Peer-to-peer (P2P) lending is a fast-growing type of finance in the UK.
It works by matching borrowers with lenders via online platforms or offline brokers.
You fill in an online form and answer questions about how your business will use the loan, the amount you want to borrow, and how long you need the money for.
You also need to provide certain company information.
On some P2P platforms, a decision can be made almost instantly, meaning you might receive the loan in as little as a couple of days.
If you receive a loan, you might first need to pay an arrangement fee to the P2P platform.
Then you pay back the loan, with interest, by making regular repayments for the duration of the loan agreement.
There are several peer-to-peer (P2P) lending platforms in the UK and they all operate in a similar way.
You complete an online form, answer questions about your business and the loan you need.
Then the P2P platform matches you with suitable lenders.
When you submit a formal application, the platform will conduct credit checks.
Loans can vary in size between platforms.
Depending on the amount you need to borrow, and your business’ profile, the lending might be:
- unsecured, and driven by the cashflow your business generates
- secured, with you putting up assets as security
Each P2P lender has its own appetite to risk. So, if one lender rejects you, it doesn't mean another lender will too.
Wide range of platforms
You should be able to find a lender that closely suits your needs.
Small to large loans catered for
The flexibility of this type of funding means you shouldn't have to borrow more or less than you need.
Simple to borrow
The lending process is straightforward and decisions are made quickly, meaning you receive the money with little delay.
Retain full control of your business
There's no obligation to surrender ownership of part or all of your business, as there is with other types of finance.
These can be higher for peer-to-peer loans than for standard business loans.
Because lenders conduct credit checks, this can have an impact on your credit report.
Being late with a repayment, or missing one altogether, can also harm your credit rating.
Charges and fees
You might have to pay to arrange the loan. And it's likely you'll be charged if you miss payments or repay your loan early.
If you fail to make the repayments on a peer-to-peer loan, the provider may pass the debt on to a debt collection agency, or it may take you to court.
This could affect your credit report.
About your business
- Business stage: Established with a trading history
- Annual turnover: Any
- Sectors: All
- Regions: All
Here are some important questions you'll need to consider before proceeding with peer-to-peer lending:
- How much money do I want to borrow?
- How will I use the loan?
- What’s the interest rate?
- Are there fees involved?
- For how long is the loan?
- Will I be charged for paying back the loan early?
- Will I have to pay a fee for missing payments?
- Can I afford the loan repayments, interest and all the fees?
You can search for peer-to-peer (P2P) lenders online.
Once you've found one you think is suitable for your business, you can set up an account with them.
To learn more about how to get started with P2P lending, read the Money Advice Service's guideLink opens in a new window.
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- Asset-based lending uses assets (like equipment) as security for a loan. Learn more about asset-based lending.
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“For general enquiries – such as asking questions before making an application – any credit search a lender conducts will be a soft one. Businesses can find this useful, as it means they can explore options without the risk of affecting their credit score.”
Other finance options
|Purpose of financessss||Creating new products, acquisition finance, product development, project fulfilment, entry into new markets|
|Amount of finance||Up to £4.3m without a prospectus, higher with a prospectus|
|Duration of finance||Dependent on the business being funded|
|Cost of finance||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|
|Time of finance||Once your documents are in order, it can take as little as a month|
|Business stage||Pre-revenue through to more established businesses|
|Business stage||Established with assets and a trading history|
Start Up Loan
|Business stage||Yet to start or trading for less than two years|
|Sectors||Some exclusions apply (see <a href='https://www.startuploans.co.uk/am-i-eligible/' target='_blank'>here</a>)|
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Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.
Making business finance work for you
Starting a business doesn’t come with a set of instructions.
We know that understanding the many different types of financial product in the marketplace can be difficult.
Our Making business finance work for you guide is designed to help you make an informed choice about accessing the right type of finance for you and your business.