Lending Loop is a peer-to-peer (P2P) lending platform that connects businesses that need money with investors. Qualifying businesses can take out a loan of up to $500,000 at competitive rates. Investors can lend as little as $25 at a time. As the funds you’ve loaned are paid back to you, you’ll earn interest.
Their platform is the first of its kind in Canada. While there is a peer-to-peer funding platform for personal loans, Lending Loop is the only one available for businesses.
There’s a short verification process to go through to qualify your business for a loan. After that, you can borrow between $1,000 and $500,000 for your business needs.
For potential investors, there are no credit checks or long-term commitments with Lending Loop. And if someone defaults on their loan, Lending Loop takes care of the collections process. So, you don’t have to worry about anything.
Best of all, your money is lent to small businesses in your community! So, when you invest with Lending Loop, it’s not only easy, but it helps the local economy grow too. Therefore, if you are looking for a safe way to earn more interest on your investment, Lending Loop could be the answer.
In this Lending Loop review, we’ll take a closer look at the pros and cons of borrowing and lending through the platform. We’ll also examine the products and services offered by Lending Loop, as well as their fee structure and more.
What Makes Lending Loop a Good Option?
When it comes to getting business loans, not all lenders are created equal. One would traditionally approach a bank or similar financial institution for a loan. But interest rates can be high when going the traditional route. And it’s not always easy to qualify for a business loan.
Lending Loop offers a refreshing alternative to traditional lenders by allowing individuals to lend money directly to companies through business loans. The application process for businesses is quick, and interest rates on business loans start as low as 4,96%.
Lending partners on the platform are individuals who have invested their own money into the borrowing company. This makes Lending Loop an excellent option for borrowers because these lenders don’t have the overheads that a financial institution does. This is why interest rates are much lower.
When the lender’s loan is repaid, it is automatically reinvested by Lending Loop. Investors don’t have to worry about additional fees because Lending Loop’s underwriters take care of everything.
Lenders will receive their repayments through either cheque or electronic deposit into your registered bank account monthly.
Through this Lending Loop review, we’ll go into more detail regarding their products and services. And we’ll more closely examine why their platform might be a good option for you.
Pros and Cons of Lending Loop
In this Lending Loop review we found what folks liked and disliked about Lending Loop’s service.
Pros
One of the key elements of this Lending Loop review is to highlight the advantages of using the platform. Both as a small business seeking a loan and a potential lender. The following is a breakdown of the pros associated with Lending Loop.
Pros For Borrowers
Here’s what borrowers really like about working with Lending Loop.
Low Minimum Loan Amount
The minimum amount you can borrow is $1,000, which is standard for a personal loan but low for a business loan. Taking a smaller loan would usually involve a shorter loan term and a higher interest rate. But with Lending Loop, terms are reasonable, and interest rates are incredibly competitive.
So, if your company needs funding, but for a small purchase or expense, Lending Loop may be a good option for you.
Low Service Fees
Lending Loop charges a service fee of between 3% and 6.5%, which is competitive compared to other lending platforms. You also don’t need to pay set-up fees or early repayment penalties, but you need to apply for all your loans on their platform.
Borrow Through Their Website or App
You can also use the Lending Loop app as a borrower. While this is something other P2P lending platforms don’t allow, I think it’s still worth mentioning. It gives people more options and makes Lending Loop’s services more accessible.
Pros For Lenders/Investors
Investors think Lending Loop is great too, for the following reasons.
Flexible Lending
You’re free to mix and match the businesses you lend money to if they meet your risk preferences. For example, suppose you have a high appetite for risk. In that case, you can filter the available borrower requests so that only the highest-rated ones appear.
I think this is one of the most significant advantages of Lending Loop. It allows you to take a targeted approach rather than just picking a random loan and hoping for the best.
Anyone Can Invest
While specific criteria are required to qualify as a lender, you don’t have to be a business or have a large amount of capital. But companies can invest too. You’ll just need to prove that you earn the minimum required amount per year. After that, you can start lending as little as $25 at a time.
Diversify Your Investment
You can diversify across many loans. Lending Loop allows you to invest up to $35,000 in every loan, and you could spread your money out in multiple different loans. That way, there’s less risk of default for any one borrower. This is especially true when they introduce the new marketplace that will allow people to invest in whole loans.
Investments are also diversified across real estate and stock markets, giving you more significant return opportunities.
Make Your Money Work for You
I like that Lending Loop allows you to keep your cash balance rather than withdrawing it all the time. That means you can add more money when you need it and lend out the extra cash when lending rates go down. While this isn’t a huge advantage, it’s an excellent way to boost your returns and make your money work for you.
Higher Returns
Investing through Lending Loop allows you to earn returns at various levels. But there is definitely potential to achieve very high returns. In fact, it’s possible to get back more than you would through many other investment platforms.
Cons
Listing the cons associated with the platform in this Lending Loop review are just as important. And we’ve detailed them below.
Cons For Borrowers
Here’s what could be improved about the borrowing experience with Lending Loop.
High Rates for Certain Borrowers
While Lending Loop’s interest rates are competitive compared to traditional lending institutions, this may not be the case for all. If your business’s finances aren’t strong, Lending Loop may see you as a potential risk in terms of repayments.
As a result, your business may be subject to higher interest rates to mitigate the risk involved. And these interest rates could be far more than what you might typically pay at a bank. However, with an unstable financial profile, you may not qualify for a bank loan at all.
Stringent Approval Process
Loan approval isn’t guaranteed. Not all loans get approved, and not everyone can borrow up to $500,000. What you can borrow depends on market conditions, your personal credit history, and the guarantor’s credit history.
Your business will also have had to be trading for at least one year and generating $100,000 in revenue per annum. This is a pro for lenders, as it ensures that Lending Loop has a lower risk of default on repayment.
Cons For Lenders/Investors
Here’s what could be improved for the investor experience with Lending Loop.
Usability
The Lending Loop platform interface isn’t as smooth as a bank site. I don’t think it’s the design, but rather the functionality that they must comply with. You can’t seamlessly choose which credit card or bank account you want to use, and you’ll need to wait for email confirmations before your account is finalized.
Lack of Choice
You can’t choose which loans you want to fund: Lending Loop is not a traditional investment platform, so you don’t choose the investments. It simply provides a way for investors to make their money work for them by lending it out on P2P platforms. However, you can filter the available loans based on your risk preferences.
Lending Loop Products and Services
Lending Loop offers a loan service for investors and small business owners, which provides many benefits to borrowers. And there are different loan grades for lenders to choose from, dependent on the risk they are willing to take.
The following is a breakdown of their products and services for both investors and borrowers.
Products & Services for Borrowers
Borrowers have lots to choose from when it comes to Lending Loop.
Small Business Loans
Lending Loop offers peer-to-peer loans for small businesses of between $1,000 and $500,000. This loan can be used at your discretion to cover expenses relating to your business.
There are specific fees associated with taking a loan through Lending Loop, as follows:
Interest rate: The interest rate ranges from 4.96% to 24.93% per year. The rate you’ll pay depends on your credit rating, as determined by Lending Loop’s in-house credit assessment.
Origination Fees: To open a loan account with Lending Loop, you’ll need to pay a once-off origination fee. This fee could amount to between 3.0% and 6.5% and is deducted from the principal loan amount.
Late Payment: If you fail to make payment against your loan on time, you will incur a late payment fee. Your payment is considered late 7 days after its due date. When a payment is late, the fee charged will amount to 15% of the loan payment due.
NSF: An NSF fee is charged when your monthly payment doesn’t clear because there are not enough funds available in your bank account. When this happens, you’ll be charged anything up to $25 for the failed processing of the payment.
It should be noted that you can choose to pay off your loan early, and Lending Loop does not charge any penalties.
Loan Types
Loans on the Lending Loop platform fall under one of two categories. They are either Express or Standard loans. Both follow the same grading system set out by the platform, which indicates the risk for lenders.
But the difference comes in the total loan amount. Express loans are those in the $1,000 to $40,000 bracket. And the Express loan process helps Lending Loop facilitate these smaller loans in a more streamlined manner.
Therefore, standard loans are all other loans above the value of $40,000, which go through the usual verification and processing procedure.
Products & Services for Lenders/Investors
Investors have some great opportunities to choose from with Lending Loop.
Investing Through Lending
With Lending Loop, individuals and businesses can sign up to become lenders and earn interest as they invest. There are different classifications of a lender, dependent on your personal income profile. And there are various loan grades to choose from in line with the level of risk you are willing to take.
Lender/Investor Classifications
Non-Eligible Investor: If you fall into this category, you can invest up to a maximum of $10,000 within 12 months.
Eligible Investor: As a Lending Loop “Eligible Investor”, you can invest up to $100,000 every 12-month cycle.
Accredited Investor: People who fall within this category can invest more than $100,000 per 12 months.
Lender/Investor Auto-lend
Another Lending Loop feature is Auto-lend, through which investors can lend based on the level of risk they’re comfortable with. The platform facilitates the lending process automatically for you, with loans categorized by a grading system.
The following are four portfolios offered by Lending Loop.
Balanced Plan: An investor’s funds will be placed in loan notes from various loan grades with a Balanced Plan.
Conservative Plan: This plan is for lenders looking for a low-risk investment opportunity. As a result, this portfolio invests in loans graded as A+, A, B+, and B.
Aggressive Plan: When it comes to the Aggressive Plan, lenders invest in higher-risk loan notes. But, due to the high level of risk, the interest gained will be more significant. This portfolio focuses on loan notes graded as C+, C, D+, D, E+, and E.
Custom Plan: Lending Loop also gives investors the option to choose the grades of the loan notes they want to invest in. Therefore, you can decide if you wish to invest at low-risk, high-risk, or a combination of both.
Are Lending Loop Products/Services Insured?
Lending Loop’s loans are insured by the Canadian Share Insurance Fund (CSIF) and regulated by the Financial Services Commission of Ontario (FSCO), which in turn falls under the jurisdiction of the Office of the Superintendent of Financial Institutions (OSFI).
What Type of Consumer Protection Insurance Do Lending Loop Products/Services Have?
Lending Loop functions as the first peer-to-peer lender registered with Canada’s Superintendent of Financial Institutions (OSFI), which means that it is subject to federal regulation.
The platform is also a member of the Investment Industry Regulatory Organization of Canada (IIROC). Through these regulators, Lending Loop must abide by all applicable federal and provincial laws governing the industry.
Consequently, they have $1M of client money protection through the Canada Investor Protection Fund (CIPF) and $100,000 of creditor protection on funds loaned to borrowers via Lending Loop’s marketplace.
Furthermore, all loan agreements executed on the platform are covered by an Errors & Omissions policy and a fidelity bond, which protects the business and its customers in the event of theft/fraud.
This number is sufficient to cover loans made through the platform. According to the company, they have never come close to using it up.
Is it Safe to Use Lending Loop Products/Services?
Many of Lending Loop’s investors are utilizing the service to earn higher returns on their investments. They invest in stocks or mutual funds, although this makes up a tiny percentage of loan volume.
The platform is safe to use if you understand the risk involved and don’t put all your eggs in one basket. The company has been in existence for
Lending Loop is compliant with the laws and regulations of all jurisdictions where it operates. In this sense, Lending Loop is a market-leading company regarding the quality of products and services.
You’ll also notice that their physical address is listed on the website, which just gives the company an additional level of authenticity.
Over and above that, Lending Loop is serious about running its platform in the most transparent manner possible. Therefore, they have a section of the website dedicated to their statistics.
Here you’ll find up-to-date information about the loans they’ve facilitated, including performance, distribution, and industry information.
When writing this Lending Loop review, the platform had 12,222 active investors. And they had funded a total of $80,145,675.00 in loans.
When writing this Lending Loop review, borrowers can get exclusive discounts that reduce up to 3% of their costs. In addition, if you’re a new borrower, you can benefit from a 0% interest rate on the first loan. The promotion is valid for loans in Canada.
Lending Loop also has a borrower referral program. This offer is available to all Lending Loop borrowers. If you refer a friend to Lending Loop, you can get up to $500 in bonus cash added directly to your account once the person you referred has taken out their first loan of more than $1,000.
There’s also a referral program of lenders by referring friends or family members to Lending Loop as lenders. Suppose your referrals sign up and become active lenders on the platform. In that case, you can get a $75 cash bonus added directly to your account once they have completed their first loan.
All promotions and discounts are detailed on the Lending Loop website.
Is Lending Loop’s Customer Service Good?
While researching for this Lending Loop review, I found their customer service team friendly and efficient.
They treat their clients with courtesy and respect throughout all stages of the borrowing and lending process. From monitoring loan performance to reporting purposes, their commitment is to deliver relevant information on time.
In addition, they have a comprehensive support centre on their website. Their business phone number is also listed, which you can call during office hours.
Overall, the company is known to have a good customer service reputation.
One of the crucial elements we wanted to assess in this Lending Loop review is the website interface and navigation.
The Lending Loop website has a great design with easy-to-read information that guides you through the process without overwhelming you. I also like that they show you how much money you’ll make if you invest in a loan which is very helpful for investors.
Lending Loop is a platform that allows investors to lend money to small businesses, find out the daily cash flow and get paid monthly. The Lending Loop website interface will enable borrowers to inform lenders about their need for credit, provide evidence of that need, and commit to paying back the loan with interest.
Lenders can browse through loans as they would on a stock exchange or can sign up to receive alerts based on their investment preferences. Lenders then fund loans and earn interest, the same way they might in a bond market.
Information on the website is easy to understand and super accessible, and you can get started with just one click.
How to Get Started with Lending Loop
We felt it necessary to detail the application process for you in this Lending Loop review.
The process is straightforward for both borrowers and lenders. Borrowers could see their loan requests listed in the marketplace in no time. And lenders can get their account up and running within one to two days.
Borrowers: Application Process
The following is the application process for borrowers applying for a loan through the Lending Loop platform.
Step 1: Small businesses can kick off the loan process by applying for a Lending Loop account. To do so, you’ll have to answer a few questions regarding your business and the total amount you’d like to borrow.
To be eligible to apply for a loan, small businesses must meet the following criteria:
- The business should have been in operation for at least a year.
- The minimum amount of revenue generated per year must be $100,000.
- The company must be registered as a sole proprietorship, corporation, or partnership in Canada.
- The owner of the business must have a credit score of at least 640.
Step 2: Next, you’ll be asked to input some personal contact information. And you’ll need to provide an email address and password for the account.
Step 3: After the account has been created, you’ll need to log in and provide Lending Loop with further information. Lending Loop requires details regarding the business’s finances to determine the company’s risk profile.
Before tackling this part of the application process, it’s wise to get your business documents together. Therefore, make sure you have your CRA and SIN numbers handy, as well as annual sales figures.
Step 4: After all your business information has been captured, you’ll submit your loan application. The application will be reviewed by specialists who will send you an offer, if approved.
Step 5: Your profile will be listed on the Lending Loop marketplace when you accept their offer. This is where investors can find you and provide you with the capital you require.
Lenders: Application Process
The following is the application process for those wanting to lend and invest on the Lending Loop platform.
Step 1: First, you’ll be asked to choose between a personal or corporate account. Personal accounts are for individuals, and corporate accounts are for businesses looking to invest.
Step 2: After that, you’ll need to fill in some personal or company information to set up your Lending Loop account.
To become a lender/investor, you’ll need to meet the following requirements:
- You must be a Canadian citizen or a permanent resident
- You must currently live in Canada
- You’ll need to be of the age of majority in your particular province
- Your bank account must be with a regulated Canadian financial institution
- You’ll need a minimum of $200 to start investing
To qualify as an “Eligible Investor”, you must have an individual net income of $75,000 or more per year. Or, in the case of a couple, your combined income should be at least $125,000 per annum.
If you wish to apply as an “Accredited Investor”, you’ll have to prove that your personal annual income is at least $200,000.
Anyone can qualify to become a “Non-eligible Investor”.
Lending Loop will require further information when applying for “Eligible” or “Accredited” investor status. This will, however, be requested during the application process.
Step 3: Next, you’ll need to deposit funds into your Lending Loop account. A minimum deposit of $200 is required.
Step 4: You’ll have to wait for your account to be verified. But once verification is confirmed, you’ll be able to see the investor status assigned to you.
You can then start to browse through the investment opportunities in the marketplace. Or you can set up the Auto-loan feature on your account.
Bear in mind that you can start investing for as little as $25.
Alternatives to Lending Loop You Can Consider
After reading this Lending Loop review, if you feel that the platform may not be an ideal fit for your needs, you could try an alternative.
However, as mentioned, Lending Loop is the first company offering Canadian small businesses a peer-to-peer lending service. So, there aren’t really any other platforms like it available to Canadians.
FundRazr
A crowdfunding platform that currently has lending as one of its options. You are still lending money, but instead of being backed by a loan made to an individual or business, it is supported by Lending Loop’s own underwriting, which means you are guaranteed to get your money back.
Wealthsimple
Wealthsimple might be a good choice if you are looking for an automated investing platform. You get access to low fees and diversification with their portfolios which is always a good thing for long-term investments.
Zenbanx
Zenbanx is for those that want near-instant access to your money and a hybrid option between a Robo advisor and a peer-to-peer lender. You may be able to get your hands on your invested capital faster than if you do it through Lending Loop, but for this convenience, you need to pay higher fees.
Lending Loop Review Take Away
In this Lending Loop review, we’ve explored the platform’s pros, cons, features, and benefits for borrowers and investors. We’ve looked at how small businesses can benefit from a loan through Lending Loop. And we’ve assessed the advantages for individuals and small businesses looking for an investment opportunity.
So, if you have a small business and need to borrowing money, there are more options than just big banks. Lending Loop seamlessly connects borrowers with investors. Instead of going to a bank, however, Lending Loop only uses the support of Canadians to make loans happen.
What’s more, unlike traditional banks, Lending Loop makes it easier to get approved for better rates.
If you want to borrow or lend money, Lending Loop is a great way to do it. The system can be automated and is designed for simplicity. This significantly reduces the time involved in the loan application process.
In this Lending Loop review we examine the pros & cons of this pioneering peer-to-peer lending platform for small businesses & investors.
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