business loan<\/a> companies aim to make this easier than ever. These firms provide a platform to link investors looking for bank-beating returns with businesses seeking competitively priced loans. The theory goes that cutting out the middleman (i.e., the high street bank) reduces a lot of overhead, and these savings can be passed onto customers.<\/p>Other than competitive rates, what are the advantages for businesses looking to borrow?<\/h3>
Because the P2P platforms are all relatively new and well-versed in using smart tech to deliver an efficient service, the application process for a peer-to-peer loan is typically very streamlined and straightforward.<\/p>
The approval process can often be largely automated, using algorithms that assess your situation and risk by considering a range of data points. That means you won’t have to sit down for hours on end with the bank manager. It may<\/em> also mean that decisions can depend on more than just your credit score.<\/p>What are the disadvantages for businesses looking to borrow?<\/h3>
Some (but certainly not all) peer-to-peer lenders may be more risk-averse than traditional lenders. That’s because they rely on investors coming back to them time and again, which won’t happen if they lose their money. If you’re deemed a risky prospect, there’s no guarantee you’ll receive a market-leading interest rate or that investors will be found for you.<\/p>
Depending on how the P2P platform operates, successful applicants may need to wait until enough willing investors have come forward to fund their loan fully, which could mean an indefinite delay. If time is of the essence, check how the lender you’re considering handles the funding process.<\/p>
Some P2P lenders may charge a fee if you repay your loan early to try to recoup platform running costs and lost earnings for investors.<\/p>
What loans are available?<\/h3>
Businesses that successfully apply for a peer-to-peer loan usually receive a lump sum and make monthly repayments (including interest). It’s sometimes possible to borrow on an interest-only basis, paying interest each month and then interest plus the capital at the end of the term.<\/p>
Peer-to-peer loans may be secured or unsecured. The typical term ranges between six months and five years, and your interest rate and monthly payments are fixed.<\/p>
Is my company eligible?<\/h3>
Each provider has its own minimum eligibility criteria, but you’ll typically need to be a sole trader, director of a limited company or owner of a limited liability partnership (LLP). Often, you’ll need to provide at least two years of business accounts, and you may only be considered if your turnover is above a specific amount.<\/p>