Peer-to-peer (P2P) lending is a form of financing that removes traditional institutions from the loan process and utilizes an online forum where lenders can offer capital. This type of financing, also known as “marketplace lending,” is facilitated through a single or a collective lending pool to fulfill a borrower's financial request at an agreed upon sum for a specific rate. Lenders can earn higher returns compared to savings and investment products offered by banking institutions, while borrowers acquire capital that otherwise takes more time or has been denied through traditional financing.
IS PEER-TO-PEER RIGHT FOR YOUR BUSINESS?
The system is not without its drawbacks. In order to compensate lenders for the risk that they are taking, the interest charged for peer-to-peer loans is likely to be greater than a traditional business loan. Additionally, the investor personally assumes the risk that the borrower might not reimburse their funding.
Peer-to-peer loans offer some value as a borrower but the lack of structure can be unsettling to lenders and require more time to find the optimal financing route. SnapCap has less hurdles than traditional banking institutions while offering a quicker turnaround time than most peer-to-peer funding options. Be sure to thoroughly consider the best financial partner for your business and start constructing a solid, working relationship.