A couple of years ago, Mark Hunter watched his savings disappear and credit card bills swell when Hollywood shut down during the writers’ strike. It took a while for Mark, a full time feature film writer, to return to work. In the meantime, his wife had given birth to their first child, and he was already $50,000 in debt from starting a film casting business. Instead of heading to the nearest bank to apply for a loan, Mark, 36, went online. He entered the relatively new world of “social lending”, in which borrowers get money directly from individuals, with an online company acting as an intermediary.
Small businesses & Entrepreneurs are finding it extremely tough to get loans from mainstream banks, despite the banks agreeing to help kick-start the economy by assisting fledgling firms. But while the banks are still closing their doors, some Entrepreneurs are finding the vital cash they need online through the growing phenomenon known as social lending or peer-to-peer lending.
Social Lending mixes the concepts of online social networking and eBay, and has found a niche given the current economic and credit crisis. The much more streamlined peer-to-peer lending process leads to borrowers generally getting better interest rates than they can from banks.
How it worked for Mark
Mark went online and signed up on websites such as Zopa, Lending Club, and Prosper and secured a $20,000 loan at a 15.76% interest rate, which is far better than the 18% rate he’d been quoted when applying for a bank loan a few years earlier. His loan is funded by 343 individual contributions.
The way to look at it is really taking out the middleman.