Dow Jones

When Ellen Carroll moved from Seattle to Kingman, Ariz., she says she knew the town's need for a speech therapist could work to her advantage.

Ms. Carroll, 27 years old, got a job in the Kingman school district as its second full-time speech therapist, working with students in preschool through junior high school. Ms. Carroll says she has a "gigantic" caseload at the Kingman schools and that showed her that starting her own speech therapy business could be lucrative -- and helpful for the town of 26,000 people.

"I don't get to see kids for very long periods of time, so I'm not seeing much progress," Ms. Carroll said. "If I'm going to make a difference, I have to do things differently."

To start her own business, Ms. Carroll says she needed therapy materials, diagnostic tests which cost up to $700 each, games and toys, and a down payment on rent for an office. She estimated it would cost about $11,000 to get started, so she says she first turned to her credit cards, figuring to put $6,000 on one card and $5,000 on another. But she decided the interest rate of 21% on the cards was too high.

Surfing the Internet for possibilities, Ms. Carroll says she found Prosper Marketplace Inc (prosper.com). "I thought I'd try Prosper first, and if it didn't work, I'd go to a bank," she said.

The San Francisco-based Web startup offers an online marketplace that puts together prospective borrowers and lenders. Borrowers can request a loan of between $1,000 and $25,000, and specify the maximum interest rate they're willing to pay. The site allows lenders to evaluate hundreds of borrowers, who explain why they need a loan, and provide a credit history and a debt-to-income ratio. Borrowers seek loans for a variety of reasons, such as opening businesses, paying off hospital bills or even buying diamond engagement rings.

Prosper works a bit like an online auction, with prospective lenders bidding against each other to fund all or part of a loan. The site also has social-networking features like user groups and profiles.

Ms. Carroll joined Prosper, adding to her loan request another $2,000 that would allow her to pay off old credit-card debt from college. In April, she secured a $13,000 loan with 13% interest from lenders on Prosper. "I felt a sense of relief," she says. "I knew I was going in the right direction, finally doing what I want to do."

Ms. Carroll made her first $312 loan payment in May, an amount she'll pay each month for another two years and eleven months. To pay back her loan, she uses part of her salary from the Kingman school district as well as the cash earned from the speech therapy business.

Starting a business isn't something Ms. Carroll dreamed about when she was young. "I just want the freedom to be able to see kids or adults however long I want to see them," she says.

With her public school caseload, Ms. Carroll already has a vast resource for clients. She is providing private therapy sessions to a few kids on evenings and weekends and hopes to have a full caseload of 20 to 30 kids by the fall. Down the road she wants to open her own clinic with more therapists.

Hilda West, on the other hand, always believed she'd be her own boss. But it wasn't until after CNN downsized in 2001 and eliminated the broadcast engineering job she held for 12 years that Ms. West set out to start her own Atlanta-based videography and photography business.

"My father was a builder, he had his own business too," says Ms. West, 53. "I grew up in that atmosphere. It's more work than working 9 to 5 but there's more satisfaction."

To start her business, the Atlanta native spent about $8,000 -- using credit cards, severance pay and her savings -- to buy computers, a Sony VX2000 camcorder and a Fuji FinePix S2 Pro SLR Digital Camera.

Focusing on weddings and corporate events, she found clients by passing out business cards at wedding conventions and video-equipment businesses, advertising in the local newspaper and on the Internet.

After three years in business, Ms. West says she does about three events a month. To draw new customers, she has been charging less than she would like -- usually about $1,500 for what she estimates is about $3,000 in services.

Recently, Ms. West needed to buy DVD and CD duplication equipment after her clients began asking for that service. But, she says she didn't have the $5,000 she needed for the purchase.

Ms. West says she posted her request for a loan on Prosper and was approved for a $5,000 loan at 11% interest. "It was very fast," Ms. West said. The site's moderator said she should post her request for ten days, and after five days her loan request had been filled at rate of 17.62%. After another five days, the rate offered by lenders on Prosper dropped to 11%.

Ms. West says still relies partly on her savings to pay the bills because she isn't bringing home as much money as she made at CNN. Her standard of living has also changed. But she says the opportunity to own a business is worth as much as money. "I enjoy what I do; this is my passion. The freedom is worth it," she says.

Erica Davis
http://www.startupjournal.com/financing/trends/20060612-davis.html