LendingClub and Prosper are well-known peer-to-peer lenders in the market.
Prosper offers personal loans up to $35,000 that can be used for business purposes. LendingClub also offers personal loans that can be used for business. However, LendingClub launched a separate business loan platform in 2014 that offers business term loans.
We compare Prosper’s personal loan and LendingClub’s business products to help you find the right fit. It may come down to what you plan to do with the money. Consider the lenders’ qualifications, fees and other features before making your decision.
LendingClub is a good option if you:
- Need expansion or working capital
- Have an established business
LendingClub offers small-business loans of up to $300,000, which you can get much faster than at banks.
How to qualify: Besides minimum requirements for personal credit score, time in business and annual revenue, LendingClub requires a personal guarantee, which is a business loan agreement that puts you and your personal assets on the hook for payments if your business can’t make them.
The lender requires collateral on loans of $100,000 and over.
LendingClub business loans are unavailable to borrowers in Idaho and Iowa.
Costs: Even though LendingClub offers competitive annual percentage rates on its loans, at 9.8% to 35.7%, it’s still slightly more expensive than traditional bank loans and Small Business Administration loans.
Loans are repaid monthly and carry repayment terms of one to five years. You’re required to set up automatic monthly deductions — ACH payments — from your bank account. But you also have the option of paying by personal check, with a $15 processing fee per check.
There is no charge to repay the loan early. Paying off the loan on time should help you build good business credit, and the interest paid on your loan may be tax deductible, unlike with Prosper’s personal loan.
Time to funding: It takes typically a week to receive funding once an application is approved.
Personal loans: LendingClub also offers personal loans of up to $40,000 that can be used for business purposes. For more information on LendingClub’s personal loans, read our review.
Prosper is a good option if:
- You need financing to start a business
Small-business startup loans typically are very hard to qualify for, as most banks and online lenders require a solid business track record and collateral, such as real estate, to back the loan. Prosper’s loans, however, are based on your personal credit score and personal income, making it an option for startups that have no sales.
How to qualify: You’ll need good to strong personal credit and annual income to qualify. Prosper requires a minimum personal credit score of 640 and a debt-to-income ratio of 50% or less.
Prosper doesn’t require collateral on its loans, but borrowers must a personal guarantee, which means the company can go after your personal assets if you fail to repay the loan. Failure to repay is also likely to damage your personal credit score.
Prosper is not available to borrowers in Iowa, Maine, North Dakota and West Virginia.
Costs: The APRs on Prosper’s loans, 5.99% to 35.99%, is comparable with LendingClub’s business loans. Like LendingClub, Prosper doesn’t charge a prepayment penalty.
However, you can borrow only up to $35,000, which may not be enough for all startups. Since it’s technically a personal loan, your business won’t build any credit history, and the interest paid on the loan won’t be deductible on your business taxes.
Time to funding: It takes three to five days to receive your funds.
Find and compare small-business loans
NerdWallet has come up with 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.
Staff writer Jackie Zimmermann contributed to this story.
Updated Nov. 15, 2017.