LendingClub Business Loans Review: Affordable Rates from an Often-Troubled Lender

Thinking about getting a small-business loan from LendingClub? It has a lot to offer small businesses, with its low APRs and relatively low application requirements.

But LendingClub isn’t all sunshine and low rates—you need to consider its sketchy past and its evolving lending model too.

In this LendingClub review, we’ll look at both sides: what makes LendingClub a good choice for small-business lending and what you absolutely must know before you apply.

LendingClub has one clear advantage over most online lenders: It offers low starting interest rates on its term loans―almost as low as the ones you’d find at a big bank. (We’ll give you specific numbers in the next section.) 

But LendingClub also has a clear advantage over traditional lenders: it has much more relaxed borrower requirements. 

While banks might ask for several years in business and more than $20,000 in revenue, LendingClub asks for just one year in business and $50,000 in revenue. And while you need about a 600 credit score to get approved for one of its business loans, that’s not a hard requirement.

In other words, LendingClub offers surprisingly affordable yet surprisingly accessible business loans. On paper, it sounds like a business owner’s dream. (Well, unless you have a very young business.)

The catch? LendingClub itself. LendingClub has had a bumpy few years, from firing a CEO in 2016 to getting hit with a government lawsuit in 2018 to deciding to abandon the peer-to-peer lending model that made it famous in 2020. 

This lender has changed a lot over the past few years, and it’s announced big changes ahead. That means that the LendingClub we’re reviewing today may not look like the LendingClub of 2022.

Maybe that uncertainty doesn’t bother you. You just want the great rates. In that case, great! We’ll tell you all about those rates (and all the other business loan details) in the next section.

But if you’re looking for a lender to form a long-term relationship with, then LendingClub’s colorful history might give you pause. We’ll give you some more context later to help you decide. (Or you can always go with a lender from our list of the best small-business loans instead.)

LendingClub offers just one small-business financing product: a term loan. Now, that term loan can be a one-year $5,000 loan or a five-year $500,000 loan (depending on what you get approved for), so it does offer some flexibility. (But you’re looking for lots of loan options, LendingClub isn’t the lender for you.)

As we already said, the real selling point for LendingClub’s term loan is the interest rates. They start at less than 5% and go up to the mid-20s. (Again, that’s pretty comparable to many banks.)

All LendingClub loans do come with a flat 5.99% origination fee. (A little on the high end, but not outrageous.) 

So what does that mean for your APR (annual percentage rate, or the cost of a loan over one year)? Expect a range between 12.15% and 29.97%, depending on your interest rate and your repayment term. That’s a much lower range than you’ll find from many online lenders (who often have APR starting in the 30s.)

As an added bonus, LendingClub uses a monthly payment schedule, so you don’t have to worry about the weekly or even daily payment schedules many online lenders use.

Interested? We’ll tell you how to apply in just a minute. But first, we need to clarify some things about how LendingClub (currently) works.

As we noted earlier, LendingClub has been through some big changes. So to make sure you understand how it works, we’re going to briefly explain how it used to work, how it works now, and how things might change in the future.

LendingClub used to operate on a peer-to-peer (P2P) lending model, which meant that it helped potential borrowers connect with individual investors. When we first reviewed LendingClub, it still worked this way.

Since then, LendingClub has slowed down its P2P lending quite a bit. In fact, it no longer offers P2P business loans at all. Instead, LendingClub now offers business loans in partnership with another lender, Opportunity Fund.

In fact, while you can start a loan application on LendingClub’s website, you ultimately apply and get funded through Opportunity Fund.

So why not apply with Opportunity Fund directly? Well, it seems that you can get larger loan amounts through LendingClub’s partnership than through Opportunity Fund directly ($500,000 vs. $250,000). Based on that, you can assume other loan details are a little different too. 

Plus, LendingClub’s website offers a lot more transparency into both borrower requirements and loan information than Opportunity Fund’s does.

That said, you probably shouldn’t count on LendingClub’s partnership with Opportunity Fund lasting forever. 

In February 2020, LendingClub announced that it was buying Radius Bank. And in October 2020, it announced it was shutting down all peer-to-peer activity (including P2P personal loans) by the end of the year. Its plan? “[T]o offer a full suite of products as a bank,” according to its SEC filing.

We don’t know exactly what that means for LendingClub’s business loans yet. But given that many banks offer business loans, and LendingClub is becoming a bank, we won’t be surprised if LendingClub starts offering its own direct loans.

At any rate, we’ll keep an eye on LendingClub, and we’ll update our review as more changes happen.

Now that you understand you’re technically getting a loan from Opportunity Fund (in partnership with LendingClub), let’s talk about how the application process works.

You’ll start your application on LendingClub’s website by filling in a form that asks for your email address, how much money you want, and why you want a loan.

At that point, you’ll have to fill out a relatively brief application on Opportunity Fund’s site that will ask for more details about you, your business, and your finances.

At the end of the application—which should only take a few minutes—LendingClub will decide if you qualify. If you do, it will show you loan offers, which might have different terms or rates. You can choose the loan offer that sounds best to you.

Now, this initial application is really a prequalification process. Once you qualify, you have to upload documentation to finish your application. Opportunity Fund will give you a list of the exact documents you need to upload, but you can expect the usual:

• Bank statements
• Business tax returns
• Proof of income
• Proof of your identity
• Proof of your business’s identity and address

Once you submit everything, Opportunity Fund will review your application. You should get an answer in a few days (at most). Assuming everything checks out, you’ll get funds deposited into your bank account within one to three days.

If any of that sounds confusing, don’t worry—Opportunity Fund will assign you a dedicated client advisor to help you through your loan application process.

Note that LendingClub doesn’t specify how long it takes to get approved or funded. It just says that you can get funding “fast.” Based on our knowledge of online lenders, we suspect that means you get approved and funded within a few days―but probably not the same day.

But before you rush out to apply, let's talk about LendingClub's customer reviews.

LendingClub fought the law and the law . . . well, we don’t know if the law has won yet. Either way, LendingClub has some big legal problems you should know about.

Here’s what happened: Back in 2018, the Federal Trade Commission (FTC) filed formal charges against LendingClub.² Why? You might want to get a drink—it’s pretty involved.

First, the FTC says LendingClub charges its customers hidden fees—big ones too—despite claiming transparency about its fees. As it turns out, the FTC doesn’t like false promises. But when the FTC told LendingClub to stop hiding fees or promising that it had no hidden fees, LendingClub doubled down. It kept charging those fees while also bragging about its lack of hidden fees even more than before.

Not great, obviously. But that’s not all. The FTC says that LendingClub lied to would-be borrowers about their loan getting funded. It told them that investors had backed their loans so they’d get funded—except that was a straight-up lie. This deceit kept borrowers from applying to places that would actually give them a loan because they kept waiting on their LendingClub loan.

Plus (this just gets worse and worse, doesn’t it?), the FTC claims that LendingClub had some super-shady payment withdrawal practices. For example, LendingClub took double payments from many accounts. It also kept taking automatic payments from customers' accounts even after they’d paid off their balances or canceled autopayments.

Oh, and LendingClub didn’t get customers to sign its information-sharing policy, which is a big legal no-no.

As of December 2020, the lawsuit is ongoing. So LendingClub has some continuing legal troubles. Should that matter to you?

Honestly, that’s your call. If you’d rather avoid borrowing from a company currently embroiled in a lawsuit, we don’t blame you. But on the other hand, things seem to be business as usual for LendingClub right now. (Well, aside from the fact that it's changing its entire business model.) If you like everything else you’ve seen about LendingClub, then a lawsuit might not be the end of the world.

Mostly, you need to be informed. Make sure, if you borrow from LendingClub, that you completely understand all your fees and rates. Likewise, you might want to keep a close eye on your bank account to ensure LendingClub doesn’t double dip.

Now you know the deal with LendingClub, but we still have a few more things to talk about.

Yes, LendingClub is legitimate. As we noted above, tons of customers have used and loved LendingClub. Now, LendingClub does have a colorful past that we think borrowers should know about (as we discussed earlier), but it’s a real lender that offers real loans. It’s not a scam.

LendingClub loans under $100,000 are unsecured and do not require any kind of collateral. Loans of $100,000 or more require a blanket lien on your business assets as collateral.

All LendingClub loans do require a personal guarantee—basically, if you end up defaulting on the loan, your personal assets are on the line. That might sound scary, but personal guarantees are pretty standard. As long as you don’t default, you don’t need to worry about it.

LendingClub used to claim that its entire application process—from submitting your initial application to getting funding—took an average of seven days. Now that it offers business loans in partnership with Opportunity Fund, LendingClub doesn't specify a normal timeline.

We’d guess it still takes a few days. But fortunately, you have more control than you might think. If you’re prepared and prompt with all the required documentation (like bank statements and tax returns), you can probably speed up your approval and funding time. If you dillydally on documentation, however, you’ll drag out the application process. Your choice.

In addition to small-business loans, LendingClub has personal loans and auto refinancing loans. Note, though, that as of December 2020, you can no longer use LendingClub’s peer-to-peer marketplace as an investor rather than a borrower.

No, LendingClub is not going out of business. It is, as we discussed above, changing its whole model and becoming a bank―no more P2P loans. But LendingClub will still be around in some form or another.

In theory, we like LendingClub business loans a lot. They have low starting rates, decently long repayment terms, and monthly payment schedules. Plus, they’re easier to qualify for than similar bank loans.

Still, we have some concerns about both LendingClub’s past and its future. With a history of sketchy lending practices and big changes ahead, LendingClub hasn’t proven itself to be the most reliable lender.

So should you borrow from LendingClub? Well, we’ve told you what you need to know. Now you have to weigh those factors for yourself. 

Miss LendingClub’s P2P lending? You might want to consider crowdfunding instead. Check out our guide to crowdfunding vs. P2P lending to see how they compare.

Disclaimer

At Business.org, our research is meant to offer general product and service recommendations. We don't guarantee that our suggestions will work best for each individual or business, so consider your unique needs when choosing products and services.