The Inner Workings & Benefits Of P2P Business Lending

P2P lending is defined as a type of financing that is funded by investors rather than being sourced through a single direct lender.

In this type of lending, the P2P platform oversees the application process and the repayment schedule. However, the actual funds are financed by investors, who get a portion of your interest payments. 

Keep reading to uncover the key benefits of P2P business lending, the major considerations, as well as the disadvantages of this type of funding for businesses and individuals seeking alternative types of financing and unsecured loans online.

The Benefits of P2P Business Lending

The key benefits of P2P business lending are as follows:

  • The biggest benefit is that the application process has a very short turnaround time. P2P business loans can be arranged within a few minutes.
  • Another key benefit of this type of financing is that the loans can be used flexibly for multiple purposes. 
  • Additionally, the term of such loans can be fairly long. The typical terms of such loans can be up to 60 months, making P2P lending suitable for both short term loans and more medium-term borrowing.

Making An Idea Into A Reality

P2P business loans could also prove to be very useful if you have not yet started your business and simply have an idea. For example, you have a business idea related to a travel portal that eases the booking process. However, you do not have a recorded business history, so getting a traditional loan may not be easy for you. Additionally, the time taken to process such a loan could be far too long, resulting in potential delays to your plan. 

In such a scenario, a P2P business loan could be the best solution for you with quick access to funds and a longer repayment term. You would be able to put the funds towards building your platform, buying equipment, or paying staff costs. Still, it is important to note that some P2P lenders require a minimum time in business that is usually between one to two years, and many will not fund startups.

Factors To Consider When Comparing P2P Loans

If you are looking to raise funds via P2P loans, then you need to consider the following five factors:

  • Keep track of the interest rate you need to pay on the loan. Different lenders charge different interest rates, and you need to choose the one that is the lowest and ensure it reflects your financing needs.
  • Choose the P2P loan that has the most suitable repayment period according to your financial circumstances. These terms may range from 12 months to 60 months.
  • The loan amount that you could receive is an important factor. Different lenders tend to have varied limits and minimums.
  • Be sure whether or not you are opting for a type of online secured loan. If the loan requires you to pledge collateral that you do not have, then you will have to reconsider the financing option.
  • Pay attention to the additional fees, penalties, terms, and conditions that may be attached to the loan.

P2P Business Loan Advantages

There are numerous benefits that accompany a P2P business loan including the following:

  • There are multiple P2P lending platforms available online so you can easily compare options. Most platforms ensure the entire application and disbursement process is highly streamlined.
  • P2P loans can help you expand your business rapidly. These types of loans tend to come with fewer stipulations and can be used for various purposes.
  • Loan rates and terms are generally more attractive when compared to traditional bank financing which typically features more stringent underwriting requirements and higher annual percentage rates (APRs).

P2P Business Loan Disadvantages

As with any loan, P2P business loans feature several potential drawbacks for borrowers:

  • The fees charged for such loans tend to be quite high compared to traditional loans. This is because the process is facilitated via platforms that make their money from these margins.
  • Another key disadvantage is that P2P business loans require good creditworthiness. If you do not have a strong credit history and score, then you may have to settle for a much higher APR.


P2P business loans offer a range of benefits for small business owners seeking financing. These loans can be used for various needs, whether that is to seek out online equipment financing or to pay the wages of your employees. 

Although P2P business loans do carry certain disadvantages, if you meet the criteria and have the ability to pay back the debt as laid out by the loan agreement, they can prove to be a great alternative to traditional bank loans which are typically much costlier.