Lendingclub.com questions.

[killnfool]

I have some questions about lendingclub.com that I'm having trouble finding answers to so hopefully some people on here can help. Background info: I started my own business at the start of the year. I'm the sole proprietor but it's been doing very well. My fiance and I had aspirations to expand and add to the business' services by purchasing a small farm one day where we could also live and raise our son (born in November).

Well the perfect opportunity to do that now has fallen in our lap before we were planning on it. It's a lease to purchase farm that used to be the exact business type I have now in the perfect location. For a number of reasons I'm 99.99% sure that this property will be a successful business expansion for us. The problem is a conventional bank will most likely turn us down since we have no real collateral to speak of, and my business is relatively new (to a bank) and she's currently on unpaid maternity leave until about 3 more months when she goes back to her job. We rent currently and our cars are both about 2 years old so the blue book value vs what we owe still is about even on them. We both have great credit scores and reports, no lates or anything, scores in the 750-810 range for both of us last we checked.

We have savings but not enough for this opportunity and I'd rather not use credit cards that have a relatively high interest rate compared to a personal loan. So I started looking for solutions for start-up business loans in the current lending climate and heard about Lending Club and Prosper. So, my questions for Lending Club and/or Prosper: 1. Do they actually require all borrowers to fax in pay stubs, or just people with bad credit? I know they have the right to, but do they? She doesn't have any current because of the maternity leave and I don't either because I own my own business. She has her last tax return but it's 7+ months old by now (plus I'd prefer it to be under my name anyway) and the business just started this year so I don't have one for it yet either.

I guess I could fax checking account statements and matching invoices but that sounds like a real hassle. Does anybody who has borrowed know what kind of income verification methods they actually do, if any? 2. What are your experiences with getting a loan through these companies? Credit card companies CAN ask for all kinds of documents but never have for us, so we're curious how painful this process will be and if it's worth the inquiry ding. 3. I read that potential lenders ask questions to people asking for loans. Should I be expecting to be faxing documents and information to countless people asking? 4. Just any information in general on what they actually require from start to finish from borrowers, the length of time from start until you have the money, how it reports on credit reports and which CRA's, etc. Thanks a lot

[RobertEG]

I cant speak as to requirements for such business loans, but offer a comment on credit reporting.

As defined in FCRA 603(d), consumer reports are restricted to "credit or insurance to be used primarily for personal, family, or household purposes."

Will the credit obligation be established through the business, or will it be personal?

[killnfool]

Personal loan, for a business startup. I'll need to create a new companny (LLC). I'll need a few employees and such that require a new organization, plus a new name to better describe the new business. The new business doesn't exist yet, but I believe most places would require at least 3 years to establish credit worthiness for a business entity without a personal backing anyway.

[llecs]

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@killnfool wrote:

So, my questions for Lending Club and/or Prosper: 1. Do they actually require all borrowers to fax in pay stubs, or just people with bad credit? I know they have the right to, but do they? She doesn't have any current because of the maternity leave and I don't either because I own my own business. She has her last tax return but it's 7+ months old by now (plus I'd prefer it to be under my name anyway) and the business just started this year so I don't have one for it yet either.

I guess I could fax checking account statements and matching invoices but that sounds like a real hassle. Does anybody who has borrowed know what kind of income verification methods they actually do, if any? 2. What are your experiences with getting a loan through these companies? Credit card companies CAN ask for all kinds of documents but never have for us, so we're curious how painful this process will be and if it's worth the inquiry ding. 3. I read that potential lenders ask questions to people asking for loans. Should I be expecting to be faxing documents and information to countless people asking? 4. Just any information in general on what they actually require from start to finish from borrowers, the length of time from start until you have the money, how it reports on credit reports and which CRA's, etc. Thanks a lot

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I'm both a borrower and a lender on Lending Club, and was approved (but declined to accept) a loan once on Prosper, and I'll answer these questions based on my experiences:

1) Yes, they ask you to send in paystubs. Lenders on LC can't see that information, but LC has their own staff that reviews your income, calls your employer, looks at tax docs, etc. When I, as a lender, looking for loans (not anymore!) I can't see your name or other demogrpahic info, but can see whether or not LC reviewed your info. Without that review, even if the loan is 100% funded, it's my understanding it'll be rejected and the money held in escrow will be returned to me..

If you can't prove income, I think it'll be impossible. You can get around it though. Under maternity leave, isn't she paid? If so, you have proof of payment for that. If not paid, then she wouldn't apply anyway. I don't think you can have joint apps. Only individual apps. For yours, pay yourself. Use a program like Quickbooks to cut official looking checks and pay taxes on your income and there's your proof. I'm self-employed too and I know it can be a challenge.

2) Mine was easy. It was $15k. Funded fairly quickly. The more info you provide, without being wordy, the easier it is to get a loan.

3) At one point with LC, the lenders could customize their questions to you. That's not the case. I know when I borrowed, I was receiving spam from some of the lenders. They didn't have my e-mail, but they were spamming me publicly when they should have been asking questions. We can't ask or tell you to fax in stuff. The underwriters at LC do that. LC has about a dozen pre-formed questions we can ask.

4) Again, more info you volunteer, the faster it goes. If there's any hesitation, then lenders move to another loan. I know I was doing background research on borrowers I wanted to lend money to. We can see who you work for. I've seen some made up companies or companies where the person lied they work for. Be honest and don't be shy about saying you are self-employed. In fact, be sure to volunteer that.

LC will soft pull your TU report. In fact, they'll look at FICO. Specifically, the will pull the same version of TU FICO (TU98) as on here. There won't be a hard inquiry (assuming they didn't change anything). Once it reports, it'll report on EX and TU only. It'll report as an installment loan.

[killnfool]

Thanks. I can prove my income, just not sure if it will be good enough for them currently, and it will be a time consuming thing depending on how much they ask for. My current business is completely service based, no inventory or supplies, so I've just been using spreadsheets since it's pretty simplistic. I'm planning on using quickbooks for the new business as well as their payroll and credit card processing equipment, but right now that would be overkill. Haha, even Amex and our car loans never asked for any proof oddly enough and they have credit limits way higher than what we would apply for. My fiance is on unpaid maternity leave. She works for a university that lets her take up to a year, but unpaid. She only got paid for the first 6 weeks because she had paid for a short term disability insurance policy. We had quite a bit of money saved up so she'd be able to spend the 1st year at home with him. Maternity laws in the USA are greatly lacking compared to other modern countries.

I'm pretty certain we could get it funded on the site pretty easily. My existing client base will transfer over, the owner of the property is willing to give us his client list, we have an agreement in place for a partnership with a non-profit down the street if the business goes through, and also already have people lined up to lease other parts of the property we wouldn't be using. The few rinky dink competitors in the area all have wait lists of at least 3 weeks the demand in the area is so high. The property has been sitting there for 2 years so it needs to be cleaned up and minor repairs done, but it's setup and has most of the equipment already in place. The current owner's mother used to own/run it until she died a few years ago. He inherited it but lives too far away with his own career and life, so the business and property where just boarded up over night. I've seen the numbers that the mother's business did there and they were great. She was only offering a fraction of what we'd offer as well so I'm pretty enthusiastic. It's not something we were looking to do quite yet but it's the perfect situation. I can use our current available credit and savings, but I'd rather not if possible. The rates would be higher and the CC companies might freak out if they saw the utilization suddenly spike.

How long ago was the last time you borrowed/lent on lending club? Would I be able to include my current business' website in the listing for lenders to be able to view? Or is the background checking you said you did against the rules technically?

Also, do they only offer auto-withdraws from your bank account as a payment option? I hate giving places permission to do that. I've had "computer bugs" take out multiple payments in a month before. Not to mention we have several bank accounts that we use so I like having the control of one time payments.

[webhopper]

Have you looked at a farm loan from USDA? Great rates. I know a guy who bought a ranch recently with a rate as low as 3.2%

[webhopper]

Also there is farm grant money out there. I would look at farm loans and grants before LC

[killnfool]

Yeah but they won't work for a number of reasons, mainly time constraints and we're looking to lease to purchase mainly to make 100% sure that the business works on the property without getting stuck in a mortgage, but maybe at the time of purchase. Our state also has some loan programs that could help then. You never know what complications might pop up with getting rezoned, utility systems, etc. though so we actually like the lease to purchase route better in this circumstance.

[webhopper]

So you're looking at getting an unsecured loan to pay down a deposit or down payment?  I'm not sure I understand

[killnfool]

No, it's more for general startup costs like equipment, cleaning and repair/renovation, application and zoning fees, signage and advertising, etc. those kinds of things.