June 20th, 2017.

Sometimes referred to as crowd lending, peer to peer lending offers businesses the opportunity to borrow money from a ‘crowd’ of people (investors) rather than an institution.

It works by offering people a platform where they can lend their money to businesses in return for competitive interest rates.

The platforms source, credit-check the potential borrower, facilitate the loan and automate (as much as possible) the process of lending and borrowing (inclusive of the legal and regulatory requirements) and take a fee or commission for doing so.

Of course, this is what the banks have always done with savers’ money; there is nothing new about the process. What is new is the technology that facilitates this and keeps overheads down for the peer to peer lending platforms. This, in turn, means that the platforms can generally offer more attractive interest rates to investors and attractive repayment rates to businesses taking the loan.

However, in all other respects, peer to peer business lending is the same as borrowing money from a bank. There are credit checks, businesses need to have their financials to hand and prove that they are able to meet repayments. Loans can be secured against property of the business or the individual, or unsecured. Whilst the process can be faster than with the banks, that isn’t necessarily the case; businesses that submit insufficient.....

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