How Does the Peer to Peer Business Loan Mechanism Work?
While there are variations, the standard P2P Business lending practice is to acquire a set of qualified investors who want to lend money directly to qualified individuals.
The P2P companies act as brokers, but with much easier terms than traditional bank lending programs. Because there is no middleman and often no shareholders to pay, the rates and terms can be favorable to both lender and borrower, fueling economic growth according to the needs of real businesses.
What Risk is there Within Peer to Peer Loans?
Like any new financial product, some wonder about the security of P2P. But since its inception, the UK P2P industry has grown to be regulated by the FCA and the SEC (in the US).
How do P2P Companies Hedge Without Securities?
All P2P lenders have some minimum requirements for borrowers, to prevent default, but some are more lenient than others. The most secure brokers provide insurance to lenders against borrower default, but most prevent it from ever occurring by ensuring that businesses can handle the loans that they are issued.
The P2P Boom in the UK and US
With the UK leading the way, the P2P e-commerce market has become the fastest growing lending format in the developed world. UK companies like ZOPA boast nearly a billion pounds in total loans issued, on their own. The US tends to have a different spin on the model, with frequent cash and invoice options appearing in the dozen, but the model is becoming more well known. The UK P2P industry is valued at over £2 billion as of 2015.