This was what I hoped Prosper and the other P2P startups would turn into. Sadly, rather than targeting businesses frozen out of traditional financing, they ended up going for B2C credit. B2C credit is an extraordinarily efficient market in which most good credit risks can borrow money absolutely painlessly, for close to nothing.
The added headache ("Instead of typing five pieces of information into the computer and instantly getting issued a credit card, I think I'm going to write up an eBay style listing of myself, submit my financial details to be wrangled over by strangers, and babysit the auction for a week") and expense in borrowing from Prosper restricted it to mostly high risk borrowers who the banks had spurned. And, as it turns out, banks were largely not rejecting them out of whim or caprice.
The added headache ("Instead of typing five pieces of information into the computer and instantly getting issued a credit card, I think I'm going to write up an eBay style listing of myself, submit my financial details to be wrangled over by strangers, and babysit the auction for a week") and expense in borrowing from Prosper restricted it to mostly high risk borrowers who the banks had spurned. And, as it turns out, banks were largely not rejecting them out of whim or caprice.