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Soaring demand for P2P business loans

Photo of coffee shop owners

Small businesses are increasingly thinking outside the bank when it comes to their finance options, creating more opportunities for investors looking to make their money work harder.

Research published this week by the government-owned British Business Bank showed that the total value of peer-to-peer (P2P) business lending across the UK soared by 51% to almost £1.8 billion in 2017.

“Such lending is challenging traditional bank-based models of lending,” said the British Business Bank, which pointed out that lending by the traditional banks remained “relatively flat” last year. It also said that awareness of the P2P lending market continues to rise as small and medium-sized enterprises (SMEs) look beyond the traditional sources of finance.

SMEs are the backbone of the UK economy, making up more than 99% of the business population and accounting for 60% of all private sector employment, according to the Federation of Small Businesses.

Businesses like these turn to LendingCrowd because we offer competitive rates and rapid loan turnaround times. On the other side of the equation, our investors can earn attractive returns by providing SMEs with much-needed support.

P2P generates real benefits for the wider economy by providing access to finance for businesses who may struggle to secure funding from the banks. At the same time, investors who are willing to take additional risk in seeking higher returns than cash can earn a target rate from 5.6%* a year with our accounts, all of which can be held within our Innovative Finance ISA for tax-free** returns.

Think outside the bank

Our Growth Account is aimed at investors who want a quick and simple method of creating a diversified portfolio of asset-backed P2P loans. It automatically diversifies your investment across the loans available on our Loan Market and the minimum investment is £1,000. Your interest and capital repayments are reinvested in additional loans, diversifying your investment further.

The Income Account is for those seeking to generate a consistent level of income from a lump sum without eating into their capital. Like the Growth Account, your minimum investment of £1,000 is spread across our Loan Market. The key difference is your interest transfers to a separate account for you to withdraw – with no fees – while your capital repayments reinvest automatically.

Our Self Select Account is for experienced P2P investors who have the time to hand-pick which businesses they want to lend to, making sure borrowers match their appetite for risk. To achieve good returns, you’ll need to reinvest your capital and interest repayments on a regular basis. The minimum investment is £20 and you can lend to businesses at rates between 5.95% and 16.25%*** based on our Credit Bands.

*Capital at risk. Target rate is variable, net of ongoing repayment fees and bad debt.

**Tax treatment depends on the individual circumstances of each investor and may be subject to change in future.

***Investors can lend at rates between 5.95% and 16.25% based on LendingCrowd’s Credit Bands. Interest rates are guided by the credit grading allocated to each business loan. Higher risk investments may yield greater returns but can also lead to lower returns if the business can’t fully repay its debts. This is known as bad debt. Find out more at our Risk matters page.

Article author

Gareth Mackie

Gareth Mackie

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If you invest through LendingCrowd you should understand that your capital is at risk.

LendingCrowd is the trading name of Edinburgh Alternative Finance Limited, Company Number SC468392, authorised and regulated by the Financial Conduct Authority (Firm reference number 670991). LendingCrowd and its products are not covered by the Financial Services Compensation Scheme.

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The company's registered office is 23 Manor Place, Edinburgh, EH3 7DX.

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