Newspaper article THE JOURNAL RECORD

Brother, Can You Spare a Dime? Merchants Finding Easier, Cheaper Loans with Peer-to-Peer Borrowing

Newspaper article THE JOURNAL RECORD

Brother, Can You Spare a Dime? Merchants Finding Easier, Cheaper Loans with Peer-to-Peer Borrowing

Article excerpt

NORMAN - When Darrin Walters needed financing to expand Champions on Display's inventory, he decided to forgo traditional bank lending for the trade-off of quick access against slightly higher interest rates. By turning to Lending Club, a major player in a growing trend in peer-to-peer lending, he landed a fixed rate of 7.9 percent on $100,000 within three weeks.

"We've been in business for 10 years, and we've used bank lending often enough," Walters said, of the business that sells licensed sports collectibles, authentic team merchandise and official logo fan gear. "But I was listening to a show on NPR talking about cutting out the middleman, and I decided to give it a try. We're a seasonal business and sometimes you need an additional injection of funds to get your inventory up.

"This was an attractive alternative, somewhere between lower bank rates and something like Amazon Lending that will give you capital at the click of a button without qualification but higher rates," he said.

As Walters said, the main thrust of peer-to-peer or person-to- person financial deals is to sidestep the red tape and costs associated with traditional institutions. Author Brett King highlights that in his latest book, Bank 3.0, as he discusses the effect of online portals such as PayPal, ZashPay and ClearXchange and mobile electronic transactions on the world's banking infrastructure. Banks have been slow to enter P2P payments, which has reinforced a vague sense of personal connection with merchants, regardless of authenticity.

Participants seem to be setting aside the meaning of the word "peer," however. Walters said his sense of participation amongst equals was largely absent; his loan could have originated with any other faceless organization. When it comes to loans, P2P can also mean crowdsourcing, microlending and angel investments, as long as immediacy is increased and traditional stacks of regulatory paperwork are decreased.

California-based Social Finance, for example, is a company that uses crowdfunding to refinance student debt under the P2P label. …

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