How the Efficient Funding Process at Lending Club Can Help

Lending Club might be best known for having a quick and easy application process. But small business owners don’t just want to apply for a loan—they want to receive one as well. Translating a final loan offer from Lending Club is the last step in the lending process, and one that requires some knowledge of the figures and fees they’ll be presented with.

The small business loan application process at Lending Club is fairly straightforward and only requires a few minutes. The next step, the underwriting process, is completed with the help of Lending Club’s Client Advisors. The advisors guide you through verifying your financial information via bank statements, tax returns and IRS forms, and deliver you to the last step.

Once you’ve selected an offer and been approved for it, you can start receiving the funds and constructing a plan for paying back the people investing in your loan on time—or early, if you choose to. Here’s a rundown of what your small business loan offer is and how best to approach it.

How can you use a Lending Club loan?

If you’re a small business owner applying for a loan, you probably know why you need a business loan. In fact, it’s part of the original online application you fill out when seeking pre-approval. But if you haven’t reviewed the first part of our series on working with Lending Club, here are some of the most common reasons small business owners look for additional funding: purchasing equipment or inventory, hiring new employees, consolidating debt, expanding locations, marketing, and emergency repairs.

Since Lending Club requires that the businesses they lend to have been in business for at least 24 months, their loans are best for small businesses looking to take the leap and expand or improve their operations, rather than obtain start-up capital. And since their funding time is relatively quick compared to traditional banks, the loans are good for companies that need to use those loan proceeds right away.

What’s in a Lending Club offer?

Your offer will show up on Lending Club’s online platform for your review. Here’s a breakdown of the most important information you’ll see:

Loan Amount

Naturally, you’ll want to look at the amount of money you’ve been offered—generally between $5,000 and $300,000, depending on your financials.

Interest Rate

Based on you and your company’s risk factors, you can expect an interest rate between 5.9% and 25.9%.

Loan Term

Loan term lengths range between 1 and 5 years at Lending Club. A longer or shorter repayment term can mean lower or higher monthly payments, respectively.

Monthly Payment

When applying for a loan through Lending Club, you’ll be asked to create an account through the platform’s online portal. There, you’re required to enter your banking information and set up automatic ACH payments from your bank account each month. (Technically you can also pay with a personal check, but that comes with a $15 processing fee per check.)

Origination Fee

This is the amount Lending Club charges for handling the paperwork and verifying your financial information.

Some lenders charge a flat rate, but for Lending Club, it ranges from 0.99% to 6.99% of the loan amount. Like your interest rate, your origination fee is based on your risk factor and gets accounted for in your annual percentage rate (or APR). Lending Club takes pride in being transparent about their APRs… Sadly, a practice not every lender follows.

Final Payment Date (Estimate)

This estimate will help you plan for the future of your financials.

Fees, Penalties, Etc.

These reminders are for terms of your loan like no hidden fees, prepayment penalties, and constant contact with a dedicated Client Advisor.

What else does the offer cover?

Another big reason customers choose Lending Club is that their loans are fully amortized, according to Linda Li, the company’s Director of Business Development and Marketing.

“If a small business owner decides to pay off the loan early, there’s no prepayment penalty,” says Li. “Also, because we offer a fully amortizing loan, if I have a 2 year term on a loan, but I want to pay it off after nine months, I wouldn’t have to pay any of the interest for the remaining 15 months. I only pay interest for those nine months. Whereas if you have a non-amortizing loan, you may have to pay a factor rate.”

Paying off a fully amortized loan on time, or early, has another perk: It’s good for your business credit score, which (like a personal credit score) is affected by late payments or defaults. Good business credit can set you up for more generous lending terms in the future.

When does Lending Club transfer your funds?

After you accept your loan offer and Lending Club does a hard inquiry into your credit history, they’ll use the banking information you provide to deposit the funds directly. Your Client Advisor will let you know the money is on its way, which typically takes 1 or 2 days to get deposited into your bank account—though larger amounts can take longer.

If at any time you need reminders as to the terms of your loan, like the amount disbursed to you or your interest rate, you can log into your Lending Club account to review details, as well as fill out the rest of your profile. (The site requests that you verify an email address and bank account, along with uploading your financial documents.)

At this point, your Lending Club loan process has been completed. Client Advisors are still on call at any time, but it’s now up to you to use your loan wisely to expand, improve or adjust your business accordingly and prepare to pay your loan back.

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from Fundera Ledger https://www.fundera.com/blog/2016/08/25/lending-club-part-3/