SMEs around the world, including Malaysia, face the same major issue: lack of financing. Without the necessary funding, SMEs find it difficult to grow. Many SMEs choose to apply for bank funds to secure working capital financing. While bank financing can be a good solution for SMEs, it isn’t always easy to get. These days, peer-to-peer (P2P) financing have become a convenient and suitable alternative source for SME working capital.
Basically, P2P financing matches creditworthy SMEs seeking short-term financing and investors via an online platform. Investors will collectively fund the financing needed by these SMEs. This business model usually results in quick disbursement.
Are you considering getting working capital through the P2P financing model? Here are four reasons why SMEs should consider P2P financing.
Easy application, less hassle
As stated above, P2P financing uses an online platform to facilitate the funding process. It allows you to apply for financing anytime, anywhere as long as you have access to the Internet. Once you find a trusted P2P financing platform, you can register for an account and fill in the online application form. The P2P application process tends to be more streamlined; often, you can complete the application within minutes – depending on the P2P platform you choose. Most P2P platforms also promise quicker approval times.
SMEs using P2P financing tend to get their funds much quicker than other financing models. That’s because investors collectively pool their resources together to fill up your financing needs. Smaller financing needs can be filled to completion in a few days, sometimes even in a few hours.
Attractive interest rates
P2P financing tends to require no collateral, yet the interest rates charged are competitive with other financial institutions on the market. Moreover, you can propose your desired interest rate and repayment period before the assessment process. Of course, the interest rates ultimately offered will be based on your business’ capacity to repay the financing. But if you build a reasonable and logical financial plan, you may just get your desired interest rates and tenor approved!
Identity remains anonymous
When issuers apply for P2P financing, they give information to the P2P platform – the P2P platform will not pass personal information to investors. In other words, your identity remains anonymous to your investors and they won’t contact you directly. However, some P2P platforms do reveal the identity of the SME to investors who have provided the financing after successful disbursement.
It’s definitely your call to choose which financing model is best for you. But you cannot deny that P2P financing offers several advantages to small businesses. Just make sure you pick a credible P2P financing platform. If you handle your initial P2P funds responsibly, you can apply for additional financing in the future. So as always, good luck!