Securing a small business loan can be difficult for startups and established companies alike. If you’ve been turned down for a traditional loan, you may want to look into non-conventional loans. Peer-to-peer lending can help you overcome the hurdles associated with conventional lending.
A peer-to-peer lending transaction connects you with another person to fund your business loan, rather than a bank. There are quite a few online lending networks out there that can facilitate a loan transaction between you and an individual, or even multiple people.
Securing a non-conventional loan comes with pros and cons. The main benefit is that an independent person is often more willing to make a decision based on a broader range of factors. A loan officer at a banking institution typically looks at the numbers and makes an inflexible decision, whereas a peer may be willing to examine your overall profile beyond just your credit history.
One of the drawbacks of peer-to-peer lending may be a higher interest rate. An individual naturally has more to lose if the terms of the loan are not met, as the money is coming from personal funds rather than the reserves of a bank. The lender’s primary goal is to make money off of the deal, so you can assume that you’re going to pay for the privilege of accessing these funds and the risk involved.
If you’re not able to secure funds from a bank, you may look for a loan from friends, family members, or other people who know and trust you. If that’s not possible, peer-to-peer lending can be an excellent alternative.