When Nora Penic applied for a bank loan to buy a $2,700 chocolate fountain for her fledgling catering business, they turned her down.
Penic had declared bankruptcy after running up $250,000 in medical bills for open-heart surgery.
"They don't look at the person. They don't look at the human factor," Penic said. "All they look at is the numbers."
Penic's only alternative would have been to borrow the money on a credit card -- in her case, at a staggering 29 percent interest. But now, she has the money for her chocolate fountain, at 15 percent interest.
She and other prospective borrowers can appeal directly to the public, all thanks to the Internet.
On Prosper.com, borrowers post listings of the loans they want and why, along with their credit scores and the interest they're willing to pay. Anonymous individuals then make offers to the borrowers they like, stating how much they're willing to lend and at what rate.
Prosper.com's CEO Chris Larsen said it's a lot like eBay, but for money.
"If you leave this to people, they'll do better than institutions can," Larsen said.
Jane Kim, a personal finance reporter for the Wall Street Journal, said that although it's a risk to lenders, they believe it's worth it because the interest payments they receive are much higher than what they would get from putting money in a bank account.
Once a person seeking a loan has posted the condition they're amenable to, lenders will bid on the opportunity to loan the borrower money. The bids are the loan conditions, which outline the amount of interest that will be charged and the term of the loan.
On Prosper.com, according to Kim, the lending limits are between $50 and $25,000. Prosper.com also vets potential borrowers by getting background information and assigns them a credit grade.
If a borrower defaults on a loan, the site has a collection agency or can sell the loan to a debt buyer.