Peer to peer lending information
Peer-to-peer lending (P2P) is a type of business loan where a large number of private investors lend to a business, usually through an online platform. The idea is that both the lenders and the borrowers get a better rate than they would through the banks.
Peer to peer lending: pros and cons
Unsecured
Usually unsecured: no security required
Fast
Process takes a few days
Accessible
More accessible than bank finance
Higher interest rates
Interest rates can be higher
Suitability
Doesn't suit every business
How does Funding Options work?
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How do I invest in peer to peer lending?
Turnover, profits and trading history
From the borrower’s perspective, approaching a peer-to-peer lending platform for a loan is much like applying with any other business lender. They’ll ask about your turnover, profits and trading history, they’ll want to see your bank statements and filed accounts, and they’ll ask about your plans for the money.
Opened to a platform of investors
Once you’ve passed their initial criteria, your loan will be opened to the platform of investors, who then offer smaller amounts that collectively add up to the sum you want to borrow. Different P2P platforms handle this stage differently, with some using an auction-style format to ‘bid’ an interest rate, while others set the rates and simply wait for investors to choose particular loans that they want to invest in.
Target funds
If all goes well, you’ll reach 100% of your target amount and get the funds shortly after.
Peer to peer lending vs crowdfunding
Peer-to-peer lending is often confused with crowdfunding — in fact, you could argue that peer-to-peer lending is a subcategory of crowdfunding — but the key difference is that P2P is about loans rather than equity purchase or donation.
Unsecured peer to peer loans
Most of the time, peer-to-peer lending platforms offer unsecured business loans. The upside with unsecured finance is that you don’t need any security and they can be fast to set up — but your business profile will be closely scrutinised and the interest rates can be a bit higher.
Competitive interest rates
Having said that, some peer-to-peer lending platforms offer competitive interest rates — but the best rates are only available to the strongest businesses.
An alternative to the banks
One of the major reasons for peer-to-peer lending's popularity is that it offers an alternative to the banks, both for businesses looking to borrow and investors looking to earn a return.
Accessible
Available to anyone through simple online platforms, P2P is one of the most accessible forms of alternative business funding.
How much can you afford to borrow?
If you're ready to take your business to the next level, use our business loans calculator to get an idea of what you can afford.
Want to understand the cost of your loan?
Use our business loan calculator below to find out how much you can borrow to take your business to the next level.
Calculations are indicative only and intended as a guide only. The figures calculated are not a statement of the actual repayments that will be charged on any actual loan and do not constitute a loan offer.
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Financial product information
Representative example*
• 7.63% APR Representative based on a loan of £50,000 repayable over 24 months.
• Monthly repayment of £2,252.94. The total amount payable is £54,070.56
*Some lenders may apply fees during the application process, please note that these are set and provided by these entities.
Annual Percentage Rates
Rates from 2.75% APR
Repayment period
1 month to 30 years terms
What is peer to peer lending?
Private investors
Peer-to-peer lending (P2P) is a type of business loan where a large number of private investors lend to a business, usually through an online platform. The idea is that both the lenders and the borrowers get a better rate than they would through the banks.
Collection of individuals
Peer-to-peer lending is a bit different to standard business loans, for a few reasons. Using P2P means that you’re borrowing from a collection of individuals, and the peer-to-peer lending company facilitates the arrangement.
P2P provider
You’ll still apply for the loan directly with the P2P provider; but technically you won’t actually borrow the money from them.
Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.
It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.
Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.
