Understanding Peer to Peer Business Lending

Whether your small business is a scrappy start-up or a successful enterprise looking to scale, peer-to-peer business lending can provide access to needed funds when a bank may not. A peer-to-peer business loan, or P2P loan, provides money from either a person or a group of people instead of a bank or credit union. P2P loans are accessed through an underwriting site or lending platform. The site handles the process of obtaining funding for loans from a person or institution, such as an investment fund or bank.

Many P2P loans are easier to access than other business loan types because it often involves an evaluation of your credit score and other credit criteria. Some loans use a blend of personal and business finances to make a decision while others will only review personal credit or business finances. Most P2P loans do not require collateral, and different lenders choose how to prioritize the various components of your credit score and your business finances.

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View our top-rated lenders and find the best rates today. It’s quick and easy.

LenderFinances/Credit ReviewedLoan AmountOrigination FeeAPR
UpstartPersonal$1,000–$50,0000%-8%6.14%-35.99%
ProsperPersonal$2,000-$40,0002.4%-5%6.95%-35.99%
StreetSharesPersonal and businessUp to $250,0003.95%-4.95%Undisclosed
Funding CirclePersonal and business$25,000-$500,0003.49%-6.99%11.67%-36%
P2B InvestorBusiness$500,000-$10 million1.5%Undisclosed
PeerformPersonal$4,000-$25,0001%-5%5.99%–29.99%
In this article

    The 8 best peer-to-peer lenders of 2020

    Best for personal P2P loans – Upstart

    You can jumpstart your business or personal endeavors with a P2P loan from Upstart.

    APR Range
    7.98%–35.99%
    Loan Amount
    $1K–$50K
    Term
    36–60 months
    SimpleScore
    3.4 / 5.0
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    SimpleScore Upstart 3.4
    Rates 2
    Loan Size 5
    Customer Satisfaction 4
    Support 3
    Fees 3

    Upstart is a P2P lender providing funding for both personal and business use. All loans provided are personal loans and sizes range from $1,000 to $50,000, making it a good option for small businesses ready to finance an equipment purchase. Because the loan is personal, you do not need to provide business information except as it pertains to your personal income. Upstart examines your earnings as well as your credit history, education and job history when making a loan determination and setting loan terms. If you have a day job and want to start a side hustle, your work and education history could help you to get better terms from Upstart than a credit card can provide.

    Upstart Disclosure

    * The full range of available rates varies by state. The average 3-year loan offered across all lenders using the Upstart Platform will have an APR of 19% and 36 monthly payments of $35 per $1,000 borrowed. There is no down payment and no prepayment penalty. Average APR is calculated based on 3-year rates offered in the last 1 month. Your APR will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will be approved. ** Estimated savings are calculated based on the credit profiles of all loans originated by Upstart-powered lenders using the Upstart Platform as of April 1, 2019 in which the funds were used for credit card refinancing. Estimated savings are calculated by deriving current credit card APR using minimum monthly payment and 1% of the principal balance. The estimated credit card APR is then compared to the accepted loan to determine median savings per borrower. To evaluate savings on a loan you are considering, it is important to compare your actual APR from your existing debt to the APR offered on the Upstart Platform. More than 303,000 loans have been originated on the Upstart platform as of July 1, 2019. Images are not actual customers, but their stories are real. † If you accept your loan by 5pm EST (not including weekends or holidays), you will receive your funds the next business day. Loans used to fund education related expenses are subject to a 3 business day wait period between loan acceptance and in accordance with federal law. ‡ While most of our borrowers opt for automated recurring payment for ease of use, we also accept payments by check or one time electronic payments. Borrowers have the flexibility to choose the repayment method that works best for them. 9 out of 10 Upstart users surveyed internally reported that they would recommend Upstart. †† When you check your rate, we check your credit report. This initial (soft) inquiry will not affect your credit score. If you accept your rate and proceed with your application, we do another (hard) credit inquiry that will impact your credit score. If you take out a loan, repayment information will be reported to the credit bureaus. § Your loan amount will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will qualify for the full amount. Loans are not available in West Virginia or Iowa. The minimum loan amount in MA is $7,000. The minimum loan amount in Ohio is $6,000. The minimum loan amount in NM is $5,100. The minimum loan amount in GA is $3,100.

    Best personal loans for business use – Prosper

    If you want your business to prosper, you can get a personal loan for business use — just be careful not to mix business and personal in operations.

    APR Range
    7.95%–35.99%
    Loan Amount
    $2K–$40K
    Term
    36–60 months
    SimpleScore
    3.2 / 5.0
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    SimpleScore Prosper 3.2
    Rates 2
    Loan Size 5
    Customer Satisfaction 3
    Support 3
    Fees 3

    Prosper provides loans for small businesses, but the products are arranged as personal loans and the company assesses your credit score to provide funds. If you are in the beginning stages of launching a business, obtaining funding through a traditional lender can be close to impossible. A Prosper P2P loan is for $2,000 to $40,000 and can have an annual percentage rate varying from 6.95% to 35.99%. Prosper’s interest rates are keeping in line with other P2P lending options, but if you do not qualify for a low APR, the loan costs will be high when you extend payments over the full 3-to-5-year repayment period. Prosper allows for early payoffs of loans without a prepayment penalty, making it possible to save on interest by paying down the balance when your business takes off.

    Prosper Disclosure

    For example, a three-year $10,000 personal loan with a Prosper Rating of AA would have an interest rate of 5.31% and a 2.41% origination fee for an annual percentage rate (APR) of 6.95% APR. You would receive $9,759 and make 36 scheduled monthly payments of $301.10. A five-year $10,000 personal loan with a Prosper Rating of A would have an interest rate of 8.39% and a 5.00% origination fee with a 10.59% APR. You would receive $9,500 and make 60 scheduled monthly payments of $204.64. Origination fees vary between 2.41%-5%. Personal loan APRs through Prosper range from 7.95% (AA) to 35.99% (HR) for first-time borrowers, with the lowest rates for the most creditworthy borrowers. Eligibility for personal loans up to $40,000 depends on the information provided by the applicant in the application form. Eligibility for personal loans is not guaranteed, and requires that a sufficient number of investors commit funds to your account and that you meet credit and other conditions. Refer to Borrower Registration Agreement for details and all terms and conditions. All personal loans made by WebBank, member FDIC. Prosper and WebBank take your privacy seriously. Please see Prosper’s Privacy Policy and WebBank’s Privacy Policyfor more details. Notes offered by Prospectus. Notes investors receive are dependent for payment on unsecured loans made to individual borrowers. Not FDIC-insured; investments may lose value; no Prosper or bank guarantee. Prosper does not verify all information provided by borrowers in listings. Investors should review the prospectus before investing.

    Best for business loans – Funding Circle

    Funding Circle provides a personal touch for business loans in a world where it’s not commonly found.

    APR Range
    4.99%–27.79%
    Loan Amount
    $5K–$500K
    Term
    3 months–10 years
    SimpleScore
    3.2 / 5.0
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    SimpleScore Funding Circle 3.2
    Median APR 3
    Loan Amount 4
    Product Variety 1
    Resources 5
    Fees 3

    For a business looking to go to the next level, Funding Circle provides financing up to $500,000 and is a true peer-to-peer loan for businesses, so prepare to buckle up and provide paperwork for both the business and the owners. This means business tax returns, personal tax returns and bank statements. Despite the paperwork, Funding Circle’s requirements are fairly minimal and include having a business that’s at least two years old, a personal credit score of 620 for a business with multiple owners or 660 for sole proprietorships, and no personal bankruptcies in the previous seven years.

    From its inception, Funding Circle has provided a personal touch through the loan process, and businesses can still expect this. The company states an account manager will reach out within one hour of receiving an application to discuss your business, documentation needs and potential loan terms.

    Best for bad credit – Peerform

    It’s in the name — Peerform funds bad credit business loans from a network of investors and lenders.

    t
    N/A
    f
    N/A
    SimpleScore
    3.8 / 5.0
    close
    SimpleScore Peerform 3.8
    Rates 5
    Loan Size 5
    Terms 3
    Support 5
    Fees 1

    Peerform provides a variety of unsecured personal loans at competitive interest rates within the peer-to-peer realm. Loan sizes range from $4,000 to $25,000, making it a viable option to cover a very specific and defined expense. For example, a jewelry designer may want to invest in a 3-D printer to expand product offerings or purchase materials to build a booth and displays for trade shows. Well-qualified buyers are able to obtain lower APRs and origination fees, and a prepayment penalty is not applied. This means you can pay your loan offer early to reduce interest costs without a fee or adjust the size and frequency of payments to accelerate repayment.

    StreetShares

    StreetShares was founded by veterans to meet the needs of veterans, but any small business can apply for a loan. StreetShares is suited to small businesses that are at least one year old and have minimum revenue. It suits enterprises in a growth phase that need access to multiple types of credit, such as a short-term loan or a line of credit. New borrowers can obtain up to $200,000 in credit but repeat customers, such as a growing business, can borrow up to $250,000. The maximum borrowing capacity is based on a variety of factors, including business revenue and personal credit history. A business loan requires examination of business finances and also requires a personal guarantor with reasonable credit. In addition to providing the unsecured loans standard in P2P lending, StreetShares also provides access to secure loan types and Small Business Administration loans, making it possible for you to start with P2P loans and move into traditional financing.

    [Note: StreetShares is only offering Paycheck Protection Loans to businesses at the moment and is not originating term loans.]

    What is a peer-to-peer lender?

    Borrowers connect with P2P lenders through an intermediary, such as a lending platform, to obtain loans. The lending platform acts as an underwriter and vets your eligibility before posting the loan through the platform. One or more lenders may fund your loan, and certain lenders may specialize in offering specific loan types, such as business loans. In addition to personal investors offering funding for P2P loans, many investment funds serve as lenders for P2P loans. You do not repay a peer-to-peer lender directly. Payments and other loan business are handled through the underwriter.

    Check Your Business Loan Rates

    View our top-rated lenders and find the best rates today. It’s quick and easy.

    How do I choose the right peer-to-peer lender?

    The right P2P lender for you will largely depend on the size of your business. For start-ups, an unsecured personal P2P loan is an alternative to financing company expenditures on high-interest revolving credit cards. A robust small business with established financial records should look for a lender with a higher loan limit if growth is a goal. For a booming enterprise looking for short-term help with expenses during cash flow hiccups, a P2P lender with a line-of-credit option is ideal.
    To protect yourself and your business, always review all the costs of a loan. P2P lenders can charge a variety of fees, including origination fees, annual fees and prepayment penalties. Research the possibilities with various lenders who use a soft credit report pull and do not require a commitment to provide additional loan terms.

    Ashley Mott

    Contributor for The Simple Dollar

    Ashley Mott is a full-time journalist with over 10 years of experience in small business management. Her work has been featured in USA Today and at Chron.com, The Knot, Yahoo! Finance and the San Francisco Chronicle.