4 Reasons Small Businesses Should Rely on Peer-to-Peer Lending
Some small businesses get their start using nothing more than personal savings, but not all of them are so lucky. If you need a cash injection to stay afloat, expand, or simply get going, you’ll probably be thinking about how to approach your bank. However, going with a bank isn’t your only option. Instead, why not think about peer-to-peer lending?
Peer-to-peer lending means you get your money from a network of peers rather than a traditional financial institution. Real people put in small amounts of money and get interest when you pay that money back. It might sound like an odd idea, but it comes with several compelling benefits, and here are just four.
- Easier Application
Small businesses often get turned down by banks, and that usually happens through no fault of their own. The problem is that banks don’t have the resources to read through every application, so loans are often rejected based on cookie-cutter principles. In contrast, peer-to-peer lending sites can better peruse your application. You’re far more likely to be accepted.
- Lower Interest Rates
You’ll be paying interest on your loan whether you get it from peer-to-peer lending or a bank, but interest rates are usually far more reasonable when you choose peer-to-peer. There are a few reasons for this, but the most important is that peer-to-peer lenders have little in the way of overheads, so they can usually undercut banks when it comes to interest rates and repayment terms.
- Added Flexibility
When you borrow from a bank, your repayment plan is more or less set in stone. With peer-to-peer lending, things are a little more flexible. If you want, you can make overpayments or pay off the entire balance early without facing any fees. This is a great way to save on interest, which is why banks usually charge high early repayment fees to discourage borrowers.
- Ideal for People with Good Credit
Most people who need money for a small business already have good credit – small business loans are usually turned down because banks don’t understand the viability of the business itself. Peer-to-peer lending is a great option for people with good credit because a healthy credit score means more to those lenders than it does to a bank.
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