Crowdfunding and peer-to-peer lending
What is peer-to-peer lending?
Peer-to-peer (or P2P) is a relatively new phenomenon in the business lending market.
A company seeks business loans by posting a kind of advertisement on a peer-to-peer site. Individuals can then choose to lend their money to one or more businesses through a kind of auction process where the lender offering the lowest interest rate on business loans wins the auction. Crowdfunding and peer-to-peer are really the same thing.
How does it work?
Normally, as a representative, you make an application directly to the companies offering peer-to-peer business loans in Sweden. Toborrow, for example, offers P2P loans to businesses. If your application is accepted, the company is posted on the P2P company's site and then the auction can begin. If all goes well, the company can get its money after deducting commission.
What are the benefits of peer-to-peer?
Businesses seeking business loans via peer-to-peer sites are often unable to obtain regular bank loans. Getting a loan is easier because the company does not have to pass the bank's risk committee. However, enough individuals have to be convinced. The application process compared to a bank loan is also relatively simple.
What are the disadvantages of peer-to-peer?
Although the process is smooth compared to the bank, it can still take a few weeks before the money is in your account. As the company borrows from many individuals, any problems with repayment risk directly affecting the people who lent the money.
Crowdfunding and peer-to-peer = business loans from the public
Read more
Growing concerns over peer-to-peer lending
The million dollar scam in Trustbuddy