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 through 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.
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 businesses that are interested in loans through Lending Club are required to have been in business for at least 24 months, loans through their marketplace are best for small businesses looking to take the leap and expand or improve their operations, rather than obtain start-up capital. And since the funding time through Lending Club is relatively quick, the loans are good for companies that need to use those loan proceeds right away.
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:
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.
Based on you and your company’s risk factors, you can expect an interest rate between 5.9% and 25.9%.
Loan term lengths range between 1 and 5 years through Lending Club. A longer or shorter repayment term can mean lower or higher monthly payments, respectively.
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 $7 processing fee per check, subject to applicable law.)
Lending Club is an online marketplace that brings borrowers and investors together, charging fees to both when funding gets delivered. The origination fee is deducted from your loan proceeds and there’s no fee if your business doesn’t receive a loan. Lending Club never asks for upfront payment of any kind.
Some lenders charge a flat rate, but for Lending Club, the origination fee for small business loans 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 rates and fees.
This estimate will help you plan for the future of your financials.
These reminders are for terms of your loan like no hidden fees, prepayment penalties, and constant contact with a dedicated Client Advisor.
Another big reason customers choose Lending Club is that loans through their marketplace 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 access to 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.
After you accept your loan offer and Lending Club does a hard inquiry into your credit history, the funds will get deposited directly into the bank account you provided. 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 loan process through Lending Club 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.