P2P on the Up-and-Up. These days, the chances of securing a business bank loan are only marginally better than Jon and Kate getting back together. That’s why more borrowers are turning to peer-to-peer lending. What’s P2P lending? Until recently it was a back-alley meeting with Rocco, the guy with the snake on his face. But thanks to the Internet, you no longer have to pay exorbitant interest rates while risking life and limb. P2P lending, as this article explains, allows business owners and individuals to borrow up to $25,000 from decent, non-violent, law abiding citizens. Web sites like LendingClub.com, Prosper.com and Virginmoney.com facilitate the transactions and set reasonable payment terms. Why would anyone want to lend money to a complete stranger over the Internet? Because the average rate of return is in the neighborhood of 7 to 10 percent. Sure, it’s not the 843 percent that Rocco is pulling in, but lenders don’t have to kill anyone to collect.
Hurt so good. We admit to a bit of a sadistic streak. Back in 1979, we’d pummel our younger siblings into submission while gleefully reciting the lyrics to the Nick Lowe hit “Cruel to Be Kind.” Cruel to be kind means that I love you. Baby, got to be cruel, you got to be cruel to be kind. Turns out we’re not the only proponents of the tough-love approach. This BusinessWeek article contends that credit card companies are doing business owners a favor by reducing their lines of credit. The argument isn’t that credit is now harder to get, it’s that, prior to the downturn, it was too easy to access. The upshot, says the article, is that businesses will be forced to kick the free credit habit, making them stronger in the long run. C’mon, sing along with us: Cruel to be kind, da da da dee dum.
The language of loans. Why do some businesses have trouble getting loans? One of the biggest reasons, says this New York Times article, is they don’t speak the bank’s language. No, we don’t mean the Chinese language. Though, of course, a little Mandarin wouldn’t hurt, given China’s ever-increasing economic clout. We’re talking about financial literacy. You know — fancy, MBA-type words like debt-to-equity ratio and debt-to-Ebitda, which, for those who missed the memo, is earnings before interest, taxes, depreciation, and amortization expenses. This is the language of bankers, and they expect you to be just as fluent as they are. If these terms are Greek to you, no wonder you can’t get a loan.
Tim Devaney has been a senior editor at Red Herring, Industry Standard, and San Francisco magazines, and editor-in-chief at the Berkeley Monthly and Peninsula magazine. He currently handles marketing communications for Working Assets, a long-distance, wireless, and credit card company in San Francisco.
Tom Stein has contributed to leading business and general interest publications including Wired Magazine, Business 2.0, Venture Capital Journal, and Tennis Magazine. Previously, he held staff-writer positions at the San Francisco Chronicle, Red Herring, and InformationWeek. He also was a senior editor at Success Magazine, where he covered some of the most unusual and utterly unique entrepreneurial companies in the world.