Why is P2P Lending Ideal for Small Businesses?
Small businesses are usually hard pressed for funds. Banks have most commonly been the borrowing platforms but now peer-to-peer (P2P) lending is gaining popularity. This is not without strong reasons. Let’s find out what exactly P2P lending is and why it is an ideal choice for small businesses.
About P2P Lending
In its essence, P2P lending involves an individual borrower and an individual lender. The lender may be in contact with an investment band or a hedge fund but the borrower is only in contact with the lender. It is the lender’s job to talk to the investors and convince them. Once the investor agrees, the lender will wire the amount to the borrower’s account. The borrower repays the lender and it is up to the lender to handle everything in relation to the investor.
Now, why would you need a third party individual to take care of your borrowing needs? How is it better than getting in touch with the investor directly? How does it benefit small businesses? Is it really a superior choice? Turns out, it is. And, there are several reasons behind it.
Reason One: It Is Faster
One of the biggest issues for small businesses is time. They have urgent needs for finances and resources. Approaching investors takes a lot of time and hard work, which could be utilized in other operations. Plus, unless the funds start flowing, one really can’t do anything. With P2P lending, the cumbersome process is taken care of and it is quicker.
A P2P loans usually takes only a few hours. The regular process takes much, much longer.
Reason Two: No Hidden Costs
Small businesses are not unaware of scams that cause them to lose money and time. They often fall prey to hidden costs and terms that they weren’t aware of at the start or while agreeing with the lender. P2P lending eliminates all these concerns. P2P loans do not come with additional strings attached. They are transparent and are aimed at helping small businesses.
The only thing to keep in mind while going for P2P lending is choosing a good platform. Your choice makes all the difference.
Reason Three: More Likely To Understand Your Concerns
P2P is new and fresh in the market. This means that these lenders have been/are in your shoes in many ways. They know for a fact that starting up comes with a huge set of challenges. This is why it is plausible that you will get in touch with someone who is authentic and understands how startups work. This level of understanding will ease your headache and smoothen the process considerably.
Reason Four: You Don’t Have To Worry About Collaterals
Collaterals cause a number of startups to struggle. Having to show that you have money in order to borrow money is a significant reason why SMEs have issues in the early stages. With P2P lending, this is another issue that’s taken care of. You don’t need to worry about collaterals and other issues. All you need is good credit score.
P2P lending has surfaced as a leading way of acquiring loans for startups since it is hassle-free and reliable. Thus, hands down, it is the ideal way to go.
Ashish Katkar
Ashish is Managing Director @ Verinite. His passion is to build a next generation technology company focused on BFSI industry in emerging economies. An ardent Arsenal, Amitabh, Kishore Kumar and Sachin Tendulkar fan.
