Peer-to-Peer Lending for Small Business – The Holy Grail?

Peer to peer lending

Ever being to or taken part in a Stokvel well that’s essentially what Peer to Peer (P2P) Lending is about where friends or those who you associated with lend money to each other. Once you’ve the money it’s yours to use as how you please as an individual.

With P2P Lending for small business the person who’s loaning you the money towards your business is not offering a loan to your business. But rather to you the individual to use as you see fit for your business.

P2P Lending involves borrowing money from your peers; including other businesspeople and investors who are interested in relatively small financing amounts. This type of lending developed during a period of time when the recessionary environment essentially killed all loan opportunities for small businesses.

But note that P2P Lending is not online lending which refers to credit providers offering their services online. But as with so many other areas of modern day life, technological developments and the age of social media have led to the birth of a new industry.

Therefore P2P provides an online platform which puts people who wish to borrow money in contact with people who have money to lend. This effectively cuts out the middle man or credit provider.

With P2P lending other consumers provide the capital which is lent to those requiring a loan. Consumers can act as both lenders and borrowers proving not only an opportunity to acquire a loan, but also to invest money as one would do on the stock market.

Although not so popular here in South Africa P2P is eagerly pursued or sought after in America and United Kingdom. This is due to its ability to meet the needs of both lenders and borrowers alike. For lenders the typical interest they receive on the money invested/loaned is better than what they may receive from a savings account. Just as, for borrowers the interest is often still less than what they’d pay if lending from a mainstream credit provider.


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