The Real Deal By Ocean Capital: P2P lending gains ground as big banks remains stringent
2/13/2012
The rise of peer-to-peer lending for small business loans has taken place because there's a personal aspect that customers can't achieve with big banks.
"With community loans, people know what they're getting into," Forbes explains. In addition, many small companies may not have been around long enough to create trust in larger financial institutions.
"If you're a small business and you don’t have an established credit history … you don't have ways those ways that financial institutions can look back see your history, you're pretty much taken out of the game," Choncul Gupta, CEO of a Louisiana-based P2P lending firm, told the media outlet.
P2P lending works when an investor opens an account with a P2P firm, and builds a portfolio by funding loans in small increments - usually $25 to $50, Your News Now reports. That amount is then pooled with money from other investors and a loan is issued to the borrower at an APR based on risk level, with yields as high as 16 to 18 percent.
The primary risk of P2P lending is that loans are not insured by the Federal Deposit Insurance Corporation, so the investment disappears if the borrower doesn't pay.
Ocean Capital, a small business lender, publishes The Real Deal on their website to keep small businesses up-to-date with the latest news and events that affect them. Read more of the latest news here.
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