Posted on: 22 May 2015

How does P2P business lending work?

P2P business lending is all about matching businesses that want to borrow money with individual lenders online via a P2P lending platform. Although the exact process varies between platforms, the usual order of events is for a business to apply to join their chosen platform online by filling in a form. Their paper work is then scrutinised by the platform. If their loan request is successful, it gets listed on that platform’s ‘marketplace’. Investors, who will have been through their own registration and verification process with that platform, will then offer money to fund the loans that they think will give them the best returns. The amount they offer varies, as does the number of investors that offer – it can be in the thousands.

On most platforms the investors choose what interest rate they would be happy to lend at. These are called auction P2P lending platforms and include Funding Circle and Thin Cats. A market platform is where the platform itself lends the money, and then resells segments of that loan to their investors. Wellesley & Co. is one such platform.

Once the loan target has been met the borrower can accept the loan and the funds are released (so long as all the paperwork is in place). Loans, along with any interest payments and fees owed to the platform, are usually paid back in equal monthly instalments.

View our full Peer to Peer Lending Guide or browse through the content below to learn more.

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