Wednesday, June 12, 2013

Peer-To-Peer Lending an Alternative to Big Banking

One of the newest trends happening online is Peer-to-Peer services. This business model of connecting people to people to provide a service is growing more every day. Some examples of peer-to-peer businesses are Airbnb (lodging), Kickstarter (project funding), and TaskRabbit (to-do lists). These companies are growing because they provide services at a personal level. The business model of dealing with large, impersonal companies is no longer your only option. Whether you're choosing a place to vacation, fund your start-up, or borrow money.

Five years ago the peer-to-peer way to borrow money online was started by Internet Company "Lending Club". Lending Club offered an alternative to large commercial banks that scaled back their lending during the financial crisis. They offer to be the middle man between borrowers who couldn't borrow and lenders who were looking to get a higher return on their cash. Lending Club provided the structures to make this happen and they have been successful ever since.

The Internet has made it possible for peer-to-peer businesses to offer their services around the world. UK peer to peer lending company Folk2Folk has a different twist on peer-to-peer lending. They are looking for individuals who are able to lend £25,000 or more. They offer secured loans on non-residential property to individuals and businesses. Folk2Folk does the banks one better by processing a secured loan in seven to ten days. This tops the time that regular banking takes, which is usually is months, to fund a loan. 

We are seeing the future with the growth of Peer-to-peer services. Even Internet giant Google sees the potential of this type of lending. Recently, Google invested $125M in Lending Club in the U.S. while in the U.K. Zopa announced that they are putting in new safeguards to protect lenders funds and Funding Circle starting to do secured loans. With Google's investment, we are seeing peer-to-peer lending services becoming mainstream. 

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