P2P lending for SMEs
The SMEs face difficulties in collecting business loans with appropriate charges, terms, and procedures.
Because of high charges and time-consuming complex procedures of traditional banking, Peer-to-Peer (P2P)
lending has a growing popularity among SMEs to get finances for their business operations. P2P lending
platforms allow companies to borrow from individual lenders who are private lenders rather than banks. To
attain several key benefits of P2P lending, SMEs should choose P2P lending instead of traditional banking.
Quick Access to Capital:
The traditional banking method requires long, tedious, and complex procedures to get access to required
capital. Many small and medium-sized businesses that are less established, find it quite difficult to get any
bank loans. On the other hand, under P2P lending, once the borrower sets up an approved profile, can collect
funds within hours without any wastage of time and resources.
Under the traditional banking method, the banks are mostly reluctant to provide a smaller amount of loans
that are lower than the minimum loan limits. Moreover, SMEs find it hard to get loans with appropriate
repayment periods, terms, and conditions according to their requirements. In this case, in the P2P platform,
the SMEs can collect a smaller or larger amount based on their risk assessment with preferable terms and conditions.
P2P lending has clear and transparent charge rates without any extra or hidden charges for the borrowers.
In traditional banking, SMEs are charged with high-profit rates due to their high risk and less established
business. However, in P2P lending, the SMEs can collect funds at charges based on their credit ratings. The
Annual Percentage Rates (APR) is lower in the P2P platform than the traditional banks. The P2P platform
provides all information regarding profit rates and charges based on repayment duration. The SMEs can use
different tools provided in the P2P platform to find out the most appropriate loan with low charges and
preferable duration upfront.
Unique Credit Scores:
In the traditional banking system, the process of finding the creditworthiness of the borrower takes a long
time and requires many documentations. Many SMEs are considered as credit unworthy due to the absence
of traditional data such as past credit history and references. However, the P2P lending platform provides
credit scores following some key traditional data such as proper business documents and employment
records and also based on non-traditional data such as social media data, national identity card data, credit
card data, etc. Thus, the P2P lending method provides each SME with unique credit ratings to access funds accordingly and easily.
No collateral requirements:
A large number of SMEs cannot collect funding from traditional banking because of the lack of appropriate
collateral required by the banks. The P2P lending method does not require any collateral or security. Thus, the
creditworthy SMEs with good credit ratings in the P2P platform can easily collect needed funds without collaterals.
The traditional banking system is not updated with the changing business world. Traditional banks charge for
online banking services and mobile accesses. On the other hand, P2P lending uses the greatest innovations in
finance. The SMEs can easily check profit rates and charges of financing available in P2P online just by logging
into their account. It does not require any extra costs and knowledge of the complex traditional banking
system. The SMEs can send loan applications directly by logging into their profile and get real-time updates at
any time and from anywhere.
P2P lending for SMEs
Peer-to-peer lending has become a great alternative to the traditional banking system because of its multiple advantages that are not available in the traditional banking system. Financing is a very difficult process for SMEs since most SMEs cannot fulfill the rigid procedures and requirements of traditional banks. In this case, P2P lending allows SMEs to connect directly with private investors and choose loans based on their preferable repayment period, profit rates, terms, and conditions.
Lendo is the first financial institution to introduce a Peer-to-Peer (P2P) invoice financing platform in SA for small and medium-sized enterprises (SMEs). Lendo allows SMEs to register online, request invoice financing, and get funded when needed. To get more information about Lendo and its services, click here.