What Is Peer-to-Peer Lending?

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• 2 minute read

There are numerous ways that small business owners can get financing for their business, and peer-to-peer lending is one option.

What is peer-to-peer lending?
Peer-to-peer lending is one way to obtain small business financing. It refers to businesses that turn to other consumers and organizations – as opposed to verified lenders – in order to get loans and funding.

What do peer-to-peer lenders consider when a business applies for a loan?
Peer-to-peer lenders largely base their considerations on credit scores and use these to establish risk scores. These risk scores then determine the interest rate of the loan offered. For more information about your business credit score, click here.

Why would a business turn to a peer-to-peer loan?
Peer-to-peer loans are often available in a short amount of time and can seem like good options when traditional routes are off the table, but loan size is usually limited to $10k.

Will it build my business credit?
No. Peer-to-peer lenders aren’t required to report repayments.

How long does it take to apply, how much does it cost, and what does repayment look like?
Application time, cost, and repayment all depend on the company and investors you apply with. Application turnaround can be quick, but rates can be as high as 50%.

What are the downsides of peer-to-peer lending?
There may be restrictions on peer-to-peer lending in certain states, but more importantly the loans themselves are often unsecured.

What is the difference between peer-to-peer lending and OnDeck?

  • OnDeck offers true business loans up to $250,000 that build business credit.
  • In addition to credit scores, OnDeck considers cash flow, time in industry, and other factors when assessing a loan.
  • OnDeck reports repayment behavior back to credit bureaus.
  • With OnDeck, you can receive a decision within minutes and funding in as fast as 1 business day
  • .

Peer-to-peer lending might be an option for you, but always make sure to fully evaluate what works best for your business.

OnDeck is a Google Ventures-backed company with an A+ rating with the Better Business Bureau. The company offers small business loans nationwide to over 725 different industries. For more information about OnDeck small business loans, click here.