Borrower Member Loan 460277 | Lending Club Prospectus

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Amount Requested
Loan Purpose Business
Loan Grade E1
Interest Rate 16.35%
Loan Length 3 years (36 payments)
Monthly Payment $847.90 / month
Funding Received $24,000 (100.00% funded)
Investors 162 people funded this loan
Note issued on 1/25/10 1:02 AM
Note Status Charged Off
Loan Submitted on 1/15/10 10:36 AM

Borrower Profile

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Loan Description

Borrower added on 01/15/10 > These funds will be used to bolster my exclusive line of products we source from here in the US and are also importing from Australia, Germany, and Taiwan. I have a defined plan based on proven marketing techniques and an experienced pool of labor who have background in IT, finance, and the school of hard knocks.

My business is currently operating in the black and has the benefit of extremely low overhead and also being in an area with a median income of $82,000 (from US Census data). In addition I am a subject matter expert in the Information Technology industry with a solid resume and job history.

I operate our business on a "plan for the best AND the worst" model, meaning the metrics I use are all based on best and worst case scenarios with contingencies for the major and obvious disasters (economy, natural etc). I track my progress based on these two watermarks. I do my best to be prepared for most scenarios and act quickly when I encounter a scenario outside of my plan. I avoid the highest risk areas of our market and opt to grow more carefully.

My current monthly budget with all expenses for the business, minus start-up costs and new inventory, is approximately $1146/mo. New inventory consumes the remainder of our monthly income -10% for our rainy day fund.

Thank you for reading my posting.

Questions & Answers

Q: What EXACTLY is your line of business, i.e., products, services? Provide DETAILS about what you import, export, wholesale, retail to public and how you do it (storefront? Internet?) and your loan will attract investors. Currently you've told investors only contingency plans for operating in good or bad economy.
A: (01/16/2010-06:11) - Thank you for your interest and suggestion. I import Remote Controlled cars and accessories for the low, middle and high end of the market. I also produce batteries with my brand and logo on them. I am targeting larger distribution contracts with 2 of the largest domestic wholesalers and will need more inventory on hand in order to win the contracts. The hobby shop sells remote controlled helicopters, planes, boats, nitro(gas) and electric powered cars, and trucks, micro cars (Mini-Z's similar to Zip-Zaps at Radio Shack), model rockets and model trains. I am also targeting advertising international events to grow my brand awareness. I retail to the public via a Storefront that has an attached indoor area where people can fly electric planes, helicopters and race electric cars in bad or cold weather all year round. I also have 2 outdoor tracks, one paved and the other dirt with jumps along with a pond for boats and an open field for flying, model rockets and gliders. I'd be using these facilities to promote my events with the local businesses and again would need to be sure I had inventory on hand at the time of the events to satisfy the demand. I retail to the public via an internet storefront as well which I am currently advertising at the larger racing events domestically and working with magazines and other product vendors to build brand recognition. Again business is growing and is profitable but in order to compete with the larger internet retailers and established brands I will need to carry more and varying inventory and have the brand visible at more events.

Q: Do you plan on submitting proof of your income to LC? I am a bit surprised your credit limit isn't higher given your income. Thanks!
A: (01/16/2010-23:07) - Thanks for your question. I am very willing to submit proof of income to LC. I didn't think LC went higher than 25k. I've been through the traditional avenues for credit for my endeavor and the requirements I've been given really don't make much sense. If I had the requirements most of the traditional sources for credit were asking for I wouldn't need the credit!! Apparently there is not much money available from banks for small or new businesses, also I've been told my credit history isn't long enough, and my secondary sources of income don't meet the bank guidelines. It has been a very sobering lesson in the current state of credit and the economy.

Q: If your venture doesn't work out, how can lenders be assured they will still get their money?
A: (01/18/2010-08:34) - We currently have roughly 40,000$ (retail) in merchandise on the shelf which we own outright. Liquidation of that inventory at .50 cents on the dollar would pay back the loan today. However coupled with the additional inventory the loan would provide we could lower the liquidation price to .20 or .30 cents on the dollar and pay off the loan more quickly. The onsite track facilities are independent from the hobby shop, therefore we can continue to take in revenue from racers and fliers paying their fees to use the indoor and outdoor facilities. Based on my calculations if next month the venture went under and I had to liquidate in order to pay off the loan the upside is I would also be reducing the interest payments so our total payoff would be just over $26k. How I get my numbers: 19% apr/12 months = 1.5833% * 6 months (approx how long it should take to liquidate) = 9.5% * $24000 (initial loan amount) = 26280$ Ultra worst case I would endure the wrath of my wife and use some of our retirement if the liquidation was taking too long or for whatever reason I was not meeting our target liquidation prices. That scenario is if I went under tomorrow. Longer term I will be using any net gains to slowly move deeper into the higher margin markets of model railroading, static models and die cast diversifying making us less dependent on one segment of the hobby. I have failure contingencies for the next 6, 12 and 18 months including possible outlets for these goods at the above mentioned liquidation prices. I do not plan to fail, but would be foolish to not have a plan in place for it.

Q: So far this is an interesting loan prospect. A few questions, however: Is this bridge loan? If so, what do you predict the repayment period to be? In the eventuality of a business collapse, what are your other assets (aside from the $40K inventory) and outstanding liabilities? General headings and dollar figures will suffice. Thanks!!
A: (01/22/2010-12:35) - Thanks for your interest. This is not a bridge loan. There is no additional financing on the 6month horizon. The next milestone is 20,000$ in gross monthly receipts. Once I reach $20k intake I will again investigate the need for credit to grow to the next plateau. Current projections put that point being this time in 2011 our current monthly gross is ~6k. I've reached the point in cash flow where I feel comfortable taking on this relatively small amount of debt. My intention from the onset of this business venture was to use as little credit as absolutely possible to make it work. So far I've been very successful at it and this loan will be used to grow faster, vs simply grow. Our outstanding liabilities are: 129$/month for phone and internet. 50$/month total for all other internet services. 600$/mo for rent/grounds maintenance fees ~400$/mo for heat and electricity 36$/mo for the credit card machine. ~12$/mo for bank account fees. I buy inventory outright. The business has about $20,000 in hard assets outside of inventory, this includes equipment, computers, fixtures etc that could potentially be liquidated, however the amount of this loan compared to the cash value of everything we have on hand and any additional inventory this loan would provide puts the need to truly sell the walls as a very unlikely event. In addition to all of those assets I have personal hard assets which could be liquidated and a retirement fund I can potentially tap. My model has been bite off what I can chew, and it's working quite well. If the business can't be liquidated to pay back the debt we don't need that amount of credit, period. That way my personal assets should never be needed, and in the unlikely event they are needed, it won't be that much of my personal assets to cover any gaps and I can stay in the good graces of my wife :).

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