The following excerpt is from Entrepreneur’s book Finance Your Business. Buy it now from Amazon | Barnes & Noble | iTunes
If you’re investigating online loans, take a look at two of the more unusual (yet legitimate) online lenders, peer-to-peer site Lendio and online pawnbroker Pawngo.
Matching small businesses with creditors: Lendio
When the economy tanked in 2008, enrollment in Olya Losina’s fledgling art school began to wane. Marketing the San Diego-based Losina Art Center to a new crop of students required cash the painter and her husband/business partner, Bill Beatty, didn’t have. So in late 2011, they created a profile on Lendio, a free online service that matches small businesses with lenders. Within minutes, they had a customized list of half a dozen potential lenders offering the five-figure, short-term financing they were seeking, and within days, they received the cash they needed.
Lendio CEO and co-founder Brock Blake says 300 U.S. lending institutions and nearly 1,300 individual lenders participate in the automated web platform, from banks and credit unions offering traditional, long-term loans to fast-cash alternative financiers such as peer-to-peer lenders and merchant cash-advance providers. Each month, roughly 10,000 business owners come to the site looking for financing, 60 to 70 percent of whom are approved for a loan, Blake says.
In a conversation with Entrepreneur, Losina sketched out how Lendio and her specific lender, OnDeck, helped keep her art school afloat:
Entrepreneur: Why did you go online for your cash infusion?
Losina: When the economy took a hit, our students pulled back. They just couldn’t spend any money, and it left us struggling. We couldn’t get ahead enough to do any marketing to expand. We needed to take out a small loan to build the business. The banks didn’t want to talk to us; we’d destroyed our personal credit opening the business. We’re renting our place, so we don’t have equity. What interested us about Lendio is that they didn’t look at equity; they looked at the cash flow. And we could show that.
What was it like working with Lendio?
It was a simple process. We filled out a quick questionnaire, and Lendio got us in touch with qualified lenders without us having to research and qualify them ourselves. This definitely helped save us time. We scheduled a follow-up conversation with our Lendio representative, who gave us tips on how to evaluate lenders. Then we spoke to a few of them. And we took time making sure OnDeck was legitimate.
What did OnDeck ask of you?
They weren’t looking at our personal credit score; they were looking at our cash flow and…