Alternative Financing: Peer-to-peer Lending

Alternative Financing: Peer-to-peer Lending

Many small business owners find it challenging to obtain financing from banks or other traditional lending institutions. Peer-to-peer (P2P) lending is an alternative financing option changing the process of borrowing money by allowing businesses to pitch to an online audience of potential lenders.

Peer-to-peer Loan Process

In Peer-to-peer lending, small business owners complete an online application that factors in your credit score and debt-to-income ratio to determine your interest rate. Qualified small business owners receive a list of unsecured personal loan options to select from.

Small Business Benefits

Peer-to-peer loans typically offer credit at a lower rate, get the money faster often in a few days, and are less risky for lenders. Peer-to-peer lending offers fixed monthly payments, flexible terms, and no prepayment penalties, and no hidden fees.

Lender Benefits

Peer-to-peer lending benefits lenders who typically see a better return on investment in a growing billion dollar industry. Lenders are putting their money into one large loan they invest in a percentage of multiple loans. Peer-to-peer lending offers lenders a diversified portfolio with monthly cash flow. Lending standards have become more regulated since the Securities and Exchange Commission (SEC) required websites like and to register as securities in 2008.

Peer-to-peer lending is a new way of small business financing that is still being evaluated. It’s not available in all states and the rules and terms are changing constantly. It could be a great resource for new and existing small business owners and offers a viable alternative to traditional banks.

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