Loans have always been a way of boosting business in the country. Entrepreneurs with few resources to invest need to resort to external aid to grow. But what would be the best form of loan? Bank credits are the most well-known and traditional in the market.
The operation is very familiar: needing resources, the entrepreneur goes to a financial institution. Then, it requests an amount, defines how many installments will be paid and awaits the approval of the bank’s risk sectors.
Although it works well in some situations, bank lending also involves very high fees and a huge amount of red tape to get the money. In a dynamic market like the current one, a little more efficiency is needed.
This gap has been filled by Peer to Peer (P2P) loans. Shall we learn a little more about them?
Peer to Peer: Person-to-Person Loan
The literal translation of Peer to Peer is the one above: it is a financial loan made from one person to another. Thus, this type of promotion already exists in some countries in Europe and is beginning to arrive in the country as a solution for many entrepreneurs who are looking for resources.
P2P is carried out through a digital platform that links investors to applicants. To get the loan, you register in the system and describe what your business needs – this is a very important negotiation moment, because it is with this description that you will be able to arouse the interest of those looking to invest.
On the other side of the platform are investors. They are looking for fast and attractive ways to monetize their resources. In this way, they choose the business they want to promote, based on the description made by the borrowers who need the loan.
When choosing an option, they lend the money to the entrepreneur in need, according to a rate pre-defined by the platform and agreed by both sides.
After the term of the loan, investors receive their money back, plus the profitability obtained.
Peer to Peer x Bank Loan
The two biggest advantages of P2P over bank loans are the lowest rates and the easiest way to obtain the resource, with less bureaucracy.
Banks charge, for a corporate loan, fees ranging from 5 to 10%. In addition, to obtain the money, it is necessary to present a multitude of documents, sign various forms and wait for the institution’s internal procedures to obtain the appeal.
P2P platforms have been practicing rates that are around 2% and the risk analysis of the client is done instantly, through online consultations with the consumer protection agencies. In addition, while the borrower gets attractive rates and little bureaucracy, the investor also obtains better returns than the conventional financial market offers.
Now that you know P2P, it’s time to look for the best loan for your business! If you want to have access to more posts like this, subscribe to our newsletter and receive our content right in your inbox!