Wednesday, 3 February 2016

Start-ups turn to P2P Lending

As an entrepreneur, have you ever tried to raise funds for your brand new firm? Whether it is trying to secure a loan from a bank or trying to get funded through private capital, you have to go through a nightmare to end up with a deal you are not happy with. The answer to this trouble lies in Crowdfunding – especially with Peer-to-Peer lending.
Peer-to-Peer lending isn’t only meant for personal loans. It is now a useful source for many start-ups worldwide. Studies show that P2P Lending to start-ups is increasing 200% per year. This trend can be easily identified when start-ups often have to deal with the overly cautious and risk averse attitude of mainstream business finance sources.
Here are some reasons as to why Peer-to-Peer lending is the fastest growing branch of the alternative finance sector:

  1. No dilution of equity: The first and most important factor which grabs your attention is the fact that via P2P Lending, securing funds do not mean your share of the company is diluted. If you were to accept funds from any private financer (equity based), your control over the company would be diluted. By accepting funds through debt, you are securing your control over the company’s future.
  2. P2P is a modern solution for business finance: Even if a business goes to a big bank with a functional idea of a brilliant new product and a fantastic business plan, they will still feel a lot of frustration as a result of the banks’ reluctance to lend. With online platform, applying for a loan becomes much easier and is a refreshing change. Most forward thinking entrepreneurs are now turning to P2P lending which can provide the right amount of flexibility that a start-up requires when it comes to securing funds.
  3. P2P Lending businesses understand start-ups: With Peer-to-Peer lending still relatively new to the market, alternative lenders in the space have faced many of the challenges that all start-ups must overcome. Therefore, with P2P lending there is a very high chance that you will be dealing with individuals who have a genuine and personal understanding of what you are going through.
  4. P2P Lending is fast: Companies who are successful in getting finances from mainstream sources still have to go through very slow and tedious processes which are not suitable considering the fact that these firms usually require a rapid source of finance. With p2P, the application process along with disbursal of the loan is extremely quick. Start-ups need this kind of speed and efficiency.


As Peer-to-Peer Lending is growing, a variety of borrowers are joining these platforms for very different reasons. Everything from a cell phone to a business can be funded on these platforms at loan rates and loan payoff duration decided by the borrower. The opportunities are endless.


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