How peer to peer lending is helping UK Startups

Peer to peer lending is fast becoming the new way of small or larger, first time business owners being able to access necessary loans to help them start up their idea from other people and not high street banks. The larger banks are not lending out as much as they used to, to startup businesses due to the potential instability of the company and, of course, the current economic climate. However, peer to peer lending companies in the UK are putting people with a bit more money who are looking to invest it, in touch with the business owners and allow for the lenders to have attractive returns and secure loans, and allows the borrowers interest-only loans and quick payments. By doing this it also stimulates the economy putting money into local areas and may soon become the only saving grace for small business startups. Peer-to-peer lending is a relatively new form of investment, only being established in 2005 and as of summer 2012 peer-to-peer lenders have collectively lent £300 million and this is an ever growing scheme that appears to be the future.

A real business example of how this new form of peer-to-peer lending is helping small and larger startups can be seen in Cornwall where the company ‘Slim Gyms’ was funded by a lender who had been in touch with a peer-to-peer lending company. Business owner Laura Morrish was finding it particularly difficult to secure any sort of funding from her bank because the business is classed as being part of the leisure industry, which currently has lending restrictions from high street banks. Laura heard about a local peer to peer lending company called Folk 2 Folk who managed to organise her funding quickly and securely. Thanks to the help and investment provided by Folk2Folk’s peer-to-peer lending platform, construction has now begun on Laura’s new swimming complex in a village just outside Holsworthy, Cornwall. The funding was put in place as soon as possible, which allowed Laura to get the construction process underway saving her time and money and in turn allowed her to keep the rest of her plans concerning the business the same.

The way it works – as a borrower you register with a company and you are then put into a category based on your credit score. When grouped the lender can then decide on where they want to invest their money based on the risk and return. As with any loan there is a risk, however the rate of an unsuccessful loan is far lower with peer-to-peer loans than taking a loan out from the bank.

If you have an idea or a plan for a startup business of any size but you are lacking the funding for it, this could be a way for you to do so with a local lender and potentially on your terms. It may well also be a safer bet for you to go with this style of lending as the bigger banks are far more restricted nowadays, as aforementioned, when Laura wanted to set up her business she couldn’t do so with the backing of a high-street bank.