Avoid the banks – Peer to peer lending for small businesses

You might have asked your bank for a small business loan and been refused. You might want to avoid the banks at all costs in protest against their behaviour in recent years. Or you might just want to try something a bit different and support the new wave of loan providers that are popping up all over the place. Either way, peer-to-peer lending could be the perfect solution.

There are plenty of providers online – just search Google for ‘peer to peer lending’ and you’ll see. But for simplicity’s sake I’m going to look at Funding Circle, a British online marketplace where ordinary people lend to businesses. Here’s how it works:

  • Investors – people like you and I – get the return they want on their investment, with a gross yield of 9.1%. You can track how things are going and access your money any time.
  • Business borrowers  can get the funds they need fast, from thousands of investors who compete to give the best rate.

Loans by the people, for the people… sounds pretty cool! No middle men who want to take a cut. No banks fannying around, making you feel like a criminal for asking for a loan. And no long delays.

Because the organisation connects people who want to invest money with established, carefully vetted businesses who want to borrow, Funding Circle eliminates the cost and complexity of bank lending, to everyone’s advantage.

  1. as an investor, you spread the risk by investing in a spread of different businesses lenders
  2. as a business, you pick and choose whose money you borrow, accepting the lowest interest rates
  3. people get good returns on their investment and businesses get low cost loans quickly, without all the usual hassle

Better still, you can set up an online account in minutes, transferring cash into your Funding Circle account via debit card or online transfer. Simple.

Of course it’s essential to study the terms and conditions and small print carefully, like always, before you take the plunge. There’s a video on site and it’s all laid out beautifully clearly, with none of the usual bank gobbledegook.

As I write, they’ve funded more than £47,000,000 worth of loans, helping loads of businesses thrive, expand and grow. That’s more like it!