Editor's choice: Funding Circle business loans
- No minimum annual revenue
- No prepayment penalties
- Loans up to $500,000
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Peer-to-peer (P2P) loans can be a great asset to small businesses and startups looking for funding to expand, take on new employees or even cover day-to-day expenses. They tend to be friendlier to new and businesses that might otherwise have trouble qualifying for a bank loan.
While peer-to-peer (P2P) lending has been around for a long time, widespread use of the Internet, Zopa in the UK and Prosper in the US have led the way for P2P lending. This guide focuses on P2P lending for businesses.
A peer-to-peer business loan is a type of financing funded by investors instead of one direct lender. P2P business loan providers oversee of the loan's application process, underwriting and repayment but don't provide the funds themselves. Instead, investors finance loans in exchange for a portion of your interest.
Marketplace lending is another commonly-used term for peer-to-peer lending, though it's not entirely accurate. When you apply for a P2P, your application enters a P2P marketplace where one or more investors choose to fund your loan. However, marketplace lending is not restricted to investors. Business loan marketplaces can also include more traditional lenders as well.
$25,000 to $500,000
Starting at 4.99%
620+ personal credit score, 2+ years in business, for-profit business in an approved industry
$5,000 to $500,000
12.15% to 29.97%
12+ months in business, $50,000+ in annual sales, no bankruptcies or tax liens, at least 20% ownership of the business, fair personal credit score or better
From the borrower's perspective, P2P business loans tend to work like any other type of online loan. You fill out a pre-approval application, review your potential rates, apply and then get your funds. Some platforms are designed more like crowdfunding sites and require borrowers to set up a profile and pitch to investors themselves, but those are less common.
To get a P2P loan, you generally must agree to a hard credit check and disclose your business’s financials. The lender usually gives you an APR and a borrower grade, which your lender will determine based on factors like your business's credit score, your personal credit score and annual revenue. This credit risk score also helps the investors decide whether or not to invest in the loan.
Soon after you apply and are approved, your loan is funded. The actual process will differ between lenders, but usually you will repay the loan directly to the investors with the P2P lender simply facilitating the loan.
When you’re comparing peer-to-peer lenders to get a loan for your business, various aspects require your attention. These include:
The White House announced new changes to PPP loans, helping the smallest businesses and opening access to people with student loan defaults or nonfraudulent felony convictions.
Small lenders continue to offer a lifeline to small businesses for First and Second Draw loans.
Lenme connects borrowers to investors through its simple app.
A standard connection service that works with lenders that offer large loans.
The PPP wasn’t made with sole proprietors and independent contractors in mind. Here are other options that can help.
A lender who primarily offers loans to underserved small business owners.
Good if you want information on state regulations — but not transparent about other details.
You might be able to apply for more funding on your PPP loan, get a second PPP loan or take advantage of a new grant program.
Wise Loan may be an expensive choice, but it’s upfront about its costs.
This New York City nonprofit offers loans from $500 to $50K with rates fixed at 3% — regardless of your credit score or time in business.
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