Lending Loop is the leading peer-to-peer lending platform in Canada. Having heard about the Lending loop and after a few experiences with them, here’s a brief rundown of how they work, how you can get access to loans and investments and how safe they are. You’re welcome to read through and leave a comment below, as well.
Since 2014, when the company was founded by Cato Pastoll and Brandon Vlaar, they have successfully lent over $66 million to small businesses in Canada and have an investor base of more than 10,886 investors.
As financial literacy and entrepreneurship are becoming the order of the day, the need for financing and investment has also increased.
To meet this demand, Fintech companies have designed an opportunity whereby small scale businesses can have access to investors without so much hassle. This way, you get the financing you need and I get an investment opportunity with diversification. Win-win for everyone! This concept is called “peer-to-peer lending”.
What Is Lending Loop All About?
Lending Loop is a peer-to-peer lending platform that allows you to lend money to run your business from regular individuals like you and me, at competitive rates and in return, these individuals make profits on the investment in form of interests.
Lending Loop serves as a middleman between you and your potential investor. They eliminate the bureaucratic and stressful need of a loan from the traditional financial institutions like banks or credit unions.
They are the first fully regulated peer-to-peer lending platform for businesses in Canada.
Also, Lending Loop falls under a regulation that makes them an Exempt Market Dealer across all provinces in Canada. Also, they are based in Toronto.
How Does Lending Loop Work?
Are you thinking of expanding your business or solidifying your ground in the industry and require a loan or some sort of financing method? Or you’ll like to diversify your investments and make some interests? Stay tuned to this review.
Lending Loop uses what is called the “crowdfunding” method to pool together a loan. In simpler terms, when you apply for a $ 1000 loan, the money isn’t gotten from one person directly; it will most likely be a composition of $100 from 10 different investors. I will further explain in terms of the borrower, the lender and the marketplace.
Lending Loop Borrower
As a business owner, you have the opportunity to borrow up to $500,000 to finance your business. Although lending through the lending loop is simple and reliable, you must meet the eligibility criteria for borrowing. These criteria help them assess your ability to service the loan you’re applying for. The eligibility criteria include:
The business must be registered in Canada either as a corporation, partnership or sole proprietorship.
Your business must have had at least 1 year of activity.
It must generate up to $100,000 in annual revenue.
The business owner must have a personal credit score of, at least, 600.
You can also make use of a free tool on their website, www.lendingloop.ca, to check your eligibility status.
How To Apply For A Lending Loop Loan?
After meeting the eligibility criteria, you’re just three simple steps away from financing your business! The steps are:
This is pretty easy and will take just about 5 minutes to complete the online loan application. The application form comprises questions on some basic information about your business, like a detailed description of your business and its performance over the years.
Evaluation of your application: After your application has been successfully submitted, it is evaluated by Lending Loop’s credit team. The team, basically, verifies the information you’ve submitted, uses the information to determine the best product for your business and makes you a personalized offer.
Get paid: You have to go through the offer you’re made and if you’re in tune with it, the investors will fund the loan through the marketplace. After which the money will be transferred into your bank account.
The loan rates for Lending Loop range from 5.9% to 26.5% and can be serviced through 3 months to 5 years.
Lending Loop Investor (Lender)
The Lending Loop offers you and me an opportunity to help grow the economy by supporting small businesses and also make at least 5-8% profit per annum on these investments.
Becoming an investor entails creating an online account, either as an individual or a corporation.
The investors are classified based on the amount you’re willing to invest within a period of 12 months and other factors like your investment preferences, your financial capability and the amount of risk that you’re willing to take. They have a questionnaire to assist with this.
The classification includes:
Non-eligible Investor: These are investors willing to invest up to $10,000 within a period of 12 months.
Eligible Investor: These are investors willing to invest up to $100,000 within 12 months, this means your net income should exceed $75,000.
Accredited Investor: These are investors willing to invest more than $100,000 within 12 months.
With this classification, every person stands a chance of becoming an investor. Lending takes place through the marketplace, so every investor must make a deposit of not less than $200 to their account on the platform. You can surf through the marketplace to pick the type of loan you want to lend to. The Lending Loop allows as low as $25 investment per loan.
Repayment Plan: On the marketplace, the full description of the type of loan, its estimated net return and grade is present. Depending on the type of loan, Lending Loop ensures that your account is credited, monthly, with repayments (principal plus interest).
What Is Lending Loop’s Auto-Lend?
The platform allows you to turn on the auto-lend feature and strategize your investments. This feature allows your repayments to be redirected and lent out again. You can select the type of loan you wish to auto-lend to. This helps you get maximum use and value for your earnings.
The plans available on the auto-lend feature include:
Balanced Plan: This plan allows you to invest in all grades of loan, that is from A+ to E
Conservative Plan: This plan only allows you to invest in loans of grades A+, A, B+, B.
Aggressive Plan: This plan allows you to invest in more risking grades of loan, which is from C+, C, D+, D, E.
Custom Plan: This option allows you to customize the grades of the loan you want to invest in.
What Is Lending Loops Marketplace?
The Lending Loop marketplace is the place where the investors interact with the borrowers. On this page, you get to select the type of loan you wish to lend to. The loans are graded from A+, A, B+, B, C+, C, D+, D to E, based on the risk involved in the business after a risk assessment by their credit team.
How Does Lending Loop Make Their Money?
The Lending Loop makes its money as percentages from both the borrower and the lender. For the borrower, you’re charged between 3%-6.5%, based on the risk grade assigned to your business, as setup fee; it is one time, there is no review fee and the money is deducted from the funds after it has been approved.
For the lenders, you’re charged a fee of 1.5% of your total return. This means that if your expected return is 6.9%, Lending Loop is entitled to 1.5% which leaves you with 5.4% of the total return.
How Safe Is Lending Loop?
Lending Loop is a registered and regulated company. The company claims that all deposits made through the platform are held in a trust with a Canadian Chartered Bank.
As with any investment, there are risks involved which is why the platform always you to regulate the risk you’re interested in taking on. You’re also allowed the opportunity to diversify your investments into different industries per time.
Pros of Lending Loop
Here are some of the pros of Lending Loop for both the borrowers and lenders, they include:
Creating an account with the Lending Loop is free.
The lending rates are way better than the average traditional bank rates.
Reward system: You receive a $25 bonus once you lend up to $1500 on the platform
As an investor, you get to invest from as low as $25.
The auto-lend feature allows you to invest without worrying.
As a small business owner, you can access up to $500,000 in loans to further finance your business.
You get to improve the economy by helping small businesses grow.
The platform is very easy to operate: All the loans and invests you need, are just a click away!
The transparency policy of the Lending Loop platform is super commendable; You can access their statistics on their website.
Finally, you get to earn good rates that may not be possible with other financial institutions.
Cons Of Lending Loop
Here are a couple of cons lending money with Lending Loop:
It’s still relatively new in Canada.
The auto-lend feature still has some limitations to lending.
Loan defaulting is still a possibility: sad but true, so it’s advisable to lend money that you can easily part with, especially with the higher risk grade loans.
There you go, that was a detailed review of Lending Loop.
As I said, it’s peer-to-peer, still very new to the Canadian audience. Nevertheless, there are a lot more Pros than Cons. Do read the actual people’s experiences before lending your money. Reddit is a good place to get started. Usually what happens with the best of the loans is, they are never repaid back on time. So be extra cautious.
Also, don’t forget to check out the Reddit discussions on Lending Loop. It is extremely informative before you decide.
If you liked the content of this article, do share it on social media and help spread the word. Also, please let me know your thoughts and comments below. Thanks for reading!
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Lending Loop Review
- Creating an account with the Lending Loop is free
- As an investor, you get to invest from as low as $25
- The lending rates are way better than the average traditional bank rates
- It’s still relatively new in Canada
- The auto-lend feature still has some limitations to lending
- Loan defaulting is still a possibility: sad but true, so it’s advisable to lend money that you can easily part with, especially with the higher risk grade loans
Sagar Sridhar is a personal finance blogger from Canada. His genuine passion for personal finance coupled with his unique style of writing is what stands out. Professionally, he is a computer engineer, agile certified and has a master’s degree in Project Management. His writing has been featured or quoted in the leading Canadian publications such as Credit Canada and many other personal finance publications. While he is juggling between his day job and blogging, he is the main author on this blog and has miles to go before making the final pit stop.