Peer-to-Peer Lending Guide for Small Business Owners

When you’re starting or running a small business, there are a lot of things to think about. One important decision is how to finance your business. You can borrow money from a bank, but that can be tough when you don’t have a lot of collateral. Or you could try peer-to-peer (P2P) lending, where you borrow from individuals instead of banks.

Peer-to-peer business lending, sometimes called crowd source business lending, has exploded in popularity in recent years, and it’s a great option for entrepreneurs. In this guide, we’ll explain what P2P lending is, how it works, and why it’s a great option for small businesses.

What Is Peer-to-Peer Lending?

P2P lending is a type of financing that allows individuals to borrow and lend money without going through a financial institution. Instead, P2P loans are made between two individuals, often strangers, through an online marketplace.

This type of lending started out as a way for people to loan money to each other for personal expenses, but it has since evolved into a popular option for small business financing. There are now many online P2P lenders that specialize in business loans, and they offer a number of advantages over traditional bank loans.

How Does Peer-to-Peer Lending Work?

If you’re considering a P2P loan for your small business, it’s important to understand how the process works. Here’s a basic overview:

1. You browse an online marketplace for P2P loans and apply for a loan.
2. Your application is reviewed by the lender, and if you’re approved, you’re given a loan amount and terms.
3. You then have to create a pitch, or presentation, explaining why you deserve the loan.
4. The lender reviews your pitch and decides whether or not to fund your loan.

If your loan is funded, the money is transferred to your bank account, and you can use it for your business expenses. It’s important to note that most P2P lenders do not offer 100% financing, so you may need to contribute some of your own money.

Why Peer-to-Peer Lending Is Great for Small Businesses

There are a number of reasons why P2P loans are a great option for small businesses. Here are some of the biggest benefits:

• Fast and easy application process. The application process is fast and easy, and most lenders don’t require a lot of paperwork. You can usually complete the application online in minutes.
• Lower interest rates. P2P lenders typically offer lower interest rates than banks, which can save you a lot of money over the life of your loan. The better your financial history, the lower your interest rate will be.
• No prepayment penalties. Many P2P lenders do not charge prepayment penalties, which means you can pay off your loan early without having to pay extra fees. Read the fine print before joining anything to make sure you’re clear on the fees.
• Flexible repayment terms. Many P2P lenders offer flexible repayment terms, which can be a big help if you’re worried about making your monthly payments. You can often choose a repayment plan that works best for your business.

There are also some drawbacks to consider before taking out a P2P loan. One of the biggest is that there’s no guarantee you’ll get approved. If you don’t have a strong credit score or collateral, you may not be able to get a loan.

Another thing to keep in mind is that P2P loans are not backed by the government, so if you default on your loan, you could lose your assets.

How To Get a Peer-to-Peer Business Loan

If you’re interested in getting a P2P business loan, here’s what you need to know:

1. Check the eligibility requirements. Not all P2P lenders offer loans to small businesses, so it’s important to check the rules before applying.
2. Compare interest rates and terms. It’s important to compare interest rates and terms from different lenders to find the best deal.
3. Complete the application. Once you’ve found a lender that meets your needs, complete the online application and provide all the required information.
4. Wait for approval. The lender will review your application and make a decision. If you’re approved, the money will be deposited into your account, and you can start using it for your business expenses.

P2P lending is a great option for small businesses because it offers fast approval times, low interest rates, and flexible repayment terms. However, there are some risks to consider before taking out a loan. Make sure you understand how the process works and compare different lenders before committing to anything.

P2P Lending Alternatives

If you feel that peer-to-peer lending might not be for you, there are a number of other funding options available. Here are some of them:

Fixed Rate Business Loans

LendThrive is an online fixed rate business loan provider that offers fast approvals and low interest rates. You can use the money for any business purpose and receive $25,000 to $150,000. LendThrive also rewards borrowers with lower interest rates down the line for consistently paying on time through its Rate Reduction Rewards program. The application process is fully online, and you can get your money in as fast as 24 hours.

Asset-based Lending

Asset-based lending is a type of loan that’s backed by your assets, such as your inventory, accounts receivable, or real estate. This type of loan is a good option for businesses that have been turned down by traditional lenders. The interest rates are typically higher but if you need cash immediately this might be a practical option.

Business Credit Cards

Business credit cards are good for businesses that need to borrow money quickly. They offer fast approval times and allow you to borrow up to $100,000, depending on the provider.

Microloans

Microloans are loans of $50,000 or less, which are designed for small businesses. Microlenders offer fast approval times, and the money can be used for any business purpose.

Looking for a Reliable Funding Partner? Try LendThrive

Peer-to-peer business lending is a trendy funding source, but it is not for everyone. If you are looking for a reliable alternative, consider working with LendThrive. With thousands of business loans funded, LendThrive has the experience and resources to help your venture grow.

We ensure approval timelines are quick so you can get the funding you need to grow your small business. The team at LendThrive is passionate about helping small businesses owners and entrepreneurs secure what they need when they need it.

Get started growing your business and apply for a business loan today!