Small Business Loans To Propel Your Business To New Heights
“It’s almost always harder to raise capital than you thought it would be, and it always takes longer. So plan for that.” – Words of wisdom from a Venture Capitalist. Startup founders and Small and Medium Business proprietors have the arduous task of not just running their business but also managing its finance from time to time. The need for finance may range from sustenance to expansion of the business. SMEs usually approach their families or friends, banks, NBFCs and local moneylenders to meet their monetary requirement. Startup founders on the other hand approach angel investors or venture capitalists to fulfill their dreams. There’s another way to get loans to burgeon a business – P2P lending for small business loans.
P2P lending is a blessing for business owners looking to raise capital at low interest rates. Peer to Peer lending operates by bringing together the lenders and borrowers under a single online marketplace.
Why choose P2P Loans
P2P lending companies are intermediaries between loan applicants looking for a quick low interest loan and investors looking to fund loan applicants in return for healthy returns on investment. Its tasks include facilitating and overseeing the entire process – from bringing the borrower and investor to the marketplace to the time the loan is paid off.
The rate of interest levied by a P2P lending platform is usually lesser than that of a bank. This is due to the fact that P2P firms can reduce overhead costs through its online processes. However the loan applicant still needs to read the fine print carefully before signing on the dotted lines.
The problem for SMEs is the reluctance of banks in disbursing loans to them and the problem for startups is the high equity that investors demand from them. P2P lending platform is the right place for businesses and startups (owners) to visit for a loan because of the many benefits it offers:
- Fast approval and disbursal process
- Flexible loan tenure
- Licensed by Reserve Bank of India
- Better foreclosure option at no additional charges
Is P2P loan credible?
Peer to Peer lending companies fall under the ambit of the RBI and have to adhere to strict guidelines. Furthermore the faith in P2P lending and loans is only fortified by its continued growth.
P2P Loans v/s Bank Loans
Most of the regulatory process involved in getting a loan is similar between banks and P2P lending firms. Credit score is analysed along with other requisite documents. However banks, being risk averse and more stringent, are more conservative in lending. P2P lending checks more socioeconomic background of the loan applicant and does not overly rely on the credit score. And as mentioned earlier, the benefits of lower overhead costs are passed on to the borrowers as low interest rates and other charges.
Cons of P2P loans
Despite all its merits it is not entirely devoid of a few drawbacks.
- Although credit score is only one of the parameters considered before approving a loan, the probability of people with really bad scores getting a loan is low.
- Interest rates of P2P loans are decided based on the risk profile of the borrower. If the risk profile is high then the interest rate might be higher than a bank.
A word of advice: – When applying for loans make sure to take into account the entire sum of money (loan amount + fees + charges).
RupeeCircle is a licensed P2P lending company that offers unsecured loans to loan applicants and high ROI to investors.
Are small business loans from P2P marketplace the best option for your business?
Whether or not to take a loan from P2P platform is the discretion of the loan applicant but it should be an avenue that must be investigated and calculated before taking a business loan. However a P2P loan should not be pis aller and should be considered at the outset.