My bank no longer loans money to businesses. However they do offer coffee and cookies in their lobby. Fair trade wouldn’t you say?
Since the crash last Fall, businesses have been hurt by a lack of new lending from banks and the cutting of their existing credit lines. But, good old American ingenuity is filling the money gap with peer to peer lending (P2P). Sites such as Prosper (which I have used) offer high interest to lenders. Borrowers have no choice but to get the funds they need where they can (heck, its better than a payday loan!)
P2P loans are now about $3B and expect to double next year. At Prosper, the average investor makes about $3500 in loans at just over 9% interest (not bad, considering the average long term CD now pays 3%). The risk of not payment is still higher than normal. Even at these rates, borrowers still out number lenders.
What has been your experience wth P2P loans?
