Lending Loop is a platform that connects small businesses with individual lenders (investors). Users benefit from interest income, with rates starting at 5.9%. The purpose of these loans ranges from renovations, expansions, and inventory purchases. Lenders can manually analyze each company, or take advantage of Lending Loop’s auto-lend program, and automate their investments. 

“Lending Loop is Canada’s first peer-to-peer lending platform. We are focused on connecting business owners who are looking to grow their business with thousands of investors from across the country. Our goal is to connect investors and small businesses to enable them to prosper together.” – Lending Loop

How it Works

The minimum commitment per loan is $25 – allowing you to diversify your funds even more. Each business is assigned an interest rate, which is based on the risk, and term (i.e. 1 year, 3 year).

Lenders can opt in for email updates to stay tuned on new loan opportunities. The email would indicate the amount of the funding, the use of the funds, interest rate, and rating. The listing of the loan would include the following additional details:

1. Loan Details
2. Business Details
3. Financials
4. Security
5. Q&A
6. Repayments
7. Lenders

This is where fundamental analysis is performed, to determine if the loan is a buy, or pass. The process of choosing a company is similar to the stock selection process. 

Lenders also have the option to choose the robo-like auto-lend risk plans (everything, low risk, and high risk) – the estimated return for these plans are 8.1%, 6.0%, and 9.8% respectively. The auto-lend makes investing within the Lending Loop Marketplace even more accessible. I highly recommend this option for those who want their funds to be diversified automatically, with less leg work. 

Lenders can also see the past loans that have been recently funded, within the Lending Loop Marketplace:

Benefits

Lending Loop offers you the benefit of diversifying your investment portfolio, and income, while supporting Canadian businesses. The concept of generating income from interest ties in with Warren Buffett’s famous quote, “never depend on single income. Make investment to create a second source.”

“Businesses across Canada in a wide variety of industries are looking for financing to grow every day. Our credit evaluation team reviews the creditworthiness of each application before deciding whether to post it on the marketplace. Lending to these businesses not only provides the opportunity to earn an attractive return, it also helps them grow, which in turn, benefits the Canadian economy.”  – Lending Loop

Lending Loop also has a cost effective business structure; these savings translate to higher returns for lenders, and lower lending costs for small businesses. Each loan application is reviewed by the credit evaluation team; where the creditworthiness of each application is verified, before advancing them to the marketplace.

How to Get Started

You can start receiving investment income  in 3 different steps:

1. Creating an account

Open an account, complete the information form, and verify your account. This part doesn’t take more than 5 – 10 minutes.

2. Lend to businesses

Once the account has been verified, you can start browsing the marketplace, to search for desirable companies to invest into.

3. Receive interest

This part occurs once the loan is fully funded (where the loan enters the repayment stage). You’d receive monthly blended interest, and principal payments.

Bottom Line

Lending Loop offers Canadians the opportunity to diversify their investment, and income sources. In a sense, lending out to businesses via the Lending Loop Marketplace platform gives you the interest income benefits of a GIC, at a higher rate of return. 

Click here to get started on Lending Loop.

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Writer: Jelani Smith 

Disclaimer: All investing can potentially be risky. Investing or borrowing can lead into financial losses. All content on Bay Street Blog are solely for educational purposes. All other information are obtained from credible and authoritative references. Bay Street Blog is not responsible for any financial losses from the information provided. When investing or borrowing, always consult with an industry professional.