Phenomenal or Painful? Our Lending Club Review Helps You Decide

Lending Club online lender is an online lending company and credit marketplace for investors. They offer term loans. We look at the specifics and drill down into the details in this Lending Club review.

Lending Club: Background

Lending Club is located online here: https://www.lendingclub.com/. Their physical address is:

Dept. 34268

P.O. Box 39000

San Francisco, CA 94139.

You can call them at: (888) 596-3157. Their contact page is here: https://www.lendingclub.com/company/contact-us?first=true. You can also email them via their contact form, here: https://help.lendingclub.com/hc/en-us/requests/new?ticket_form_id=134447. They have been in business since 2007.

Lending Club works as a kind of credit marketplace. Investors can place as little as an initial deposit of one cent into an account and then invest in a variety of loans. The rate of return for investors historically has averaged between 4.95% and 7.10%.

Term Loans

Lending Club offers business loans from $5,000 to $300,000. Their loan terms range from one to five years. Your business can get a quote in less than 5 minutes. Your funds will be available in as little as 48 hours if you are approved. Your company’s annual revenue has to be $75,000 or more. Your company has to be in business for 2 years or more. You need to have a personal FICO score of 620 or better.

Fees

Lending Club has rates of 5.99% to 29.99%, at a fixed monthly rate. They charge total annualized rates starting at 8%. There are no prepayment penalties.

Advantages

Advantages are that the annual revenue requirement is not too high and the funds are available quickly. Another advantage is that there are no penalties for prepayment and the company is transparent about its rates.

Lending Club: Disadvantages

Disadvantages include their fairly high maximum rates. Another disadvantage is their relatively high personal FICO credit score requirement.

Lending Club: Upshot

Companies that will do the best with Lending Club are captained by entrepreneurs with decent personal credit scores and the ability to pay back their debts on time or early. These companies need to have some history but they do not have to be runaway successes.

For companies run by entrepreneurs with bad personal credit scores, or that cannot pay their debts on time, Lending Club will not be as good a choice as building business credit or obtaining unsecured business financing or even cash flow financing.

Building Business Credit as an Alternative to Lending Club

Business credit is credit in a business’s name. It doesn’t tie to an owner’s consumer credit, not even if the owner is a sole proprietor and the sole employee of the corporation.

As such, a business owner’s business and individual credit scores can be very different.

The Benefits

Given that corporate credit is independent from individual, it helps to safeguard an entrepreneur’s personal assets, in case of a lawsuit or business bankruptcy.

Also, with two distinct credit scores, an entrepreneur can get two different cards from the same merchant. This effectively doubles buying power.

Another benefit is that even startup businesses can do this. Visiting a bank for a business loan can be a recipe for disappointment. But building small business credit, when done correctly, is a plan for success.

Individual credit scores rely on payments but also additional factors like credit utilization percentages. But for small business credit, the scores actually only depend on if a corporation pays its debts in a timely manner.

The Process

Establishing small business credit is a process, and it does not occur automatically. A small business will need to proactively work to establish small business credit. Nonetheless, it can be done easily and quickly, and it is much more rapid than developing personal credit scores.

Merchants are a big aspect of this process.

Performing the steps out of sequence will lead to repetitive rejections. Nobody can start at the top with company credit. For example, you can’t start with store or cash credit from your bank. If you do you’ll get a denial 100% of the time.

Business Credibility

A business needs to be authentic to credit issuers and vendors. Hence, a company will need a professional-looking web site and e-mail address, with website hosting from a merchant like GoDaddy.

Plus business phone and fax numbers should have a listing on ListYourself.net.

At the same time the business phone number should be toll-free (800 exchange or similar).

A business will also need a bank account dedicated strictly to it, and it needs to have all of the licenses essential for operating. These licenses all have to be in the perfect, correct name of the small business, with the same business address and telephone numbers.

So keep in mind that this means not just state licenses, but potentially also city licenses.

Dealing with the Internal Revenue Service

Visit the IRS web site and obtain an EIN for the small business. They’re free. Pick a business entity like corporation, LLC, etc.

A business can get started as a sole proprietor. But they will most likely want to change to a sort of corporation or partnership to limit risk and optimize tax benefits.

A business entity will matter when it involves tax obligations and liability in the event of a lawsuit. A sole proprietorship means the owner is it when it comes to liability and taxes. No one else is responsible.

Sole Proprietors Take Note

If you operate a small business as a sole proprietor, then at the very least be sure to file for a DBA (‘doing business as’) status.

If you do not, then your personal name is the same as the company name. Because of this, you can end up being directly liable for all corporate financial obligations.

Also, per the Internal Revenue Service, with this structure there is a 1 in 7 chance of an IRS audit. There is a 1 in 50 probability for corporations! Avoid confusion and considerably lower the odds of an Internal Revenue Service audit as well.

Starting the Business Credit Reporting Process

Begin at the D&B web site and obtain a free DUNS number. A DUNS number is how D&B gets a small business in their system, to generate a PAYDEX score. If there is no DUNS number, then there is no record and no PAYDEX score.

Once in D&B’s system, search Equifax and Experian’s web sites for the company. You can do this at https://oldcs.creditsuite.com/reports/. If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process.

By doing this, Experian and Equifax will have activity to report on.

Trade Lines

First you ought to establish trade lines that report. This is also called vendor accounts. Then you’ll have an established credit profile, and you’ll get a business credit score.

And with an established business credit profile and score you can begin obtaining revolving store and cash credit.

These kinds of accounts tend to be for the things bought all the time, like coffee, shipping boxes, outdoor work wear, ink and toner, and office furniture.

But first of all, what is trade credit? These trade lines are credit issuers who will give you initial credit when you have none now. Terms are typically Net 30, instead of revolving.

So if you get an approval for $1,000 in vendor credit and use all of it, you must pay that money back in a set term, such as within 30 days on a Net 30 account.

Details

Net 30 accounts have to be paid in full within 30 days. 60 accounts have to be paid fully within 60 days. Unlike with revolving accounts, you have a set time when you must pay back what you borrowed or the credit you used.

To launch your business credit profile the proper way, you need to get approval for vendor accounts that report to the business credit reporting bureaus. As soon as that’s done, you can then use the credit.

Then pay back what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

Vendor Credit Helps!

Not every vendor can help like true starter credit can. These are merchants that will grant an approval with negligible effort. You also want them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

But you may have to apply more than one time to these vendors, and you may need to purchase some things you don’t really need, to verify you are reliable and will pay on time. Consider donating nonessential items to charity.

Revolving Store Credit

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, move to revolving store credit. These are companies like Office Depot and Staples. These companies are likelier to have goods you need.

Use the corporation’s EIN on these credit applications.

One instance is Lowe’s. They report to D&B, Equifax and Business Experian. They need to see a DUNS and a PAYDEX score of 78 or higher.

Fleet Credit

Are there 8 to 10 accounts reporting? Then progress to fleet credit. These are service providers like BP and Conoco. Use this credit to purchase, fix, and maintain vehicles. Make sure to apply using the company’s EIN.

One such example is Shell. They report to D&B and Business Experian. They need to see a PAYDEX Score of 78 or more and a 411 business telephone listing. Shell may claim they want a specific amount of time in business or profits. But if you already have enough vendor accounts, that won’t be necessary and you can still get an approval.

Cash Credit

Have you been responsibly managing the credit you’ve up to this point? Then move onto cash credit. These are companies like Visa and MasterCard. Keep your SSN off these applications; use your EIN instead.

These are companies such as Walmart and Dell, and also Home Depot, BP, and Racetrac. These are typically MasterCard credit cards. If you have 14 trade accounts reporting, then these are doable.

Monitor Your Business Credit

Know what is happening with your credit. Make sure it is being reported and address any mistakes as soon as possible. Get in the practice of checking credit reports and digging into the specifics, and not just the scores.

We can help you monitor business credit at Experian and D&B for 90% less than it would cost you at the CRAs. See: https://oldcs.creditsuite.com/business-credit-monitoring. Update the relevant information if there are inaccuracies or the details is incomplete.

Disputing Errors

So, what’s all this monitoring for? It’s to dispute any mistakes in your records. Mistakes in your credit report(s) can be taken care of. But the CRAs typically want you to dispute in a particular way.

Disputing credit report mistakes normally means you send a paper letter with copies of any evidence of payment with it. These are documents like receipts and cancelled checks. Never mail the original copies. Always send copies and retain the original copies.

Disputing credit report mistakes also means you specifically spell out any charges you challenge. Make your dispute letter as crystal clear as possible. Be specific about the concerns with your report. Use certified mail so that you will have proof that you sent in your dispute.

A Word about Building Business Credit

Always use credit responsibly! Don’t borrow more than what you can pay off. Monitor balances and deadlines for payments. Paying off punctually and fully will do more to elevate business credit scores than virtually anything else.

Establishing company credit pays off. Great business credit scores help a corporation get loans. Your credit issuer knows the business can pay its debts. They recognize the corporation is authentic.

The corporation’s EIN connects to high scores, and loan providers won’t feel the need to ask for a personal guarantee.

Business credit is an asset which can help your company in years to come. Learn more here and get started toward building corporate credit.

Lending Club: A Final Word

And finally, as with every other lending program, whether online or offline, remember to always read the fine print and do the math yourself. Be sure to go over the details with a fine-toothed comb, and then decide whether this option will be good for you and your company.

In addition, consider alternative financing options that go beyond lending. And that includes building business credit. And you’ll be able to best decide how to get the money you need to help your business grow.

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