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Peer-to-peer (P2P) business lending

Peer-to-peer lending: A new way to finance your business.

Peer-to-peer lending (P2P) has been making strides in Canada since Lending Loop first launched in 2015. While it was originally restricted to personal loans, P2P business loans are now also available. But exactly what is peer-to-peer business lending, and how could it help your new or established business?

What is P2P business lending?

Taking out a peer-to-peer loan means that while you apply to a lender, your loan will actually be financed by peer investors. The P2P “lender” acts as an intermediary for the loan, charging a fee for doing so. The application process works in a similar way to any other lender, but the source of funds come from a single investor or pool of investors. When it comes to repaying the loan, you repay the investors directly using the lender as an intermediary.

See if a P2P business loan is right for you

Name Product Interest Rate Loan Amount Loan Term Minimum Revenue Minimum Time in Business Loans Offered
Lending Loop Business Loan
Starting at 4.96%
$10,000 - $500,000
3 - 60 months
$8,500 /month
12 months
To be eligible, you must have been in business for at least 12 months and have a minimum of $100,000 in annual revenue.

Lending Loop is Canada’s first regulated peer-to-peer lending platform. Complete an application in 5 minutes. Once you accept your loan offer, investors will begin to fund your loan on the marketplace. Your loan will be transferred to your bank account when it is fully funded.

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How does the peer-to-peer business lending application process work?

Peer-to-peer business loans are available for a variety of business purposes. Applying for one of these loans still requires that you meet the lender’s eligibility criteria. You will usually need to be at least the age of majority in the province or territory in which your business is located (either 18 or 19) and the company director(s) will need to have good credit history.

The loan is risk-based as it is financed by investors. So, if you pose a high risk to investors, you’ll be charged a higher interest rate to make up for the increased risk that you won’t pay back the funds. Once your application is accepted by the lender, it’s posted for potential investors to look over.

One or more investors fund your peer-to-peer business loan until you receive your entire loan amount. You subsequently repay these investors directly, usually via direct debit.

What features do P2P business loans offer?

Peer-to-peer lenders typically offer these features:

  • Convenient application. Most lenders let you apply online in a few minutes. You’ll usually find out if you’re eligible that same day or very soon after.
  • Easy repayments. You won’t have to worry about making your repayment on time – repayments are direct debited out of your nominated bank account on the due dates.
  • Borrow and invest. There are features for both business owners and investors, with investors having access to a new asset class that could potentially yield high returns, and business owners having access to an alternative source of financing.

How you can compare your options

Finding a P2P lender that matches your business needs is important. No matter what you need the loan for, keep the following points in mind when comparing your loan options:

  • Loan purpose. Business peer-to-peer loans are available for a variety of purposes, but it’s best to confirm the suitability of the loan before submitting your application. Make sure to check whether the loan is only available for new or established businesses.
  • Business eligibility. Does your business need to have been established for a certain period of time? Does it need to be have a certain annual turnover?
  • Loan cost. The interest rate for a P2P loan is usually determined on a risk basis. This is calculated using the information you provide in your application. However, you need to keep in mind upfront origination fees, early repayment fees and any other fees that may apply.
  • Turnaround time. Will you be able to get the loan when your business needs it? Check the average turnaround time offered by the lender you’re applying with.

What benefits and drawbacks come with these loans?

  • An alternative source of funding to traditional banks
  • Business loans from peer-to-peer lenders can offer more competitive rates
  • A quick application and a fast turnaround time
  • Interest rates vary depending on the information you provided in your application
  • Regular repayments may not suit businesses with irregular profits or businesses that are seasonal. In this case, invoice financing or purchase order financing might be a better option.

Is there anything to consider before applying?

Before applying for any type of credit it’s important to compare your options and consider if the lender is right for you. While you generally won’t be given an interest rate until you submit your application, you can find out about application fees as well as ongoing fees to give you an idea of the cost of the loan.

It’s also best to confirm your eligibility before submitting your application if you are unsure about criteria. Once a loan is offered, compare it to conventional business loan rates to make sure you’re getting a competitive deal.

Bottom line

Peer-to-peer business lenders can offer a competitive source of business finance to consider, but it’s always best to compare your options thoroughly before settling on which funding avenue to take.

Peer-to-peer lending for consumers

Not sure if a P2P business loan is right for you? Compare these loan options instead

Name Product Interest Rate Loan Amount Loan Term Minimum Revenue Minimum Time in Business Loans Offered
SharpShooter Funding Business Loan
Prime pricing from 9.00%
$500 - $500,000
6 - 60 months
$10,000 /month
6 months
Unsecured Term, Merchant Cash Advance, Invoice Factoring
To be eligible, you must have been in business for at least 6 months with a minimum of $10,000 in monthly deposits.

SharpShooter provides capital to small businesses that are underserved by banks and credit unions. It measures overall business health and potential rather than focusing strictly on traditional metrics. Fill out a simple application and get pre-approved in minutes. Receive your funds within 24 hours.
OnDeck Business Loan
8.00% – 29.00%
$5,000 - $300,000
6 - 18 months
$10,000 /month
6 months
Secured Term, Line of Credit, Merchant Cash Advance
To be eligible, you must have been in business for at least 6 months with a minimum monthly revenue of $10,000.

OnDeck offers fast and simple financing. Apply in less than 10 minutes with your basic business information and see your loan offers without hurting your credit score. Get approved within 1 business day, and choose your term, amount and payback schedule once approved.
Loans Canada Business Loan
Prime Pricing from 9.00%
$2,000 - $350,000
3 - 60 months
$4,166 /month
100 days
Unsecured Term
To be eligible, you must have been in business for at least 100 days, have a credit score of 410+ and show a minimum of $4,166 in monthly deposits ($50,000/year).

Loans Canada connects Canadian small business owners to lenders offering financing up to $350,000. Complete one simple online application and get matched with your loan options.

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