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Best Peer To Peer Lending For Small Businesses

What Is Peer-to-Peer Business Lending?

Peer-to-peer (P2P) lending is a type of business financing in which a lender acts as a middleman between an individual or institutional investor, and the borrower. Borrowers who fall short of the qualifications necessary to be eligible for a traditional business loan may be more likely to secure funding through this style of lending.

How Peer-to-Peer Business Lending Works

During the peer-to-peer lending process, a P2P lender works to match a borrower with an investor who is interested in working directly as a lender. Investors may be individual or institutional, meaning that they’re part of a hedge fund, traditional bank or life insurance company. After submitting your application with the P2P lender, they’ll evaluate whether they want to share your application with their partnered investors.

If you’re approved during this initial step of the process, the P2P lender will post your application on a platform where investors can view and make a decision on your offer. The entire process usually takes around one to two weeks.

How To Get A Peer-to-Peer Business Loan

You can apply for a peer-to-peer business loan through an online application on your lending platform of choice.

Before starting the application, you should take a look at your credit report and make sure that there are no inaccurate remarks on it. Because your credit history is one of the biggest factors in a decision on any loan application, it’s vital to maintain as high of a score as possible. You’ll also want to have your business’ financial information and documents together before starting the application process.

It’s also important to review the standard requirements of the P2P loans that you’re applying for. Most lenders will require a personal credit score above 600, at least two years in business and a strong annual revenue. However, even if you have a credit score below 600 or just a year in business, there are still lenders that may work with you. Make sure  before you put in the time to fill out an application, that your financial qualifications line up with the eligibility requirements of the lender that you want to apply with.

In addition to credit and annual revenue, it’s also vital to have a strong business pitch due to the nature of P2P lending, where investors review your application before making a decision on whether to grant you funding or not.

How To Qualify For Peer-to-Peer Business Loans

Credit Score: To ensure your chances of qualifying for a P2P loan, it’s best to have a credit score above 600. However, some lenders may fund you if your score is as low as 550.

Time in Business: The majority of P2P business lenders require that you have at least two years in business. Some require just six months to a year to be eligible for a loan, but will fund young businesses at a higher interest rate.

Term Length: The length of your repayment term also impacts your interest rates. Generally, a shorter repayment term correlates to a lower APR.

Is Peer-to-Peer Business Lending Safe?

The safety of your P2P loan depends on the reliability of the platform you’re applying with. This type of funding is normally safe for borrowers, as long as they are applying through a reputable website.

Pros & Cons of Peer-to-Peer Lending

Pros

  • Easier for new businesses and borrowers with low credit to get approved than with traditional SBA or business loans
  • Competitive interest rates
  • Access to wide variety of loan types and amounts
  • Less time to fund than traditional bank loans

Cons

  • Slower to fund than other online lending options, with an average of one to two weeks before funds become available
  • Potential for much higher interest rates than with traditional business lenders
  • May have less flexible repayment terms than traditional bank loans

Best Peer-to-Peer Business Lending Options

Loan Amount:$5,000 – $300,000
APR Range:9.77% – 35.71%
Time To Fund:As quick as 2 days
Loan Term:One to five years
How To Qualify:620+ Personal Credit Score
$50,000 Annual Revenue
Great Option For:Good Personal Credit
Works With All Entities Including Sole Proprietors
Click “Check Rates” to apply to LendingClub

» MORE: LendingClub Business Loan Review

Pros:

  • Flexible loan terms, with terms of up to five years
  • Quick to fund, with loans becoming available within two days to two weeks
  • Easier to qualify for borrowers with average credit scores
  • One application gives access to several different lenders

Cons:

  • UCC-1 lien requirement for loans above $100,000
  • Potential for higher APR than with a traditional business loan, with rates ranging between 9% and 35.7%
  • Low maximum loan amount of $300,000

P2P Lending With LendingClub: LendingClub’s business loans can range up to $300,000, and are good for borrowers with average credit scores. This lender also offers rates as low as 9% for highly qualified borrowers. LendingClub’s products can be used for mid-sized business expenses, including equipment and supply purchases and refinancing old debts.


Term Loan
Loan Amounts$2,000 to $250,000
APR Range24.00% to 99.00%%
Repayment TermsUp to 3 years
Time to FundingTypically 1 – 5 days
Click “Check Rates” to apply to StreetShares

» MORE: StreetShares Business Loan Review

Pros:

  • Quick to fund, with funds becoming available within just one to five business days
  • Rates as low as 9%

Cons:

  • May not offer as many benefits or financing opportunities to individuals who are not veterans
  • Low maximum loan amount of $250,000
  • High maximum APR of 40%
  • Funding hits a maximum at 20% of the borrower’s annual revenue

P2P Lending With StreetShares: StreetShares is a P2P service that is specifically geared towards helping veterans who own business find suitable investors. While borrowers with bad credit may be offered annual percentage rates of 40%, highly qualified borrowers can secure rates as low as 9%.

Loan Amount:$25,000 – $500,000
APR Range:4.99% – 26.99%%
Time To Fund:10 days on average
Loan Terms:One to five years
How To Qualify:660+ Personal Credit Score
No Minimum Annual Revenue
Great Option For:Established Businesses, Not Sole Proprietors
Click “Check Rates” to apply to Funding Circle

» MORE: Funding Circle Business Loan Review

Pros:

  • Wide range of loans, with amounts starting at $25,000 and a maximum of $500,000
  • Flexible loan terms between one and five years
  • No minimum annual revenue requirement
  • Faster application and funding process than a standard SBA loan

Cons:

  • Slower to fund than other online lenders, with most loans funding within an average of 10 days
  • Difficult for new businesses to qualify, with a minimum of two years in business required to qualify

P2P Lending With Funding Circle: Funding Circle has slightly more stringent requirements than many of its online competitors, with a requirement of at least two years in business and a minimum of $150,000 in annual revenue. Their loans are also best for borrowers who can wait a few days to secure their funding, as some loans can take up to 10 business days to fund.

Conclusion

If you don’t have the qualifications to be approved for a traditional bank or Small Business Association (SBA) loan, it might be worth pursuing a P2P loan. Although this type of funding often has more stringent requirements than other forms of online lending, a P2P loan can also offer lower interest rates and more flexible repayment terms than other types of funding that can come with interest rates that soar into the triple digits. Remember to make sure to carefully evaluate the elements of any loan offer before accepting it in order to ensure that you find the funding that’s best for your business.

DISCLAIMER
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