Why SMEs Should Choose P2P instead of Traditional Banking. 

If you are a small business or planning on starting up a business, you are more than likely aware of the difficulties of getting a business loan. Traditional banking both for business and personal loans involve long processes and procedures, making it difficult and strenuous. Which is why more businesses are leaning towards P2P Lending platforms.  

Peer-to-peer (P2P) lending also known as person-to-person lending is an alternative to the traditional way of taking loans which are becoming more popular with SMEs due to its benefits and offers. In banks, the loans are given and disbursed from the bank assets, which are in actual fact deposits made by their customers. With P2P lending, borrowers get directly connected with investors via different lending platforms. The investors select the business in which they want to invest in and provide them with a line of credit.  

These loans vary from personal lending to small business loans. Even though some companies restrict what type of people can invest, but there are companies that are open to everyone, as long the account minimum amount is met.

It was the drawbacks of good ole bank loans that gave rise to peer-to-peer lending making it one of the most popular platforms amongst both the borrowers and investors.  Let’s look into the benefits that P2P offers both to lenders and borrowers:

Benefits for Investors:

No Middlemen:

If you are an investor looking to both save some money and earn some money, a deposit is a good way to go. However, the rules for bank deposits and with a P2P platform are a little different. With a P2P platform, you know where your money is at all times, that you are helping someone with your investments, plus the interest rates and the amount is decided directly by the investors and borrowers without any interference.

Stability:

If you are looking for a safer option, then P2P offers that to you. P2P lending is much safer and comes with minimal risk compared to the risk of investing in other investment options like equity markets which come with a higher risk factor. 

A steady source of passive income

Who doesn’t like a passive income?  A passive income is the earning you get without putting any effort and which comes in a regular interval and it is up to you to reinvest, use it or save it. With P2P lending you start generating a passive income along with the payments of your loans based on the interest rates fixed against the loan.

Helping SMEs and leaving your mark:

Money takes an essential role in our everyday lives. Whether it’s getting a dream house or paying employee wages, everyone needs it for something. SMEs especially need P2P lending platforms to stay afloat and better their business. Not only are you investing your money for the gain of passive income, but you are also investing in the potential of SME’s and the future of the economy. 

Benefits of P2P Lending for Borrowers 

More flexibility:

Banks have their business and branch models to follow, which often means they are reluctant to give out smaller loans. Businesses looking to borrow below the minimum limit are out of luck with the loan flexibility. Therefore P2P lending platforms are better suited to these SMEs. On a P2P platform, the financing amount can be smaller or larger and can be more flexible with their risk assessment. 

Online Platform:

Much like the rest of the world, lending platforms, banks, applications and the such, has moved online. P2P Lending is a facility that uses online application processes that you can engage with any time and anywhere, with the help of the internet. There is no need to wait in queues or leave the comfort of your home. 

P2P lending has been making a tremendous mark in the financial sector and the economic growth with the help of dozens of borrowers and investors who are contributing to the growth of this industry. Today P2P financing is a multibillion-dollar industry with an impressive increase in growth expected to happen. 

 

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