When it comes to getting funding for a business, there is a vast array of options out there, and knowing which is going to work best for you and your company can be a struggle.
One popular choice for business owners is peer-to-peer lending, which is a form of business loan that is funded by a number of private investors as opposed to a bank. Peer-to-peer lending is growing rapidly in popularity, and as such, it now contributes around £1 billion to the UK economy per quarter.
Peer-to-peer lending offers flexibility and competitive rates for both the lender and the borrower, but what is peer-to-peer lending and how does it work?
What is peer-to-peer lending?
Peer-to-peer lending is essentially a business loan; however, instead of the money being lent by a bank or other finance provider, it is funded by a large collection of individual, private investors. It is usually arranged through an online platform that operates as a marketplace to bring together businesses that are seeking funding and investors looking to lend money.
The idea behind peer-to-peer lending is to provide a funding option without having to go through banks and to offer both lenders and borrowers a better rate than they would get through more traditional methods.
When you borrow using peer-to-peer lending, you will be borrowing from a large number of individuals as opposed to just one lender. The peer-to-peer lending platform will handle all the arrangements for the loan, so you will still apply for the funding directly with them.
How does peer-to-peer lending work?
As a business borrowing through a peer-to-peer lending platform, the process is very similar to applying for any other business loan. You will be asked to provide information about your business, such as turnover, profits, trading history, filed accounts, and bank statements. You will also need to let them know what you are planning on doing with the money from the loan.
Every peer-to-peer lending company will have initial criteria that you will have to meet in order to get onto their platform. As long as the information provided meets this, then your business loan application will be put in front of their platform of investors. These investors will each decide if they want to lend to your business and can choose how much they want to invest.
Usually, a large number of investors will each offer a small amount that will collectively amount to the amount you wish to borrow. Once you reach 100% of your loan amount, the funds will be released to you.
Why choose peer-to-peer lending?
There are a number of benefits to peer-to-peer lending, including:
- Unsecured finance: Most peer-to-peer lending loans won’t require you to have any security for the loan.
- Easily accessible: As peer-to-peer lending is handled online, it is easy to apply for and obtain.
- Fast process: In some cases, funds can be raised and released in a matter of days.
If you’d like to learn more about how peer-to-peer lending could benefit your business, chat to us by calling 02031760115
