Peer to peer lending and crowdfunding

Crowdfunding and peer to peer lending

Peer to peer lending has been a success story of the modern age.

Whilst not a new phenomenon, (the funding for the plinth of the Statue of Liberty being an early example), the age of the internet has certainly put the crowd into crowdfunding.

Peer to peer lending in the modern age relies on the internet to draw the crowd together and present them with the business to be funded. The internet has made connecting the crowd and the business so much easier, with information available at the click of a mouse the lenders can establish the kind of company, who is behind it and even how they are performing before they lend.

Peer to peer sites each have their own general criteria for listing, some will list start up businesses looking for seed capital or equity investment whilst others might lend to established businesses or lend on the purchase of an eligible business. Your Acorn.finance broker will help guide you to a suitable lender for your business.

What are the different types of peer to peer lending?

There are 3 key sectors of peer to peer business funding, each with a variety of providers;

Donation or Reward crowdfunding

Backers get behind a project because they believe in the product or the cause. With a business start-up rewards might be offered, the rewards can range from a simple vote of thanks on the company website through to an early stages product or first release of the final article.

Debt crowdfunding

Lenders act more like the bank, assessing the risk of a business loan proposition and deciding for themselves how much to lend to a business and what interest rate is warranted.

Equity crowdfunding

Rather than a set return as an interest payment as with peer to peer lending (above), the investor purchases a small share of the business from the founders (typically). This investment is made with the assumption that the business will increase in value significantly and these shares will become saleable in the future for a significant profit.

Find out more about crowdfunding and peer to peer lending here

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