How Does Peer-to-Peer Lending Work in South Africa

With traditional funding, banks and financial institutions use their own finances to lend businesses money and charge and interest rate. Peer-to-peer Lending, also known as P2P funding is different as they do not lend out their own money, but instead, they directly match you with investors.

Peer-to-peer platforms act as the middleman in this process. This is done by matching businesses who are looking for funding with investors. The platform will review your application to evaluate your status and review your credit.

Additionally, they will also manage the transaction between the borrower and the investor, or multiple investors, as some loans may be collected from multiple investors.

Key Benefits of Peer-to-Peer Lending in South Africa

South African businesses do not have the greatest luck when it comes to accessing funding through traditional funding methods like a bank or financial institution. There are alternative funding options, one of them is peer-to-peer funding. Peer-to-peer funding brings about a wide range of benefits, which include the following:

Accessibility: Accessing funding is a challenge for many businesses in South Africa, and peer-to-peer funding provides a solution for the lack of funding.

Flexible loan terms: Businesses looking to borrow money may benefit from flexible repayment periods.

Easier application: The application process for P2P funding is easier and more convenient in comparison to how complex applications can get through traditional funding methods.

Lower interest rates: This form of funding gives businesses the chance to access competitive rates as there are different investors bidding and there are no bank overheads.

Disadvantages of Peer-to-Peer Lending

Puts your credit status at risk: Like the risk of taking out a loan through traditional methods, P2P loans could put your credit status at risk when you miss payments.

No insurance: With peer-to-peer lending, there isn’t always insurance offered to cover instances of business failure.

Cost of platform fees: P2P platforms need to cover operating costs, which, in many cases, falls on the users.

Peer-to-Peer Funding Platforms

Sourcing funding platforms can be difficult, but there are quite a few existing peer-to-peer funding platforms for South African businesses to apply. These platforms are:

RainFin

RainFin is one of the popular platforms for peer-to-peer lending. RainFin exposes businesses to a secure online marketplace where businesses and individuals borrow from and lend funds to each other.

FunderJet SA

FunderJet is a digital platform that gives businesses and investors an opportunity to benefit from borrowing and investing. FunderJet is committed to working with South Africans and offering them improved lending rates for borrowers.

How to Choose the Right Peer-to-Peer Lending Platform?

Sourcing funds can be a drag, and at times, you might even become desperate, but it is important to be cautious when you’re looking for a lending platform.

Conduct thorough research: Make sure you compare interest rates, fees, as well as penalties for late payments. Additionally, ensure the platforms you’re considering follow the right procedures.

Look for success stories: Finding stories of businesses that have successfully accessed and repaid loans can be beneficial is legitimising the platform.

Conduct thorough research: Make sure you compare interest rates, fees, as well as penalties for late payments. Additionally, ensure the platforms you’re considering follow the right procedures.

Look for success stories and reviews: Finding stories of businesses that have successfully accessed and repaid loans can be beneficial in legitimising the platform. Reviews and ratings from other businesses who have used the platform can provide insight into how effective the platform is.

Register on the platform: Once you’ve found a platform you feel confident in, register your business on the platform. Make sure you complete all the necessary details.

Assess the platform’s customer support: A responsive and helpful customer support team can make a big difference if you encounter any issues.

Position yourself as a qualifying business: Consider the platform’s requirements. P2P lending platforms have various eligibility requirements. It’s best to ensure you meet the criteria before settling on a specific platform.

Propel Your Business With Alternative Finance Options

Now that you know of peer-to-peer lending, you no longer have to do the run around of traditional funding methods. Peer-to-peer lets you access money for your business.

Whether you’re looking for funds to invest in new equipment, expand, or cover essential operations, peer-to-peer lending platforms provide quicker access to money without the complexity of dealing with banks or financial institutions.