PayPal and Lending Club are the latest in a line of companies to announce their interest in providing small business loans.
Small business loans are notoriously difficult to obtain for the average entrepreneur. As such, there is a constant stream of new alternatives provided by companies that look to attract those businesses that don’t quality for a traditional bank loan. Lending Club and PayPal are that latest of these innovators, hoping to bring down the cost of borrowing for businesses that are struggling to find funding elsewhere. The former, a peer-to-peer lender, will be offering loans ranging from $15,000, whereas the latter has announced plans to expand its current business financing program.
Both of these companies are basing their latest ventures on the current popularity of online borrowing, or applying for loans online and without going through their local bank. Lending Club will be offering small business loans online that range from one to five years in length, and with interest rates starting at around 6%. That is opposed to the loans they currently offer, which are confined to institutional investors: hedge funds, insurance companies, etc. The typical origination fee to be paid by those seeking out a new small business loan through Lending Club will range from 1% to 5% on top of the interest payments.
PayPal, on the other hand, will be offering something that is much more specific and tailored to its own users. Obviously, they will be providing a service for those business owners who use its online system. Entrepreneurs are offered the opportunity to apply for working capital loans through a bank in Utah, to be repaid in small, daily installments. This is a convenient option for those who currently use PayPal for their business, but the company hopes it will attract even more new users to the payment system.