Sometimes referred to P2P lending, peer to peer lending is when money is lent to businesses, or individuals, using online services. These services aim to match individual lenders with the person who is looking to borrow. Companies who offer this type of service only operate online, which is advantageous to borrowers, as they are run with lower overheads and the service that they offer is cheaper than other financial institutions that operate in a traditional manner.
Borrowers are also able to take advantages of these benefits as they can borrow money at a lower rate of interest; this is still the case even after the P2P lending company has taken the appropriate fee for providing this “match-making platform” and carried out a credit check on the borrower to ensure suitability. At Able Commercial Finance we only assist business clients to source funding from appropriate P2P platforms.
How peer to peer lending works
Interest rates are set by lenders who compete for the lowest possible rates available on the reverse auction model. These lenders can also be fixed by an intermediary company following the completion of an analysis into the credit status of the borrower in question. There is not usually any government guarantee protection offered on the lender’s investment for the loan.
A lender may choose to mitigate the risk that is associated with bad debt by selecting which borrowers they want to lend to. This can mitigate the total risk by carefully spreading the total investment between several borrowers. There are other models which involve the P2P lending company using a separate, ring fenced fund. This is designed to pay any lenders back in the event that the borrower defaults on the loan.
How peer to peer lending works
Access to several lending platforms is available and we can help with the selection process. We will consider type of lending, security on offer, size of facility and other complexities. Preliminary assessments can help with a smooth and speedy listing on the peer-to-peer lending platform. It can also eliminate lengthy delays that can unfortunately arise when dealing with bank.
Peer to peer lending can reduce complicated and unnecessary conditions and covenants that may arise. Providing that the correct information is available, funding can be obtained in a matter of days rather than the months that some institutions require in order to process an application
Borrowers can borrow any amount from £25K to £5M, over any period up to 10 years and with limited or no redemption penalties in place should they choose to repay early.
It is suitable for businesses in any sector of industry from finance to property to health care.
Types of peer to peer lending
Secured lending, which is secured against the fixed assets of a business is often used over longer periods and for larger amounts. Borrowers are usually better established, have been trading longer, and have fixed assets listed on their balance sheet. This allows them access to lower borrowing rates. Assets – property, vehicles or equipment – are called upon in the event of a default. Typically, repayment periods are 36-60 months.
This is a solution that offers businesses immediate access to capital on an invoice-by-invoice basis, without tying them to a long-term contract. With Peer funding, all invoices are verified and full assignment of any debt is taken for your security. This offers quick and straightforward access to flexible terms and short-term funds. Typically, repayment periods are 30/60/90/120 days.
This is like Selective Invoice Finance, but allows for the financing of multiple or batches of invoices from the same debtor. Invoices are verified by Peer Funding and then full assignment of debts is taken. Typically, repayment periods are 30/60/90/120 days.
A product offering a short-term bridging solution, secured against no-residential or commercial property. It “bridges” a gap by offering access in the short-term to funds in the period between purchasing one property and selling another or before a main line of credit becomes available. This is repaid as a single capital and interest repayment at the end of the term of the loan. If there is a default the property is used to recoup any possible investor losses. Typically, repayment periods are 6-18 months.
This is a term loan for property development and building companies. The loan is a value of the maximum of 70% including capital and interest, usually secured with a first charge against the property. Repayment is a single capital and interest payment at the end of the loan term. If there is a default the property can be used to recoup and losses by potential investors. Typically, the repayment period will be 6-18 months.
