Alternative Lending: Funding Circle vs. Lending Club
When dealing with large banks, getting the funds your business needs can be a long and arduous process. Over the last several years, many alternative online lending companies have entered the scene to make the process of getting a loan easier and faster. Two of the largest alternative lenders, Funding Circle and Lending Club, offer similar low interest rates and high loan amounts.
When comparing companies, the question becomes: which one is right for you and your business? We put the companies side by side so you can see for yourself.
Funding circle offers an alternative to to traditional banks for business loans. Funding Circle features peer to peer loans up to $500,000 with repayment terms from 1 to 5 years. These of loans are good for financially stable companies or franchises that want to expand. To date, Funding Circle has provided over $2 billion in loans to help small businesses.
How To Qualify
To qualify with Funding Circle, borrowers must have a minimum credit score of 620, the business must have been in operation for at least two years, and the revenue must be at least $150,000 per year. Additionally, a borrower must not have filed for bankruptcy within the last 7 years and must provide a personal guarantee.
The online application only takes about 10 minutes. On the same day that you submit the application, you will hear back from a loan specialist who will ask you to submit documents for verification of the application. Once you are approved (usually within 72 hours), you will receive the funding in 10 to 14 days.
What It Costs
Funding Circle is transparent about its interest rate information. According to the company’s website, interest rates range from 5.49% to 18.29%. If a business decided to take out a $100,000 loan over a 12 month term, the borrower would pay just over $0.18 on the dollar. Funding Circle also charges a one-time origination fee from 0.99% to 4.99%. However, there are no prepayment penalties which can help borrowers save on interest should they choose to repay the loan early.
- Must have strong credit and revenue
- Loans up to $500,000
- Quick and easy online application
Check out our Full Review of Funding Circle.
Lending Club is a peer to peer lending company that offers business loans from $15,000 to $300,000 and lines of credit from $5,000 to $300,000. Loans from Lending Club are typically for well established businesses with good finances who need quick capital or want to expand. Since its launch in 2007, Lending Club has issued over $16 million in funds.
How To Qualify
In order to qualify for a loan from Lending Club, the business must have been in operation for at least two years and have at least $75,000 in annual sales. Additionally, the borrower must own at least 20% of the company, have no recent bankruptcies or liens, and have a personal credit score of at least 600.
The online application can be submitted in 5 to 10 minutes for pre-qualification. After submission, you will receive a quote for a loan. Once you are approved for the loan, you will be required to submit documentation for verification. The funds may be delivered to you in as little as two days or as many as 14.
What It Costs
Lending Club charges interest rates ranging from 5.9% to 21.6%. For a $100,000 loan over a 12-month term, the APR amounts to $0.32 on the dollar. These rates are slightly below the industry average. Like Funding Circle, Lending Club charges a one-time origination fee ranging anywhere from 0.99% to 5.99%. This origination fee is deducted from the loan principal.
- Must have fair to strong personal credit
- Loans up to $300,000
- Fast online application and approval time
Check out our Full Review of Lending Club.
The Bottom Line
These two alternative lending companies are quite similar on many points. Both lenders offer terms of 1 to 5 years, and they both charge similar origination fees. However, Funding Circle has the advantage with lower interest rates and a higher maximum loan amount. At the end of the day, your approval, rates, and terms will largely depend on the decision of the underwriting team of either company. It may be a good decision to get quotes from several different companies.
Check out our Top Rated Business Loans Companies.