The Intersection of Crowdfunding and Traditional Debt Financing

“Anyone who lives within their means suffers from a lack of imagination.” – Oscar Wilde via Wisebread.com

Last week I wrote about crowdfunding and the many different platforms available for funding. I decided to explore the site Lending Club. I’ve since learned, this type of funding is called person-to-person or P2P lending. Think of it as crowdfunding meets an angel investing pool. I spent some time researching their model and writing some brief instructions on the steps to become approved with Lending Club. Here’s my screencast evaluation of their financing option:

And some more in-depth info on the steps for applying with Lending Club:

Now, let’s follow the (hypothetic) steps to apply from the borrower’s perspective:

Determine your eligibility

Click on this link for a dashboard of steps to follow (with access to the electronic platform):

https://help.lendingclub.com/hc/en-us/categories/202523217-Small-Business

1. Start by exploring the “How to Apply” button
2. Check your rate
3. Choose your offer, if given
4. Watch as people invest in your loan
5. Funding is sent directly to your bank account
6. Set-up monthly auto-draft payments
7. Pay off your loan early, if wanted, with no early pay-off penalty

 

Success and Key Questions (6/30/18 Stats):

https://www.lendingclub.com/info/statistics.action

• How much does the Crowdfunding source take as a fee? Varies depending on the terms of the loan
• How long will the process take until the money arrives and can be used? About 7 days for approval and a few more days for funds to be deposited (depending on bank rules). Need to use their check-list to avoid delays.
• Restrictions? Varies depending on the terms of the loan
• Reporting requirements? Lending Club wants to see your IRS tax return and requires a 4506-T form to do so. Borrowers would report funds as part of their tax return.