Chapter 15
Peer-to-Peer Lending
Essential Idea: Go Online and Get Funding from Your Peers
Jennifer started her natural soap company in 2005 out of her home on a shoestring budget, a wing, and a few prayers. Within two years she was able to get her soaps into a few stores and created a nice online e-business profit center as well. The next year she was able to move her business into an office and adjacent warehouse. Things were looking up.
In 2008, a client asked her to create a shampoo line that it wanted to carry in their stores and privately brand. Thrilled, Jennifer immediately applied for a loan at a bank. But since this was right around the time that the economic tsunami hit, she was turned down. She tried again at her personal credit union, still to no avail. She lacked both the requisite great credit rating and necessary valuable collateral.
Jennifer did not know what to do but was afraid of missing out on the incredible business opportunity that was in front of her. Then she heard about a relatively recent phenomenon called peer-to-peer (P2P) lending, which is sort of like social networking for money. Businesses seeking funding can post their business opportunities online and then investors can peruse the offerings, find the loans they like, bid on them, and if they win, fund them.
Using online P2P lending, Jennifer was able to craft a pitch about the opportunity and post it on one of the P2P sites that have recently sprung up online. Within a few weeks she secured the ...
