Peer-to-Peer Lending

Peer-to-Peer (P2P) Business Lending provides business loans from individuals, businesses and institutions, generally through online platforms. They’re an alternative to bank loans and can offer a different funding product with significantly shorter decision lead times.

In 2017, more than £1.78bn was lent to UK businesses through Peer-to-Peer Business Loan platforms

British Business Bank Small Business Finance Markets report 2017/18

Key requirement

You typically need a trading history, track record or security

Key benefit

Loan decisions are usually made quickly, sometimes instantly

Key consideration

Interest rates on Peer-to-Peer Loans are comparable to other business loans

What is Peer-to-Peer Lending?

Peer-to-Peer Lending is a fast-growing finance type in the UK where borrowers are matched with lenders via online platforms or through brokers offline.

Businesses complete an online form and answer questions about how the loan will be used, the size of the loan and how long you need it for, along with company information.

On certain P2P platforms decisions can be made almost instantly and the loan provided in as little as a couple of days.

The loan is repaid with interest through regular payments for the duration of the loan agreement and you may also have to pay an arrangement fee to the Peer-to-Peer platform if you receive a loan.

“Some of our quickest platforms can make decisions almost instantly but you are certainly looking at a decision within a matter of days or weeks.”

Quote logo Robert Pettigrew Director at Peer To Peer Finance Association

What are Peer-to-Peer Lending platforms?

There are several Peer-to-Peer Lending platforms in the UK and they operate in a similar way.

Businesses complete an online form, answer questions about their business and the loan they need before the platform matches them with suitable lenders. When you submit a formal application, Peer-to-Peer platforms will conduct credit checks.

Loans can vary in size between platforms and, depending on the size of the loan required and the business’ profile, lending can be unsecured driven by the business’ cashflow generation, or lending could be secured against assets.

Each Peer-to-Peer lender has its own appetite to risk, so if you do get rejected by one, you may still be approved by another.

“For general enquiries, i.e. pre-application enquiries about P2P, any credit search will be a soft one, which can be relevant and useful to businesses because they can explore options without risking it impacting on their credit scoring.”

Quote logo Robert Pettigrew Director at Peer To Peer Finance Association

Peer-To-Peer Lending regulations

The Peer-To-Peer Lending industry is regulated by the Financial Conduct Authority (FCA).

As an FCA regulated industry, Peer-To-Peer Lending platforms need to meet certain requirements. They must be clear and transparent, and not misleading.

For most, that means publishing lots of information about the risks and rewards involved in P2P Lending, including performance information and how this compares to expectations.

Benefits of Peer-to-Peer Lending

Wide range of platforms

Small to large loans catered for

Secured and unsecured loans

Simple, straightforward process

Decisions made quickly

Retain full control of your business

Access finance quickly

Risks of Peer-to-Peer Lending

Interest rates

Interest rates for Peer-to-Peer loans may be higher than Business Loans.

Your credit report

Your credit report may be affected when you apply for a Peer-to-Peer loan, depending on the platform. Late or defaulted payments may also impact your credit report.

Charges and fees

Charges and fees may apply for arranging the loan. Charges and fees may also apply if you miss payments or repay your loan early.

Defaulting

If you default on a Peer-to-Peer loan, the provider may pass the loan on to a debt collection agency or it may go to court. Your credit report may also be affected.

Need to know / Checklist

  • What’s the interest rate on the loan?
  • What’s the capital repayment profile?
  • What fees are involved?
  • How long is your loan?
  • Are there charges for early repayment?
  • Are there charges for missed payments?

Key considerations for Peer-to-Peer Lending

  • Do you know how much money you want to borrow?
  • Are you clear in how you will use the loan?
  • Do you know how long you want the loan for?
  • Can you afford the loan repayments, interest and platform fees?

About your business

Business stageEstablished with a trading history
Annual turnoverAny
SectorsAny
RegionsAny

What's your next step?

Other finance options

Venture Capital
Equity
Venture Capital invests in businesses with high growth potential, often after Angel investors have got the business started.
Is this suitable for your business?
{"mTitle1":"VENTURE CAPITAL","mTitle2":"Investors like","mPara2":"Early stage businesses, regardless of whether they have made a profit or revenue, with an annual turnover of less than £3m.","mTitle3":"You're looking for","mPara3":"Significant growth and £1m+ of finance within six to 12 months with the option for multiple funding rounds.","mCTATxt":"FIND OUT MORE","mCTAUrl":"https://www.british-business-bank.co.uk/finance-hub/venture-capital"}
{"section1Name":"ABOUT VENTURE CAPITAL","section1CTA":"LEARN MORE","section1URL":"/venture-capital","section1LearnTitle":"Discover more about ","section1LearnAria":"Discover more about Leasing & Hire Purchase","section1Rows":{"row1":{"Title":"Purpose of finance","Content":"Acquisition; research and development"},"row2":{"Title":"Amount of finance","Content":"£1m+, depending on funding round"},"row3":{"Title":"Duration of finance","Content":"5-10 years"},"row4":{"Title":"Cost of finance","Content":"None"},"row5":{"Title":"Time to finance","Content":"6-12 months"}},"section2Name":"ABOUT YOUR BUSINESS","section2CTA":"LEARN MORE","section2URL":"/venture-capital","section2Rows":{"row1":{"Title":"Business stage","Content":"Early stage; no revenue or profit needed"},"row2":{"Title":"Annual turnover","Content":"Depends on the business, but is often below £3m"},"row3":{"Title":"Sectors","Content":"All"},"row4":{"Title":"Regions","Content":"All"}},"applyItems":{"item1":{"txt":"view the journey to finance","url":""},"item2":{"txt":"view the application checklist","url":"https://www.british-business-bank.co.uk/finance-hub/venture-capital-checklist"}}}
Equity Crowdfunding
Equity
Using an online platform, investors buy shares in a company to help it grow.
Is this suitable for your business?
{"mTitle1":"EQUITY CROWDFUNDING","mTitle2":"Investors like","mPara2":"Businesses of any size who sell their product or service in a compelling way on Crowdfunding platforms.","mTitle3":"You're looking for","mPara3":"Either large or small sums of finance to create new products, for acquisition, to develop products, fulfil projects or enter into new markets.","mCTATxt":"FIND OUT MORE","mCTAUrl":"https://www.british-business-bank.co.uk/finance-hub/equity-crowdfunding"}
{"section1Name":"ABOUT EQUITY CROWDFUNDING","section1CTA":"LEARN MORE","section1URL":"/equity-crowdfunding","section1LearnTitle":"Discover more about ","section1LearnAria":"Discover more about Leasing & Hire Purchase","section1Rows":{"row1":{"Title":"Purpose of finance","Content":"Creating new products, acquisition finance, product development, project fulfilment, entry into new markets"},"row2":{"Title":"Amount of finance","Content":"Up to £4.3m without a prospectus, higher with a prospectus"},"row3":{"Title":"Duration of finance","Content":"Dependent on the business being funded"},"row4":{"Title":"Cost of finance","Content":"This is platform specific. Platforms often charge a success fee (usually a percentage of the amount raised) with a listing fee. Others will charge a percentage of profit"},"row5":{"Title":"Time to finance","Content":"Once your documents are in order, it can take as little as a month"}},"section2Name":"ABOUT YOUR BUSINESS","section2CTA":"LEARN MORE","section2URL":"/equity-crowdfunding","section2Rows":{"row1":{"Title":"Business stage","Content":"Pre-revenue through to more established businesses"},"row2":{"Title":"Annual turnover","Content":"Any"},"row3":{"Title":"Sectors","Content":"Any"},"row4":{"Title":"Regions","Content":"Any"}},"applyItems":{"item1":{"txt":"view the journey to finance","url":"https://www.british-business-bank.co.uk/finance-hub/wp-content/uploads/2018/04/Equity-Crowdfunding.pdf"},"item2":{"txt":"view the application checklist","url":"https://www.british-business-bank.co.uk/finance-hub/equity-crowdfunding-checklist"}}}
IPO
Equity
An IPO (or Initial Public Offering) is when a business sells shares via the public markets, such as the Main Market or AIM operated by the London Stock Exchange.
Is this suitable for your business?
{"mTitle1":"IPO","mTitle2":"Investors like","mPara2":"Established and growing businesses, with predictable revenues and a proven track record. Smaller companies, including those who are pre-revenue, can also be attractive depending on the proposition. ","mTitle3":"You're looking for","mPara3":"Unlimited equity capital. Up to £200m on AIM or even larger sums on the Main Market and exposure to a wider pool of investors.","mCTATxt":"FIND OUT MORE","mCTAUrl":"https://www.british-business-bank.co.uk/finance-hub/ipo"}
{"section1Name":"ABOUT IPO","section1CTA":"LEARN MORE","section1URL":"/ipo","section1LearnTitle":"Discover more about ","section1LearnAria":"Discover more about Leasing & Hire Purchase","section1Rows":{"row1":{"Title":"Purpose of finance","Content":"Acquisition, product development, new markets"},"row2":{"Title":"Amount of finance","Content":"Up to £50m on AIM; unlimited on the Main Market"},"row3":{"Title":"Duration of finance","Content":"10 years +"},"row4":{"Title":"Cost of finance","Content":"You will need to appoint an accountant, a law firm and usually a PR firm. Assume this will cost 8% of the amount you hope to raise"},"row5":{"Title":"Time to finance","Content":"IPO processes takes 10-12 weeks; but planning and negotiations can take 12-18 months"}},"section2Name":"ABOUT YOUR BUSINESS","section2CTA":"LEARN MORE","section2URL":"/ipo","section2Rows":{"row1":{"Title":"Business stage","Content":"Established and growing"},"row2":{"Title":"Annual turnover","Content":"Over £5m; this does not apply to healthcare businesses"},"row3":{"Title":"Sectors","Content":"All sectors; healthcare and tech may be able to list earlier in their lifecycle than other sectors"},"row4":{"Title":"Regions","Content":"All"}},"applyItems":{"item1":{"txt":"view the journey to finance","url":"https://www.british-business-bank.co.uk/finance-hub/wp-content/uploads/2018/04/IPO-Journey-Infographic2-purple-yellow-teal.pdf"},"item2":{"txt":"view the application checklist","url":"https://www.british-business-bank.co.uk/finance-hub/ipo-checklist"}}}