P2P lending, crowd funding and direct lenders outside banking system. Legal platforms – loans by private companies. Where, how, when. Check now.
If you have a business idea and cannot seem to get the funds from a bank, there are many alternatives you can try. Or maybe your needs are not business related, you’ve done a personal loan comparison and the results are not quite satisfying in terms of bank offers. For business needs, currently there are only available traditional peer-to-peer (P2P) lending sites, but now some places are being transformed into something new called crowdfunding. For personal needs, you can always perform a comparison between various personal loans sources. In this article we will cover basic aspects of p2p lending – loans by private companies.
Basics of P2P lending – loans by private companies
We go back and start with the basics. P2P lending is a way out of the financing equation – excluding banks. This allows people to go online to borrow money directly together.
Here’s how it works P2P loans for a potential borrower: You agree to a credit check and reveal their status and income from debts. Based on this information, it is assigned equivalent to a credit risk score. Considering the score, it is assigned a letter grade (AA E) and an APR according to credit risk you pose to potential lenders.
P2P lenders, protect its interests by buying multiple small loans, instead of pouring everything into one big loan. Thus if any borrower fails to pay, a lender only loses a fraction of their money, not the entire amount.
At first P2P lending they did not set sufficiently high as to who could borrow and do not adequately inform investors (lenders) on the level of risk involved standards. So the business model did not work out. Now things have changed, standards have become more refined and more sophisticated.
It has reached the point where Prosper claims that the average yield obtained by lenders after expenses, approximately 10% – very good numbers in all that is loans by private companies.
The P2P model evolves to crowdfunding
Now, the basic idea of P2P lending is undergoing a change in USA. They have come to the fore new they do what is called crowdfunding. With crowdfunding, a borrower gets the money only if enough people agree to put small amounts of investment. If you do not get 100% financing for a potential project, no money is not obtained at all.
One of the highlights is Kickstarter.com crowdfunding sites. Although some might lend money in a traditional P2P site and earn a good return on investment, this is not typically the motivation for people making borrowing money on a site like Kickstarter. The user Kickstarter does more than anything to help entrepreneurs and entrepreneurs when they have a creative business idea.
There are reports that just under half of all ideas on Kickstarter get funding and so far since its launch on April 28, 2009 $ 1. 5 billion has been pledged by more than 8 million people, have financed more than 80, 000 creative projects.
Another site is crowdfunding Kiva.com, which enables people to finance loans to entrepreneurs in increments of $ 25 or more. Again, people do not do it to earn interest. All they do is to help entrepreneurs start, and it is assumed that more than half a million people have received money from Kiva, which claims a repayment rate of 99%.
MicroPlace. com is a similar site where you can support entrepreneurs from around the world, such people can be financed in Spain, Colombia, Chile, Ecuador, Mexico, Dominican Republic, Peru, Panama, Argentina, Ecuador, Uruguay, Paraguay , Guatemala, El Salvador, etc. But unlike Kiva, actually wins something nominal interest rate of your investment. MicroPlace claims a repayment rate of 98%. Another popular site is IndieGoGo.com.
If you have a business idea and the bank has no interest in you or your idea, try these options. There may be money out there to make your idea come alive.
One stop shop for online merchants and entrepreneurs
If you are a trader who works specifically on the Internet, a new beginning is in the business of making loans only for e-sellers like you (loans by private companies). They are not interested in lending to companies of brick and mortar traditional operations, only lend themselves to online merchants.
With a new site called Kabbage. com, the application process is so quick and easy, within 10 minutes after completing the online application, you could have the money in your bank account! Kabbage evaluation is based on the observation of what you are doing in your online business, transaction history, degree of user feedback and even play and participation in social media.
You make the request and, if approved, the money is issued through PayPal in minutes. One caveat, though: the interest rate for loans at Kabbage. com is ranging between 10 and 18 percent.
Again, this is another option to get money for your business at a time when banks refuse to help.