Peer to peer lending is considered under debt financing as it is a kind of loan that one needs to pay back after a given time. This is becoming as a most favourable source of financing in the emerging startup ecosystem. With enhancing competition in all the industries, the need for financing is also increasing among the startups and small business.
A common barrier that stops a startup growth is financing which can be solved through peer to peer lending. To know why this is a good option we need to understand how it started in the first place. In India, the general way of lending is either banks or financial institutions, which follows strict criteria of background check, the capability of returning the amount in the fixed period, security and high-interest rates. In many cases, startups are unable to match up to the required procedure and not get funding but that doesnt mean that they will shut down their business. Now peer to peer lending evolves which is the rejected startups try to seek out to private lenders for financing.
Now this private lending does not involve any middleman or any official financial institution to make the transaction. It is sort of a crowdfunding that offers unsecured loans to individuals. But this kind of transaction is riskier as compared to other ways of lending.
Lets see the pros and cons or P2P lending for better understanding.
Pros of Peer to Peer Lending:
Cons of Peer to Peer Lending:
This decision solely depends on you whether to go for it or not. One thing to keep in mind is, it is better to approach them through a recognised platform like BusinessEx which offers you a space to interact with lenders, investors and other business associates as per your requirement. This is a better approach because this platform protects from networking with wrong lenders.