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Peer-to-peer lending

Helpsheets and support

Published: 01 Jun 2016 Updated: 24 Mar 2021 Update History

Peer-to-peer lending connects established businesses looking to borrow with investors who want to lend, usually via online platforms.

What is peer-to-peer lending?

Peer-to-peer (P2P) business lending is one of the major innovations in business finance in recent years where, online platforms are used to match lenders with borrowers.

The UK is at the forefront of innovation in this growing form of alternative online business finance.

P2P business lending is a direct alternative to a bank loan. By cutting out the costs and complexity of dealing with banks, P2P lenders aim to provide business owners with affordable loans, agreed relatively quickly.

P2P finance also allows partners, customers, friends and family who invest through the platform to share in the returns of the business.

Investors are likely to be primarily private individuals.  They can lend small parts of individual loans, for very small amounts, which encourages a wide range of lenders to participate in multiple loans.

P2P business loans can range from a few thousand pounds up to several million, with the upper threshold increasing as the industry grows.

Obtaining P2P finance

The platforms through which P2P finance is arranged have set criteria outlining which businesses can borrow. They usually require borrowers to have a trading track record, to submit financial accounts, and they perform credit checks as part of the credit assessment.

Platforms offer either a fixed rate or, in some cases, lenders bid for loans by offering an interest rate at which they would lend.

Peer-to-peer loans has been eligible to be held in Innovative Finance Individual Savings Accounts (IF ISAs) as of 6 April 2016.

The Financial Conduct Authority (FCA) regulates P2P lending.

Finance at every stage

Business financing is not a one-off decision, but an ongoing and evolving situation. No decision can be made in isolation to the businesses journey. Find out more about what options are suitable now and what might work at another stage.

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