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Peer-to-peer business lending

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


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Peer-to-peer lending (P2P) has been making strides since its introduction into New Zealand in 2014. While originally restricted to personal finance, P2P business loans are now available. What is peer-to-peer business lending, and how could it work for your new or established business?

What is P2P business lending?

Taking out a peer-to-peer loan means while you apply to a lender, eg Lending Crowd, your loan is financed by peer investor/s. 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 other lenders, 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.

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 usually need to be over the age of 18, and the company director/s will need to have a good credit history. The loan is risk-based as it is financed by investors, so the higher a risk you’re determined to be, the higher the interest rate will be. Once your application is accepted by the lender, it is posted for potential investors to see. One or several investors fund your peer-to-peer business loan until you receive the entire loan amount. You repay the the 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 usually find out if you’re eligible that same day or soon after.
  • Easy repayments. You don’t have to worry about making repayments on time, as they are paid via direct debit from your nominated bank account on the due dates.
  • Borrow and invest. Peer-to-peer lending features benefits for both business owners and investors. Investors have access to a new asset class that potentially yields high returns, and business owners can apply for an alternative source of business finance.

How you can compare your options

Finding a P2P lender that matches your business needs is important. No matter what the loan is for, keep the following points in mind when comparing your 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 available for new or established businesses.
  • Business eligibility. Does your business need to have been established for a certain period? Does it need to 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 also need to keep in mind upfront establishment fees, early repayment fees and 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.

What benefits and drawbacks come with these loans?


  • An alternate source of funding to traditional banks.
  • Business loans from peer-to-peer lenders may offer more competitive rates.
  • A quick application and fast turnaround time.


  • Interest rates vary depending on the information you provide in your application.
  • Regular repayments may not suit businesses with irregular profits or those that are seasonal.

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 won’t normally be given an interest rate until you submit your application, you can find out about application and ongoing fees on P2P business lender websites, to give you an idea of the cost of the loan. It’s also best to confirm your eligibility before submitting an 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.

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

Picture: Shutterstock

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