The world economy has been passing through a period of recession because of the pandemic. So, the alternative methods of earning profits and generating cash for fulfilling the small business requirements have emerged over time. P2P lending is one such innovation that serves investors and borrowers worldwide to benefit from each other financially.
How the P2P Platform Serves Lenders and Borrowers?
After visiting a P2P lending website, people tend to register on it. When the platform joining process is complete, typically borrowers need to fill an application form on the platform. Alongside applying, the borrower also provides plans about spending the money they will receive from the Peer to Peer lending portal. At this point of the borrowing procedure, the loan approval committee determines if a loan application is valuable and in line with the borrower’s investment plans. So after approval of the loan application, the approval team posts it on the Peer to Peer lending website, making it viewable by all lenders. A loan application is viewable until the borrower has been completely paid the loan. Or it stays visible till the time it is withdrawn by the borrower or the P2P lending portal.
Individuals all over the world are trying to launch small businesses to become financially independent. The P2P lending platforms are serving them in materializing their dream. The Peer Peer lending system is undoubtedly very profitable, but it has its advantages and disadvantages for small businesses. We are outlining them in this post.
Advantages of P2P Lending for Small Businesses
In contrast to borrowing money from a conventional lender, P2P loan application and provision are carried out quickly. As a result, the majority of loan applications are accepted or rejected immediately. Usually, the review team responds in two weeks to the loan applications after the approval phase. Furthermore, P2P lending’s collective investment strategy secures the lenders against the higher amount of losses. Fortunately, small businesses usually take advantage of the entire strategy because of ease in gaining money, even with a below-average credit score.
Moreover, some of the important benefits of P2P lending are that there is almost no paperwork for receiving the loan, so there is no need to visit any office or loan officer. Also, one of the benefits of Peer Peer lending is that it offers an easy acceptance process to borrowers as compared to banks. The P2P lending model offers easy and simple services to clients. For example, the majority of P2P lending portals are reachable from specifically-built mobile apps. That means lenders can have a quick view of the profits they have gained from the funding they have made, along with the new investment opportunities. At the same time, the borrowers can inspect interest rates and application progress with the help of the internet.
Disadvantages of P2P Lending for Small Businesses
Besides its benefits, the Peer to Peer lending system is based on a comparatively new financial concept that requires in-depth regulations. That means the lenders may not effectively find out the risk related to the non-repayment of the loan before giving it to the borrower. Also, it is important to learn that borrowing money from P2P lending portals can negatively affect your credit score. Since most of them are set up to provide loans to individuals instead of small to medium size companies. That is vital because a below-average credit score will lead to strict terms when reaching out for financial assistance from standard lenders like banks.
The Outcome of the Post
The P2P lending business concept is based on an innovative money-raising model that facilitates business owners in receiving funds from the investors’ community. Some important perks of P2P lending consist of the least paperwork for receiving loans, lesser interest rates, low chances of application disapproval, simple client experience, and fast loan granting. On the other hand, the disadvantages may range from fewer regulations to no person-to-person meetings and the increasing possibility of a below-average credit score. Besides these disadvantages, the Peer to peer lending network is progressing fast throughout the world.