Alternative Small Business Financing
P2P/Crowdfunding gives SMEs access to funding raised by a pool of individual investors. This process circumvents bank eligibility requirements and gives funding access to SMEs that may not be eligible for bank loan. Additionally, these loans tend to disburse cash much more quickly than banks (some in as few as 1 - 3 business days). When considering the best source of financing, P2P/Crowdfunding business loans can be a great option for SMEs that require large, customisable loans or those that are not eligible for bank loans.
Average Interest Rate of P2P/Crowdfunding Business Loans
P2P/Crowdfunding platforms tend to charge higher interest rates (9 - 20%) than banks (4 - 10%). Because P2P/Crowdfunding platforms have lower eligibility standards, they are exposed to increased risk and therefore charge higher interest rates. For SMEs that are not eligible for bank loans, higher interest rate costs may be an unfortunate reality of financing their company through P2P/Crowdfunding business loans.
Average Fees of P2P/Crowdfunding Business Loans
P2P/Crowdfunding platforms charge success fees, which are important to consider when applying for funding. Typically, these platforms charge a success fee that ranges from 2 to 5% of the loan amount. Additionally, some platforms charge application or early repayment fees. These fees are great than bank loan fees, but should be evaluated on a case-by-case basis as they are not too dissimilar.