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February 13, 2006

Starting a Business

Need a Little Money?

Posted by Carole Matthews at 12:17 PM

If you need a little cash to get your business off the ground, maybe you should tap Prosper.com. The start-up, "offering a mixed brew of eBay, Friendster, and the local bank," according to a New York Times article today, aims to hook up people looking for loans with lenders who will show them the money.

According to the article, a prospective borrower registers with Prosper.com, undergoes a credit check, and, if he or she passes, is permitted to submit a request for a loan (up to $25,000) along with an interest rate he or she is willing to pay. The borrower also includes a description of him or herself as well as why the money is needed. Lenders (individuals in this case, not banks) deposit their money with Prosper.com and are offered the opportunity to review individual loans or have Prosper.com review loan requests based on a criteria the lender defines. The eBay part of this is the bidding process, where lenders bid to issue the loan, using interest rates as their competitive advantage. At the end of the process, which cannot last more than two weeks, the bids with the lowest rates are put together to come up with one low-interest rate loan for the borrower.

For entrepreneurs looking to raise small amounts of capital, this seems to be a very attractive alternative to the ever-risky family and friends loan or difficult-to-secure bank loan. The terms are also very friendly: no collateral needed, no prepayment penalty, and a fixed rate over three years. It seems to be a very entrepreneurial solution to every start-up's need for cash. Would you consider using something like this to raise capital?

2 Comments

Posted by: Dave at February 14, 2006 7:41 AM

Carole - having launched Zopa almost a year ago now (The UK inspiration for Prosper!) we've seen a lot of people come to us to raise money for startups or to expand their small business. It's a obvious angle to attack, and we're going to explore it in more detail over the coming months (before we launch in the US in Q2).

One thing we're grappling with is how to properly reward lenders for the higher risk that they are taking on (A scary number of startups fold...and would take your money with them). Doing anything with equity is a regulatory nightmare, and really high interest rates aren't going to help a strugglng entrepreneur - so what other options are there - suggestions welcomed!

Posted by: Mr Kenneth White at May 30, 2007 11:22 AM

Determination and belief are the starting points for success. They open you to new opportunities to do and be anything you desire, and you only need a subconscious thought to plant the seed. How do we do this? by giving you that loan that will give you that financial freedom e-mail address is sizzlerloans@yahoo.com

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