your password has been reset successfully, Please login again.

Peer to Peer Lending: Emerging Role in Startup Ecosystem

With increasing startups in the economy the role of peer to peer lending is also enhancing. Let's see how.
BY Akshay Arora
Feature Writer, BusinessEx
Dec 12,2017

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:

  • This way brings ease in the lending process as any startup can get this without fulfilling the harsh criteria of banks and financial institutions. P2P lenders even help in the bad times of a business with funding.
  • The lenders also attract startups by offering less interest as compared to other lenders. Lenders do this because they still get a higher return on investment as compared to investing in the stock exchange. It is a win-win situation for both the parties.
  • As startups are in beginning phase they dont have security to offer in exchange and get rejected by banks but these lenders not always ask for security is if they see potential in your business.
  • Lenders have the benefit of diversifying their funds among different borrowers as there is no government entity involves in the process.

Cons of Peer to Peer Lending:

  • In this type of lending with an increase in benefits, risk also increases. As there is no role of government then lenders have the power to take as much interest as they want and can get you to sign a contract which is more favourable to them.
  • Generally, these lenders offer the funds for a limited time constraint in which the startup needs to repay the amount or a part of it with interest.
  • In many cases, a startup cannot get the required amount of funding from one lender so they approach multiple lenders to accumulate the required amount. This leads to multiple risks for a startup if the revenue is not generated as per the expectations.


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.

Please add your Comment
SIMILAR Articles
February 14, 2019
Today, insistent entrepreneurs are opting-in the industry and help create a positive outcome in the ...More
By Jaspreet Kaur
February 12, 2019
Plainly trusting on the success rate of the stocks and betting your hard-earned money into plans can ...More
By Jaspreet Kaur
February 11, 2019
Ascertaining a good business idea is not difficult nowadays, the surging economy easily renders new ...More
By Jaspreet Kaur
February 09, 2019
Oodles of hard work and knowledge need to be imbibed to become a good businessman ...More
By Jaspreet Kaur
February 08, 2019
Success is not only relatable to startups; it can be achieved by acquisition of failed ventures also ...More
By Jaspreet Kaur
February 07, 2019
One can earn good revenue from waste management business besides creating positive impacts in the so ...More
By Jaspreet Kaur
February 06, 2019
The enterprises which mainly target children as their customer face lesser struggles since the enter ...More
By Jaspreet Kaur
February 05, 2019
Regulating the waste is a jostling task for the regime, so it's time for young millennials to become ...More
By Jaspreet Kaur
February 04, 2019
An entertainment centre business directly deals with chunks of masses and thus, promotion precipitat ...More
By Jaspreet Kaur
January 31, 2019
To find the root cause, employers need to dive deeper into the problem and the results were totally ...More
By Jaspreet Kaur
January 31, 2019
Reckoning the candidates completely is not fair; an employer should consider crosschecking his backg ...More
By Jaspreet Kaur
January 30, 2019
Hiring a software company for the work is like employing the candidates in the company ...More
By Jaspreet Kaur