The Peer-to-Peer or P2P way of funding a small business enables the small entrepreneur to raise the most required capital. If the small entrepreneur doesn’t want to go the traditional way for the fund, P2P is an option. A traditional process is through a bank. It complicated the bureaucracy with a traditional bank loan to fund a small business.
How do P2P loans work to fund a small business?
Peer-to-Peer loans are unsecured loans, given to individuals and not firms. In recent times, they even recognize a firm and allow the firm to take P2P loans. P2P lending platforms allow the user to apply online and, in return, it checks:
- Verify the borrower’s history of payments and financial information
- A credit check
- How many loans serviced
The collaterals are not that strict. Sometimes, the interest rate is also lower than the traditional loans.
The purpose of P2P loans is to fund a small business
These loans help small businesses. The ease of applying for a small business allows it to get away from the adversity of them without money. Loans are for various purposes like:
- Purchase a new infra and equipment
- Expansion of market to other geographies
- Training for a new tech
- Even debt consolidation
What are the advantages of P2P Lending?
- Quick process—The decision is out instantly, either you get it or don’t. Disbursed in 2 weeks.
- Lower Interest Rate—The lending interest rate is lower than traditional banks
- They don’t say no—If your lending history is not that great, still you can fund
- CX is great—Since the software platform does most of the work, CX is taken care of
Some disadvantages of P2P lending are?
- Lack of financial regulation—The concept is new and lacks regulation like traditional loans
- Individual credit score—As P2P works for the individual, even if you take it for the firm. It will hit the credit score of individuals.
- Lack of personal touch—P2P works through the platform and that leaves with a lot of questions. No one is there to answer your queries.
Here are some P2P options you can check for your next loan to run operations:
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1. Prosper to fund a small business
As you create your loan listing, an investor can see your credit history and can quickly check the purpose of your loan. It has the credibility of giving away $3 billion loans so far.
As you get an approved loan, the investor will disburse the money, and before that borrower needs to make a payment plan.
2. The lending club makes it easy to fund a small business
Businesses would always need funds, sometimes to make for uncollected outstanding and sometimes to grow the market range. If you have already been in business for quite some time and need cash, check Lending Club.
It would depend the approval on individual credit score, around $75K business turnover, and at least two years in business.
3. Upstart for funding small business
If young entrepreneurs and new businesses with no credit history to check-in for, Upstart works like wonder. It helps young entrepreneurs and gives a miss for credit history. It works on historic data and AI to approve loans.
Not more than a $50k loan, but this makes for the much-needed firm.
4. Perform to fund your small business
It works for investors and borrowers. The investor needs to make a profile to show risk-taking appetite. Not sure if you get your funding as easily as other platforms.
They invest a maximum of $25k at the lowest interest rate of 6%.
5. Funding Circle to fund a small business
Funding circle funds between $25k to 500k. It works hybrid. You apply on the platform and assign a loan manager to ease the process.
Comparatively, at a very high-interest rate and charges late fees if you miss your payment plan.
Here is all about Peer-to-Peer loans, fund a small business if you driving it individually and can risk your credit score.
