare Lending Club with other loan providers.
Here is what the effective APR and monthly payments would be a $100,000 loan from Lending Club, depending on different payoff times. When we spoke to a rep from Lending Club, they wouldn’t specify an average interest rate or origination fee. Therefore, for these calculations, we assume an interest rate of 12.9 % and an origination fee of 2.99 %.
- $100,000 for 1 year = 18.72 % APR ($8927/month)
- $100,000 for 2 years = 16 % APR ($4749(/month)
- $100,000 for 3 years = 15.04 % APR ($3365/month)
- $100,000 for 4 years = 14.55 % APR ($2678/month)
- $100,000 for 5 years = 14.25 % APR ($2270/month)
Using a midpoint interest rate, the APR for Lending Club loans fluctuates from 14 % to 19 % depending on the length of the loan. In general, a longer loan term results in a lower annual interest rate and lower monthly payments. However, you also end up paying back a larger amount if you borrow for a longer time. You have to repay $136,200 if you borrow $100,000 for 5 years in this example; you have to repay only $107,124 if you borrow for 1 year.
The cost of a Lending Club loan is very comparable to the cost of a Funding Circle loan. The APR s is lower than what alternative lenders (OnDeck, CAN Capital, and Kabbage) charge, but higher than what banks and SBA lenders charge.
You can see if you prequalify for a Lending Club loan online in about five minutes. You will be instantly presented with multiple loan offers. You can compare different loan amounts up to the amount you qualify for, different repayment times, and different interest rates. Once you select the loan offer that is most appropriate for you, you submit an online application. After you submit your application, the underwriting team may ask you to upload documents, such as tax returns and bank statements, online. Finally, your loan request will be made available to investors who may decide to lend you money (investors cannot view your personal information). If your loan is accepted, the funds will be deposited in your account within a few days.
The entire process from pre-approval to getting the funds typically takes about 7 days. This is a bit faster than Funding Circle, where the entire process takes 10-12 business days.
What documents need to be provided? Your most recent business tax returns, 3 previous months of bank statements, IRS form 4506t (this verifies that your tax returns were filed).
Additional documents may be needed. The complete list of documents that is needed to process your loan application will appear in your Lending Club online account summary.
Do they need online access to any systems – Quickbooks, PayPal, bank accounts? Yes, Lending Club needs access to your business bank account.
Is there a credit report pull? If so, at what point in the process? Yes. There are two credit pulls, one during the initial pre-qualification questionnaire and one for closed loans. The first pull won’t affect your credit score. The second one is a “hard inquiry,” so it can temporarily hurt your credit score. Both your personal and business credit history are checked.
Does Lending Club report to the credit bureaus? Yes. Lending Club reports both timely and untimely payments to the business credit bureaus. They only report to the personal credit bureaus if the loan goes into default.
What credit reporting service do they use? Experian (for business credit) and Equifax (for personal credit).
Loan Sizes and Terms
What is the minimum / maximum length of loan? The minimum loan term is 1 year, and the maximum loan term is 5 years.
What is the minimum / maximum amount of the loan? The minimum loan amount is $15,000, and the maximum loan amount is $300,000.
Payment Methods & Schedule
- Schedule of Payments: Monthly.
- Payment Initiation: Lending Club automatically deducts your fixed monthly payment from your bank account. You can also elect to pay by check, but there is a $15 processing fee for each check payment.
- Method of Payment: ACH.
- Penalties for Missing Payments: After a 15-day grace period, Lending Club charges the greater of $15 or 5 % of the due amount.
- What Happens on Pre-Payment? There is no pre-payment penalty if you want to pay off the loan early. You save money by borrowing for less time. For more information on this, click here.
Lending Club has phone and email support for borrowers and applicants. There is a comprehensive FAQ page as well.
US-based or International? US-based. Lending Club is located in San Francisco, CA.
Support Hours: Monday – Friday 8 AM – 5 PM PST.
Other Lending Products
Before they began providing small business loans, Lending Club rose to prominence as a personal loan lender. They offer personal loans of 3 to 5 years between $1,000 to $35,000. The APRs on the personal loans range from 6.48 % to 28.69 %. If you’re a startup, you can apply for a personal loan and use the funds to grow your business. Check out our guide on taking out a personal peer to peer loan for business use.
Need some money for your business? Click here to get our FREE Guide:
How to Get a Small Business Loan.
The Bottom Line
You may want to consider Lending Club if your business cannot qualify for traditional loans and you need to borrow $300,000 or less fairly quickly.
Lending Club is pretty similar to Funding Circle, another business loan provider that we reviewed. Both are peer to peer providers that connect investors with borrowers and that lend relatively large loan amounts with short repayment terms.
Ultimately, Lending Club is more borrower friendly than Funding Circle. Its annual revenue requirement is half of what Funding Circle requires. In addition, Lending Club places a lien on liquid business assets for large loans, whereas Funding Circle places a blanket lien on all your business assets for loans of all sizes. If you need to borrow more than $300,000, Lending Club allows you to have two loans at at time.
One drawback of Lending Club is that they can require a lot of paperwork. Some borrowers say that the paperwork required was more than what a bank would want to see.
In terms of cost, Lending Club lies somewhere in the middle: its annual interest rates are costlier than what a bank or SBA lender would charge but cheaper than what many other online lenders charge.