Skip to content

Top Benefits of Peer to Peer lending for Startups

    Benefits of P2P lending for startups



    Top Benefits of Peer to Peer Lending for Startups


    The startups and established small businesses are seeking additional funding which is too small for an investor in order to get a return for their effort. Banks also contemplate that it is not worth their time.

    It is however noted that the amount required might be too much to be financed on a credit card or the entrepreneur might not want to use that type of method. This is when peer to peer lending platforms come into the picture – they work to bridge the gap. This type of a model is an impeccable solution for the many small businesses who are struggling to tap into smaller funding amounts.

    Peer to peer lending is basically about borrowing money from peers which include other business people as well as investors who are interested in lending small amounts.

    This mode of lending has developed during that period of time when the recession environment had killed all the loan opportunities for small businesses.

    There was new software technology which was built on the marketplace framework where the software matched the willing investors with borrowers.

    Peer to peer lending has made it possible to get any type of loan and also pay it back once the recipient has begun to thrive and grow. Because of this lending environment, it has kick-started the economy and has also brought it back to life.

    P2p lending has been expanded with a lot of companies who serve the needs of the startups as well as small businesses.

    Why should you consider peer to peer lending?

    The immediate benefit of a p2p loan is that there is no requirement of collateral. The lower interest rate is largely based on the credit score, loan term and the loan amount. The peer to peer lending platforms operate with a lower overhead.

    The loan can be repaid early and there are no prepayment penalties. Because of the online loan lending environment, there is faster approval and no paperwork and there is only a requirement to fill the online forms.

    Once the user borrows and repays the loan, there will be an opportunity to continue using the p2p lending connection in order to tap additional funds later when there is a need for additional capital. This accessibility can help the person achieve their business goals and aid in quick dispatch of the loans.

    P2p lending for startups is an excellent alternative compared to a traditional loan from a bank because it is well suited for startups and small businesses.

    Below are its advantages:

    1. Quick access to funds

    The money can be used immediately after it is received. The interest is only paid on the funds used, so the amount will be taken only when it is needed.  On the other side, there is no obligation to take the funds because if something happens, there is no requirement to pay anything.

    Through the p2p platforms, there is a convenient way to access the funds through the desktop or mobile application. The borrower can select the amount to be borrowed, review the repayment schedule and then get the money transferred to the bank account within 1 to 3 business days.

    1. The best interest rate

    The borrowers get to decide the interest rate where the investor will estimate as to whether they want to invest on the type of loan. Though investors are more driven for the higher interest fee, if the lender demand is high, the borrowers can get funds with a lower interest rate than which is initially set.

    The p2p platform sets the interest rate according to the specified requirements. The rate is affected by credit grade, loan period and other parameters which might affect the rate and will be used for all borrowers with the matching requirements.

    There are more advantages of P2P like quick online application, fixed monthly payments, quick personal loans, fast access, no early payment fees and flexible use of money.

    The p2p niche is expanding and is perfect for small to medium sized businesses, leading platforms like Finzy, in this context, is the right fit.