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From the Ablrate Blog

What Are Peer to Peer Business Loans? 22/07/2019

What Are Peer to Peer Business Loans?

When looking for a loan for your business it used to be reasonably limited to the places you could go to. Most of the options revolved around a bank or building society, now a new option rising in popularity, peer to peer business loans. It might be all well and good having a new option out there but what are the advantages and disadvantages of using this new source of loans compared to the classic banking route? In this blog, we are going to break it down. These points might not be the same for all peer to peer platforms but are true for Ablrate.

Overview of peer to peer business loans

The simple and fundamental difference for peer to peer loans is that you are borrowing from a group of individuals rather than a bank. Similar to how many start-ups gain funding from friends and family Ablrate facilitates this on a much larger scale. With potentially thousands of people funding a loan with hundreds of pounds to hundreds of thousands each. The key to a platform such as Ablrate is to gather these individuals in one place and make the process as clear as possible. A business trying to do this themselves would be incredibly difficult let alone making sure everything is abiding by the rules of the Financial Conduct Authority (FCA).

Ablrate is not just an open platform for funding like Kickstarter or other crowdfunding platforms (see our page of the difference between peer to peer lending and crowdfunding). Ablrate like any other lender will need to ask for financial information such as profits, turnover, trading history and your plans for the money. We will also need an asset for the loan to be secured against, this is not always true for peer to peer lending but it’s something Ablrate focuses on. Once approved your loan is provided to the potential lenders for review. A set amount of time is then given to provide the required amount of funding.

For some businesses, a minimum loan amount is given so that the loan does not need to hit the maximum amount, but often loans are for buying a plot of land or something else with a fixed value so the full amount is needed. If the limit is not reached then the funds are returned to the lenders, but fortunately, this is a rare case once through all the vetting we do at Ablrate.

No need for Banks or Building Societies

So why would a business use a platform like Ablrate rather than go to a bank for a loan? There are many reasons for this but one of the most common is the speed of getting a loan agreed. Sometimes going to a bank for a business loan can take 4-6 months compared to peer to peer lending that can take around 4 weeks. This can be vital for a business who can’t afford to wait 6 months for a loan especially if what they need it for has a fixed time limit.

One point to consider when using a peer to peer business loan is that it does not have the same protection as a bank loan.  They don’t have insurance or the same government protection. So it is definitely worth working out what is best for your organisation before committing.

Dealing with a peer to peer lending organisation rather than a bank also has the benefit of being more flexible. The vast majority of the banks in the UK are incredibly large and inflexible when it comes to loan terms. Ablrate is able to be flexible and discuss options rather than making an organisation fit to its needs. This could include the length/reason for the loan, or even the asset the organisation is providing.  Ablrate has seen many different assets provided from planes, batteries, machinery to pubs.

So do you think a peer to peer business loan would work for your organisation? Why not give us a call!

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