Crowdfunding and P2P lending have recently gained popularity as a financing alternative to loans from more traditional financial institutions, especially for SMEs and small business. Both crowdfunding and P2P lending are new methods to gain capital. Despite the relative newness of both these financing models, it seems they are here to stay. Especially as crowdfunding and P2P lending share some great advantages for small businesses that you should know.
To read more on the differences between crowdfunding and P2P lending, click here
Provides Easy Access to Capital
The main reason why both crowdfunding and P2P lending has become great alternatives for gaining capital is the ease of the application process. With crowdfunding and P2P lending, banks and venture capitalists are no longer the only bastions for raising capital.
Additionally, P2P lending is very suitable for small businesses as its loan products don’t require collateral from borrowers. Creditworthiness is mostly assessed by business health and financials. Meanwhile, with crowdfunding, you only need minutes to put up your campaign and information onto an online crowdfunding platform when you are ready.
Great Marketing Tool
This is an advantage more in line with crowdfunding. Crowdfunding is a great way of introducing a new product or your business to the market via an online-based platform. It is a free and easy way to reach various channels to spread your words, especially as many crowdfunding platforms are integrated with social media mechanisms so it will be easier to generate traffic to your website and other social media pages. Crowdfunding can help entrepreneurs to get organic visits from unique users and potential investors.
P2P lending circumvents the normally lengthy process of a loan application in addition to the difficulties and requirements prospective borrowers face. Bank loans can take months before an approved loan is disbursed. By contrast, crowdfunding and P2P lending can fulfill a loan in days, even hours so long as there is enough interested lenders and investors.
Crowdfunding and P2P lending attract not only borrowers, but lenders and investors. With crowdfunding, most of the investors will get physical gifts and tokens of appreciation from the borrower. But P2P lending offers an investment instrument. By lending money into quality borrowers, investors can get high, periodic returns on their investments along with low entry barriers and flexibility. On a P2P lending platform, investors are free to choose which companies and businesses to invest in and how much they want to invest. This type of investment spreads investors’ risk and is great for teaching beginning investors on the importance of diversification.
The above are benefits of crowdfunding and P2P lending that you should know before you get involved in either of them. Click here if you are interested in borrowing or here if you are interesting in investing. Good luck!