LendingClub Business Loans Review: Peer-to-Peer Lending with a Reputation Problem

Thinking about getting a 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—there’s a pretty big reputation problem too.

In this 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 is best for businesses wanting decent APRs through peer-to-peer lending

Lending Club has attractive APRs that almost match those of traditional lenders, but its application requirements are far more accessible. At a minimum, you need the following:

• 12 months of business operations
• $50,000 in annual revenue
• 20% ownership of the business
• Fair personal credit score
• No recent bankruptcies
• US citizenship or permanent residency

Of course, to get the best rates, you’ll want to meet more than the minimum standards. And business owners with brand-new businesses will need to look elsewhere to find startup loans.

Even so, LendingClub’s accessible requirements make it possible for many business owners to benefit from its peer-to-peer lending platform. But what does that mean anyway?

LendingClub’s peer-to-peer lending model

LendingClub operates in the peer-to-peer lending world, along with other online lenders, like Prosper and Funding Circle.

That means that LendingClub is not actually a lender itself; instead, it’s one of a growing number of peer-to-peer lending platforms that connect potential borrowers (that’s you) with investors. So just like the name suggests, peer-to-peer loans get funded by your peers rather than banks. LendingClub just facilitates that process.

LendingClub’s peer-to-peer lending has some notable advantages. Peer-to-peer lenders—including LendingClub—often have lower application requirements than traditional banks while offering relatively competitive rates.

On the other hand, the rates at peer-to-peer lenders like LendingClub can get pretty high. So if you have bad credit, you shouldn’t expect to get a great deal from peer-to-peer loans.

Also, peer-to-peer lending platforms haven’t been regulated super well. That means borrowers and investors both take a bit of risk. Remember this—it will be important later.

But for now, let’s look at what LendingClub can do for small-business owners like you.

LendingClub’s business loan

LendingClub offers just one small-business financing product: a term loan. Of course, that one term loan can be a one-year $10,000 loan or a five-year $300,000 loan, so it can definitely adapt to meet your business’s particular needs.

But aside from meeting your needs, LendingClub’s term loan has some features you’ll simply want. For example, you’ll like the low starting APRs offered by LendingClub; its rates start lower than most online lenders and just a little higher than many traditional financial institutions.

You may also like that LendingClub business loans use monthly payments, unlike many alternative lenders that insist on weekly payments.

Sounds like a good deal, right? It certainly can be, but not always. LendingClub’s APRs range from the wow-this-is-great 9.77% to the I-might-want-to-shop-around 35.71%. Your specific APR will depend on your creditworthiness as well as your loan amount and term.

You’ll also need to consider LendingClub’s origination fees, which have a similarly large range of 1.99% to 8.99%. Again, the upper end of that range might give you pause.

Despite those potentially high APRs and origination fees, LendingClub can save you money in other ways. It has no prepayment penalties. And since your fixed-rate interest gets calculated based on your remaining principal, early repayment can save you money on interest.

Interested? Then let’s talk about how to get a loan with LendingClub.

The LendingClub application process

While LendingClub’s application isn’t the fastest we’ve seen, you should be able to get funding relatively quickly—and get an answer even faster.

It all starts with a brief online application, which gives you a quote. You’ll give LendingClub some basic information about you, your business, and your finances. LendingClub will then do a soft credit check. Don’t worry; it won’t affect your credit score.

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.

Now, this initial application is really a prequalification process. Once you qualify, you have to upload documentation to finish your application. LendingClub 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, LendingClub 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 that sounds confusing, don’t worry—LendingClub will assign you a dedicated client advisor to help you through your loan application process.

Again, LendingClub’s weeklong application won’t win any awards for speed, but at least you won’t be wasting your time. The initial prequalification process should—in theory— prevent you from applying for a loan you’ll never qualify for. After all, if you’re going to spend time finding and scanning documents, you want it to be worth your while.

But before you rush out to apply, we need to talk about some potential issues.

What customers say about LendingClub

As we’ve explained, there’s a lot to like about LendingClub. But based on LendingClub’s customer reviews, unfortunately, there’s also a lot to dislike.

Most online lending companies that we’ve reviewed have had good Trustpilot scores of at least an 8 out of 10. But LendingClub’s TrustScore? Just a 4.7 out of 10.

Now, that (admittedly bad) score comes from just 13 reviews, so you might want to take the small sample size into account and take that score with a grain of salt.

But it’s not just Trustpilot. LendingClub has a B rating with the Better Business Bureau, due to government action against LendingClub (we’ll come back to that in a moment). And customer ratings on the BBB give LendingClub just two out of five stars.

So what are people complaining about? Well, many customers dislike the APR LendingClub offered them. Other customers complain about deceptive approval practices, saying they got prequalified for a loan only to later have their loan denied or changed. And finally, customers complain that LendingClub’s customer service is unhelpful and hard to get ahold of in the first place.

That being said, the reviews aren’t all bad. Some customers really like LendingClub. They praise its fast, straightforward lending process. You’ll even find customers who say that LendingClub extended a loan to them when no one else would.

You can decide for yourself which reviews you trust. Before you do, we should talk about LendingClub’s big, government-shaped problem.

LendingClub vs. the Federal Trade Commission

Remember when we said peer-to-peer loans come with a certain amount of risk because of a lack of regulation and oversight? Yeah, well, LendingClub is the poster child for that risk. You see, 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: the Federal Trade Commission (FTC) filed formal charges against LendingClub.¹ Why? You might want to get a drink—it’s pretty involved.

The FTC’s complaint

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.

What this means for you

So LendingClub has some 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. 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.

FAQs about LendingClub

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

Does LendingClub require collateral?

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.

How long does LendingClub’s application process take?

LendingClub claims that its entire application process—from submitting your initial application to getting funding—takes an average of seven days.

Ultimately, the answer depends on you. If you quickly upload all the documents LendingClub asks for, you can definitely get funded within that seven-day window. If you dillydally on documentation, however, you’ll drag out the application process. Your choice.

What else does LendingClub offer?

In addition to small-business loans, LendingClub has personal loans and auto refinancing loans. And of course, you can use LendingClub’s peer-to-peer marketplace as an investor rather than a borrower.

The takeaway

LendingClub has much to recommend: low starting rates, reasonable terms, and monthly payments, for starters. Just make sure you keep negative reviews and a pending lawsuit in mind.

If you decide to go with LendingClub, enjoy those rates and other benefits—but watch your account closely.

If you’d rather see some other options, you can check out our list of the best business loans to find an alternative.

Disclaimers

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.

Sources

1. Federal Trade Commission, “FTC Charges Lending Club with Deceiving Consumers”