Posted on: 22 May 2015

How to choose which platform to use

So, you’ve researched all your options for raising finance, both via the banks and using alternative finance (try the CBI’s FindmyFinance tool to see which types could work for you), and you’ve decided that P2P lending is the most cost effective and appropriate route for your business. Before you go any further, you need to decide what type of loan you’re after. Will it be secured or unsecured? Or are you looking for asset or property finance? Are you prepared to offer a personal guarantee? Knowing this up front will determine which P2P lending platforms are going to be appropriate for you.

Factors to consider when choosing a platform

• How easy is the platform to use, for you and for the investors you’re hoping to attract?

• What fees are payable, are they fixed or variable depending on the size and term of your loan, are they reimbursable?

• Is there a minimum interest rate and if it changes as investors bid their money, how does it change?

• There are two types of lending model used by P2P lending platforms:

• Auction sites are where lenders bid on loans with the lowest rates winning.

• Market sites are where lenders offer funds at defined interest rates.

• Lending periods vary from one month to five years and more.

• Different platforms attract different types of investor and some allow you to sort by investor experience so you can match them to your business and needs.

• What types of repayment schedule are available, are they flexible and how are they administered?

• Many platforms do not charge an early repayment fee on loans, but not all.

The fees charged by P2P lending platforms are a bit of a minefield, and in the past businesses have been stung by high and unexpected costs. But as the industry has matured the costs of borrowing and the chance of there being hidden fees have reduced.

“It has taken a long time for a lot of the P2P platforms to become profitable,” says Ian Gurney from P2Pmoney.co.uk, “so it is only now that their fees are starting to come down.”

Websites like Ian Gurney’s, try to monitor all the platforms’ fees to give potential borrowers a way of comparing prices. But with so many different fee structures it can be hard to work out which is the cheapest overall.

Which peer to peer lending UK platforms are for business borrowers?

The list of platforms offering loans to small businesses today is likely to be different to the list in a year’s time because P2P platforms are appearing and disappearing all the time. The reasons for this are many and varied, but suffice it to say that in general the longer the platform has been established, the more evidence you have for its longevity into the future.

“The most successful platforms are those that manage to grow their numbers of lenders at the same rate as their number of borrowers,” says Ian Gurney. “Funding Circle has done a great job of managing the supply and demand on their platform – something that is particularly hard to do and has caused the demise of platforms in the past.”

For now, listed below are the P2P lending platforms that offer loans to limited companies using the auction model.

Wellesley & Co (wellesley.co.uk) is a market platform that has lent more than £150 million in secured loans. If you’re a sole trader, you can also raise funds for your business through RateSetter and Zopa.

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

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