A new startup is poised to shake up the Canadian credit industry with the creation of an online marketplace to facilitate peer-to-peer lending. Offering an alternative to traditional bank loans, CommunityLend.com launches on the heels of a credit crunch that has made the public increasingly leery of banking institutions.

CommunityLend’s founder and chief executive officer Michael Garrity cites transparency and simplicity as the key attributes distinguishing their services from traditional banking models.

People interested in borrowing money can apply to the site where potential lenders review their information and offer an interest rate for the transaction. Borrowers are evaluated for their credit worthiness and are held to the same penalties they would face if they were to default on a regular bank loan.

Only qualified, credit-worthy individuals are permitted to borrow and only accredited investors are allowed to lend. However, this pool may be expanded in the future. “We want to make the assets of peer-to-peer lending available more widely to non-accredited investors and will be exploring methods to do so within our regulatory framework,” says Garrity.

Competing with behemoths in a heavily regulated industry isn’t for the faint of heart. In 2008, another Canadian startup, IOU Central, launched a similar social lending platform and was promptly shut down. CommunityLend itself has been beleaguered by legal woes in its attempts to carve out a place for itself. It's taken years and undisclosed amount of investment to navigate the murky waters and receive the necessary authorization.

Despite facing regulatory issues of their own, similar peer-to-peer lending sites in the United States and United Kingdom continue to enjoy success and a continually growing membership. LendingTree in the U.S. has already facilitated more than 25 million loan requests and over $185 billion in closed loan transactions.

According to Garrity, the market for unsecured consumer loans in Canada is $100 billion annually. This is the potential CommunityLend’s shareholders are clearly excited to pursue.