Peer-to-peer lending

Business loans from individuals, businesses and institutions, generally given through online platforms.

Peer-to-peer (P2P) lending is a fast-growing type of finance type 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.

Interest rates

These can be higher for peer-to-peer loans than for standard business loans.

Credit report

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.

Defaulting

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.

“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.”

Robert Pettigrew Director, Peer To Peer Finance Association

Other finance options

Click here to visit Angel Investment
Equity
Angel Investors act as mentors and invest their own money in early-stage businesses for a share in the company.

Angel Investment

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Early-stage businesses with a turnover of less than £5m. They invest in any sector but like businesses with a scalable business proposition.

You're looking for

Between £15,000 and £500,000 within two to six months from a single Angel for working capital, product development, entry into new markets, to build teams or increase sales. Large Syndicates may offer up to £2m.

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Equity
Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.
ABOUT Angel Investment
Purpose of financessss Working capital, product development, entry into new markets, build teams, increase sales
Amount of finance Usually £15k-£500k, but large Syndicates may offer up to £2m
Duration of finance Typically 3-8 years
Cost of finance None
Time of finance 2-6 months
About your business
Business stage Generally early stage, pre-revenue or pre-profit
Annual turnover Less than £5m
Sectors All sectors, but especially suitable for companies with a scalable business proposition
Regions All regions
Click here to visit Private Equity
Equity
Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.

Private Equity

Investors like

Mature, growing and profitable business with an annual turnover typically between £10m and £100m.

You're looking for

Finance in the region of £10m to £50m to shake up your business through management buy-outs, acquisition, product development or entry into new markets.

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Private Equity
Equity
Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.
ABOUT Private Equity
Purpose of financessss Change in shareholder ownership, management buy-outs, acquisition, product development, entry into new markets
Amount of finance £10m-£50m
Duration of finance 3-5 years
Cost of finance Monitoring and director fees; loan note interest
Time of finance Minimum of 3 months but can take up to a year
About your business
Business stage Mature and growing; profitable
Annual turnover £10m-£100m
Sectors All sectors
Regions All
Click here to visit Asset-Based Lending
Debt
A business secures finance against its existing assets; these can include invoices and also machinery, property and even intangible assets such as IP.

Asset-Based Lending

Lenders like

Established businesses with assets and a trading history.

You're looking to

Raise finance from untapped assets on your balance sheet.

Find out more about Asset-Based Lending
Asset-Based Lending
Equity
Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.
About your business
Business stage Established with assets and a trading history
Annual turnover Variable – dependant on asset values
Sectors Any
Regions Any

Regional support

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