If you’re in the market for a small-business loan, a traditional bank isn’t your only option. Although bank loans offer low interest rates, approval is tough, and you’ll likely have to wait several months to get funded. Online lenders Lending Club and Fundation both promise fast access to cash and flexible repayment terms, and likely offer a better shot at approval than banks.
Here’s a comparison of Fundation and Lending Club to give you an idea of which lender may be the better fit for your small business financing needs.
|$5,000 to $300,000||$20,000 to $500,000|
|9.8% to 35.7%||8% to 30%
| One to five years for term loans||One to four years
|• At least one year in business|
• $50,000+ annual revenue
• 600+ credit score
Jump to more Lending Club details
|• At least two years in business
• $100,000+ annual revenue
• 600+ credit score
• At least three employees.
Jump to more Fundation details
Should you choose Lending Club or Fundation?
When to go with Lending Club: Lending Club is a good option if you need to borrow up to $300,000 for an expansion, such as buying equipment or hiring workers, or working capital for day-to-day operations. You’ll need a personal credit score of at least 500, minimum annual revenue of $50,000 and one or more years of business history to qualify.
Lending Club also is a good choice for business owners who prefer to make monthly payments rather than the more frequent payments that Fundation requires. Lending Club loans typically are funded within one to two weeks, longer than it takes with Fundation.
When to go with Fundation: Fundation is the better choice if your business needs to borrow more than $300,000 to fund an expansion or if you need cash fast. To qualify, you must have a minimum credit score of 600, at least $100,000 in annual revenue, at least three employees and a minimum of two years in business. Fundation is also a good choice if you don’t mind more frequent loan payments, as the lender requires biweekly payments instead of monthly payments. Funding is faster than with Lending Club; borrowers could get access to cash in as little as three to five days.
Lending Club is a good option if:
- You need money for an expansion or working capital, and need to borrow up to $300,000.
- You prefer monthly loan payments.
Lending Club provides business term loans that range from $5,000 to $300,000, repaid monthly over one to five years. (Read our Lending Club review.)
How to qualify: Lending Club requires a minimum of one year in business and at least $50,000 in annual revenue. You must own at least 20% of the business and have a minimum personal credit score of 600, with no recent bankruptcies or tax liens.
For loans under $100,000, Lending Club doesn’t require collateral, although you’ll still have to personally guarantee the loan. This means failure to repay puts your personal assets at risk. If you borrow over $100,000, Lending Club takes a UCC-1 lien on your business’s liquid assets, which may include inventory, cash and accounts receivables. (Note: Lending Club is currently unavailable to borrowers in Iowa and Idaho.)
Speed: You can complete the application online in just five to 10 minutes, and you’re required to submit business documents only if you’re been approved for financing. Funding can be as fast as two days, but borrowers typically receive funding within a week or two.
The costs: Annual percentage rates on Lending Club term loans range from 9.8% to 35.7%. The APR represents the annual cost of the loan with all fees and interest, including a one-time origination fee on term loans that ranges from 1.99% to 6.99%.
Your APR will depend on many factors, including the loan size and repayment length, as well as your credit score, time in business and annual revenue. There are no fees or penalties for early repayment, so you can pay off the loan at any time to reduce your interest costs.
Best uses: Lending Club’s term loans are best suited for a one-time investment where you know exactly how much cash you’ll need, such as buying new equipment or opening a new location. You may also use Lending Club’s business loans for working capital.
If Lending Club’s business loan sounds like a good fit:
Fundation is a good option if:
- You need to borrow up to $500,000 for a business expansion.
- You have strong business finances and don’t mind frequent loan payments.
Fundation offers small-business loans ranging from $20,000 to $500,000, with loan terms from one to four years. (Read our Fundation review).
How to qualify: You must have been in business two or more years, have at least three employees (including yourself), and earn an annual revenue of at least $100,000. You also need a personal credit score of 600 or better with no recent bankruptcies, and you must be willing to sign a personal guarantee.
Fundation also requires a form of collateral called a UCC-1 blanket lien on your business assets — real estate, equipment, inventory — which gives the lender first priority over those assets if you can’t repay the loan.
Speed: You can complete the application in less than 10 minutes and could see funding in as little as three to five days. However, approval typically takes three to five days, and money usually can be accessed within two to five days of loan approval. You’ll likely need to supply two years of business tax returns and three months of bank statements after an initial review of your online application, according to the company.
The costs: Fundation loan APRs range from 8% to 30%, which includes all fees and interest. Your APR will depend on factors including your business’s revenue and profitability, your personal and business credit history, and cash flow and debts.
Loans are repaid biweekly, and there are no early repayment penalties. As with Lending Club, you can make additional payments to save money on interest.
Best uses: Fundation is a good option if you need a longer-term loan for expansion.
Find and compare the best small-business loans
If you want to check out other loan options, NerdWallet has created a list of the best small-business loans to meet your needs and goals. We gauged lender trustworthiness and user experience, among other factors, and arranged them by categories that include your revenue and how long you’ve been in business.
Updated Nov. 15, 2017.