Published By Janet Gershen-Siegel at March 9, 2018
Prosper Online Lender is one of several online lending companies out there. In our Prosper Online Lender Review, we look at just what sets this online lender apart from the others.
They offer personal loans for business use. However, it seems as if applications for business loans were shunted off to their partner, OnDeck (https://www.ondeck.com/), regardless of personal credit rating or amount of credit requested. We look at the specifics and drill down into the details with respect to Prosper.
Prosper is located online here: https://www.prosper.com/. Their physical address is:
Prosper Funding LLC
221 Main Street, Suite 300
San Francisco, CA 94105.
You can call them at: (866) 615-6319. Their contact page is here: https://www.prosper.com/plp/about/contact-us.
They abide by a Code of Ethics and Business Conduct. See: https://www.prosper.com/plp/code-ethics-business-conduct/
The main thrust of the Code is to support standard disclosures of conflicts of interests. Employees have restricted access to Prosper’s loans, in order to make it harder to exploit inside information (this is somewhat similar to the Securities and Exchange Commission’s insider trading rules for publicly traded corporations). The Code also means their employees are not permitted to accept substantial gifts (this may be to deter overly enthusiastic but well-meaning clients who have a hard time taking no for an answer. With the Code, the company can be the ‘bad guy’). The Code also specifically protects whistleblowers in the event that an employee witnesses and reports wrongdoing to management.
On January 2, 2018, Prosper presented a prospectus to the Securities and Exchange Commission. This is a document which is filed before presenting an Initial Public Offering (IPO). See: https://www.prosper.com/Downloads/Legal/Prosper_Prospectus_2018-01-02.pdf. The funding is for up to $1.5 billion.
If accepted by the SEC, Prosper could begin offering stock to the public in 2018.
From $2,000 – 35,000 is available. They will check your personal credit score. There is a “low” yet otherwise unspecified interest rate. Prosper offers a fixed term of 3 or 5 years. You have a single monthly payment.
Per their prospectus, Prosper calculates a score for borrowers, “… calculated using the historical performance of previous Borrower Loans with similar characteristics”. The score is based on data from Experian.
The Prosper Score predicts the probability of a loan going “bad, e. g. going more than 60 days past due within twelve months of the application date. To calculate the Prosper Score, the company developed a custom risk model by using their historical data in addition to a data archive from a consumer credit bureau. They built the model based upon a population of users who applied for a Borrower Loan. This was so that their model would incorporate behavior which is unique to that population.
This is in contrast to a credit score from a credit reporting agency, as that is based on a much broader population. However, Prosper borrowers are only a small subset of the borrowers taken into consideration when developing a standard consumer credit score. The company then uses both the Prosper Score and a borrower’s credit score in order to best gauge the level of risk associated with a listing.
There are no hidden fees or prepayment penalties.
Advantages include fixed terms and no hidden fees.
Disadvantages include an unspecified interest rate. Also, Prosper will perform an inquiry on your personal credit.
Given that the company is highly likely to go public soon, Prosper’s Board of Directors will be beholden to shareholder demands as opposed to the requests of either borrowers or employees. Furthermore, the company seems to shunt all small business loans off to OnDeck, anyway. It seems the best action for a small business owner to take would be to bypass the middleman and go straight to OnDeck.
And finally, as with every other lending program, whether online or offline, always be sure to remember to read the fine print and do the math. Go over the details with a fine-toothed comb, and decide whether this option will be good for you and your company. In addition, consider alternative financing options that go beyond lending, including building business credit, in order to best decide how to get the money you need to help your business grow.