WHAT IS PEER-TO-PEER OR CROWDFUNDING LENDING?

The Internet has made a huge impact on our lives. For instance, you can now hire a driver with just a single click while sitting at your home. Similarly, you can now rent homes with home-sharing apps. The same is the case with the P2P / Crowdfunding platforms. However, these platforms are supposed to provide an opportunity for small businesses that need funds to launch their business idea.

You can share your idea with thousands of investors who are willing to invest in new and unique business ideas. So, there is nothing to be worried about if you couldn’t qualify for the bank loans.

What is Crowdfunding / P2P Lending?

Crowdfunding is the raising of funds from many individuals for a project, cause, or organization. You’d have to repay the money to the investors with the gifts, equity shares, interest payments, or products. It’s an opportunity for you to get in touch with the individuals instead of dealing with a company or institution. For instance, Uber is a ride-sharing app where individuals can hire the services of other individuals.

Thus, car owners can make more money by getting more customers. The best thing about this service is that the individuals don’t need to deal with the traditional service providers. P2P / Crowdfunding platforms enable you to raise funds for your business in return for equity shares or interest payments. There are several online platforms you can use in this regard. If you aren’t a fan of traditional funding such as Smart Loan, the P2P / crowdfunding can be the ideal option for you.

Reasons for Using Crowdfunding / P2P Lending

With these financing options, you’d be able to raise a massive amount of money for your business. The smaller companies that aren’t eligible for traditional bank loans can use these platforms to access the finances. Moreover, you’d get a chance to customize the loan terms according to your preferences. It means you can now set the interest rate structures and loan repayment schedules according to your requirements.

Some Crowdfunding / P2P platforms enable you to borrow more than S$5 million in one shot. And you can extend the loan tenure up to 3 years. The benefit that investors get from Crowdfunding platforms is that they can start the investment from as little as S$100. And they’d also get a chance of investing in high growth companies to reduce the diversify their risks.

Disadvantages of Crowdfunding

You must understand the disadvantages of crowdfunding before making a final decision. The lenders on Crowdfunding platforms aren’t as experienced as the banks, and they don’t have a performance track record in this field. Their default rates can also be very high. And the worst thing about P2P / Crowdfunding platforms is that they charge very high-interest rates as compared to the banks. Moreover, your idea will become public when you share it on the Crowdfunding platforms. Thus, you won’t be able to maintain the privacy of your idea.