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Prosper, a peer-to-peer lender that supported $180 million in loans before shutting down new lending last fall, restarted after federal regulators gave the greenlight to the service.

The site, among the first of its kind to facilitate loans directly between individuals online, is getting the chance to stake out market share amid the U.S.’s longest recession since the Great Depression. The decision also opens up the doors for greater competition in the space with rivals like Lending Club and Loanio.

The Securities and Exchange Commission’s approval also gives Prosper the right to run a secondary market, where investors can buy and sell existing loans.

The San Francisco-based company also made it easier for investors to gauge risk by creating a bid floor. This helps make sure that lenders don’t demand too low an interest rate for the amount of risk they’re assuming. It combines the standard certificate of deposit rate over the life of the loan plus extra interest based on an estimated default risk.

After shutting down last fall, existing borrowers could still make payments but the site couldn’t issue new loans. The site’s outstanding loans total $52.1 million, and Prosper had an overall default rate of 19 percent since launching in 2006.

Peer-to-peer lending promises an alternative route to credit for cash-strapped businesses and individuals as the U.S. banking system is mired in its worst crisis since the 1930s. The SEC put a damper on the nascent industry last year, demanding greater oversight because it considers Prosper’s loans investments that bear a rate of return. (Another non-profit peer-to-peer lender, Kiva, got around this because its loans are interest-free.)

Prosper has raised $40 million from Accel Partners, Benchmark Capital, DAG Ventures, Fidelity Ventures, Meritech Capital Partners, and Omidyar Network.

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