Creative Capital Source for Small Business: Prosper.com

One of the biggest problems facing every business owner is capitalization.

Where can I find start-up capital? How can I be sure to always have enough working capital?

Bank loans are much more difficult to secure than most new business owners realize. Without a decent track record of growth and profitability, no bank is going to give you a loan without requiring you to post collateral such as your house.

Securing venture capital is also very difficult. In fact it’s pretty much impossible if you have no experience in the process and/or your business model doesn’t fit with what VCs look for in terms of growth and the probability of a significant future liquidity event.

So, what’s Johnny Entrepreneur to do when he needs to get his hands on some cash to grow his business? For many people, the answer may be Prosper.com.

Prosper.com bills itself as “The online marketplace for people-to-people lending.” In effect, it’s kind of like an eBay for personal loans. If you need money, you anonymously post your story, how much money you need and the maximum percentage interest rate you’re willing to pay. The site checks your credit score and assigns you a Credit Grade and a Debt To Income percentage. Lenders then post bids of fractions of the total you’re looking to borrow at varying percentage rates not to exceed the maximum threshold you’ve set.

There are too many details and case histories to cover in a blog posting so I recommend you visit the Prosper.com yourself. While you’re at it, you should also visit one of the many piggyback sites which have popped up like EricsCC.com, which chronicles the lending and borrowing statistics of Prosper.com members. Truly fascinating stuff.