With the emerging of peer-to-peer (P2P) lending the financing strategies and lending and borrowing system of the market have been transformed. P2P lending has also proved to be quite profitable for business start-ups. This article will cover all the key points and reasons that make P2P lending is considered the best lending platform for your business and start-ups.
Before we look into the pros and cons of peer-to-peer lending, let’s take a quick review of the functioning of the P2P lending.
Things to learn about the p2p world –
- What is P2P lending?
- The crucial pros and cons of P2P lending for your business.
- Functioning process.
- Quick accessibility of capital
- Lower interest rates
- Unsecured loan
- Higher returns
What is the basic concept of peer-to-peer lending?
It is a system of getting money or loan from an investor through an online mode of transaction. P2P lending platforms in the United Kingdom were the first of their kind. The deal occurs on the same platform for both the investor and the borrower as both of them get linked directly. The process is very simple the borrower simply signs up and fills up the complete details of his/her loan and about his/her needs. And this the investor gets a chance to check out the borrower thoroughly and list out the loans that they want to invest upon.
The loans can be customized according to the needs of the borrower. Whether you want to build a new home, buy your dream car or for any medical requirements? So the borrower can specify his/her needs and seek loans accordingly.
One of the crucial key points of the peer-to-peer lending process is that it supports the small business units that are struggling to make a face in the market. If a start-up needs extra capitalization for article buying, research, and development, stock purchase, proliferation or accession, it can get a loan from £25,000 to up to £75,000.
Since peer-to-peer lending is a new financing strategy so it will take some time to stabilize itself. Still, there are some risks if the borrower doesn’t return the money in time then no one is going to take the liability for it. There is no promise of profit and less liquidity in the system. So sometimes it becomes risky to work in this system.
Though there have come up a number of similar service providers out there, yet you should check out the financial product analysis and reviews of the p2p providers of your choice from reputed criticism websites such as Crowd Reviewed. Mintos review is a p2p platform that is held high in authority by users and critical reviewing websites.
So let’s get into the pros and cons of P2P lending platforms.
Pros and cons of peer-to-peer (p2p) lending for start-up
Let’s take a view of the good points of P2P lending for the companies at its starting point.
The easy application process, an advantage of P2P lending over a bank is the simplicity in filling up the form and submitting it to the authority. It provides direct contact between the lender and the viewer which makes the system more transparent.
Borrowers can simply sign up through the website of any P2P platform and enter the complete details and propose of seeking a loan. His/her description must be very much attractive so that when the lender first through it he/she totally gets convinced by the viewpoint of the borrower. And the borrower can get a clear idea about the interest rates and the amount he/she needs to pay back. The platform works fast and it brings you attractive funding offers within no time. The usual details that the borrower needs to provide is – Your personal information, the loan amount your credit score, what the loan is for, your income range.
Suppose if you are applying a loan for a start-up then you will be asked to give the complete details of the company, probability of profit and loss, tax returns, etc. You must be able to show a good manual turnover to make the lender believe in you and to get the transaction done quickly. Some of the P2P lending platforms provide the quote calculator for the borrowers to calculate the amount to be repaid.
Point to be noted is that the fund borrowing system is simple in P2P platforms but that doesn’t mean that whoever applies for a loan will get it. The platform authorities will conduct a thorough checking to check out the worthiness of the borrower to get a loan. This involves that the borrower must have a strong credit rating which is a sign that the person can return the money in due time.
The high speed of funding is a very attractive facility for P2P lending. If you have a reasonable remark for your loan and if you have done the procedure right then within 1 or 2 weeks capital will be funded in your account. The funding process is very fast comparing to any other funding system.
The most unique part of the system is that it takes care of the profit for both the lenders and the borrowers. Borrowers are able to get much lower interest rates comparing to other funding systems and on the other side lenders too are able to make out higher returns of their invested amounts. That’s where the perk of the peer-to-peer lending system lies.