Increasingly Irish businesses are banking on peer to peer borrowing to help them grow.
Peer to peer (P2P) borrowing is an innovative model of finance carried out online, via a web-based platform, connecting those who have money with the small and medium-sized enterprises who need it.
Sharing as much in common with social media as it does with traditional banking, P2P lenders are often ordinary members of the public – they could be your customers, friends, family, or sometimes, those with intense curiosity about Giant African Land Snails and exotic creatures – as Ann O’Connor, co-owner of Secret Valley Wildlife Park in Wexford, found out.
‘I think the type of business we are really piqued people’s interests,’ said Ann, with a laugh. ‘We raised the full amount we applied for within 50 minutes of our request being approved. Even our vendor couldn’t believe how quickly we reached our target’.
In less than one hour 87 bids totalling €12,000 was raised. The loan request had been assigned a grade based on the results of a credit evaluation and Ann now has 36 months of repayments at what she says is a very manageable rate of interest. She plans to renovate the wildlife park’s cafe and children’s play area with the money, keeping it fresh and attractive to new and returning customers.
With P2P borrowing there’s no need to make an appointment with your bank manager and sheepishly await his verdict on whether or not your overdraft will be extended. P2P lending firms typically make decisions within hours – and because borrowers simply have to log into their online portal to check if they’ve been successful, there’s no waiting around for the postie to deliver that highly-anticipated brown envelope of official-looking papers!
‘I found the process of peer to peer borrowing so easy compared to the usual rigmarole’. said Ann
However, there’s more to P2P borrowing than just an easy application process and fast finance. Lenders take a real interest in the companies they’ve supported, often becoming loyal, long-term customers and advocates for the business. Their support is rewarded with attractive interest rates and in addition to this, there’s the feel-good factor of knowing they’ve supported local, often family-run, businesses.
For Ann and the wildlife park, P2P borrowing also provided a great marketing opportunity: ‘I was able to offer each of my lenders a voucher to come and visit the park,’ she said. ‘I’ve managed to meet quite a few of them’.
The benefits of P2P borrowing have led to a surge of interest in alternative finance in recent years.
According to the UK Alternative Finance Industry Report, approximately 20,000 SMEs raised alternative finance through online channels in 2015, receiving £2.2 billion in business funding. The appetite to do things differently undoubtedly exists, and evidence suggests that similar patterns are emerging in the borrowing trends of Irish SMEs.
Linked Finance has facilitated over 600 loans to Irish businesses recently, at the same time building an online lending community of over 13,000 lenders. Ordinary Irish people ready to lend to great local businesses at attractive rates.
If even a small percentage of Irish savers chose to spread their investments to include P2P lending, the alternative finance industry would have the potential to grow exponentially in Ireland. Irish household savings are valued at €89 Billion according to most recent figures by the Irish Central Bank – almost 4 times as much as all Irish SME business loans in Ireland.
By connecting those people who have cash, and are earning very little interest, with great local companies who need loans, P2P really is a win-win situation for Irish SMEs, lenders and communities. And with increasing demand, better technology and more transparency, things are about to get even better for the industry and all of its stakeholders.
If you are thinking of a business loan and are interested in exploring Peer to Peer options, you can apply right now in just 2 minutes or give us a call on 01 906 0300 and we’ll talk through your options.