Many people who would like to start a business or expand their business into something great will look for a venture capitalist or angel investor. Especially when they find out they can’t get all the money they need from a local bank because they don’t have the collateral to deposit. This often happens when an entrepreneur already has every dollar that he has invested in his own business. From a risk reward standpoint, and considering the way bankers do business, entrepreneurs often get frustrated and turn to other sources.

But where do they turn, and what’s the best way to get a business loan or perhaps hire an investor that doesn’t require a lot of capital? Where should they start looking? Well, trying to answer this question, I am reminded of an interesting article I read not long ago in the Wall Street Journal. The article was titled “Peer-to-Peer Lending: Business Owners Fed Up with Banks, Entrepreneurs Turn to Internet Sites” by Angus Lotten, published June 16, 2011. The article stated;

“The website works like eBay-style marketplaces, matching borrowers with lenders. Two of the largest such websites have generated more than $500 million in personal loans in the last five years. And while the Most loans are used to pay off credit cards, the share of funds used to finance small businesses is increasing.”

This is quite interesting isn’t it? This is something completely new, but it makes sense in our new information age, especially considering how everything is interconnected and how social media is supposed to work. Imagine how many jobs could be created every time $100 million is slow for small businesses? These are small businesses that are expanding their operations, or just getting started, and that money will be used to hire more employees, buy equipment, and all of that activity will stimulate the economy and also increase the tax base.

In other words, I see it all right, and I was thinking the other day about all this, and I think it would have been great to have this in years past. For example, before I retired I was running a franchise company, and we always had franchisees looking for funds to start their business, and it was amazing how local banks would turn around and cost us precious time to start their business.

Maybe if this trend continues, we can see better job growth, better lending practices, and better use of money, at lower interest rates because of the supply side, sure sounds like free market capitalism to me, even the style from Internet. In fact, I hope you will please consider all this and think about it. If you have a new concept up and running, send me an email, because I’d love to hear what you’re up to. Let’s talk about it so I can write about it.