How peer-to-peer business lending works
A peer-to-peer platform traditionally matched businesses seeking finance with individuals or institutions prepared to fund loans.
Some platforms now use institutional capital, partner lenders or their own balance sheet, so the customer experience may look similar while the legal structure differs.
Read the credit agreement to identify the lender, broker or platform, payment recipient and servicer. The platform brand alone does not tell you who owns the debt or what happens if the platform stops operating.
Application and eligibility
Online applications commonly request company details, owners, turnover, bank statements, accounts, purpose and requested term. Open-banking access may speed up analysis, but you should understand the consent, data scope and duration.
Eligibility can depend on trading history, revenue, profitability, sector, credit history and guarantees. A fast decision is convenient, not evidence that the loan is affordable or appropriately priced.
Interest, fees and repayment structure
Compare the annual or monthly rate, arrangement and platform fees, total amount advanced, payment frequency and total amount repayable. Some facilities use daily or weekly collections, which can place different pressure on cash flow from a monthly bank loan.
Check early repayment, missed-payment fees and default interest. A fee deducted at payout reduces the working capital the business actually receives.
Security and personal guarantees
Marketplace loans may be secured or unsecured in the ordinary marketing sense. Even without security over a named asset, the agreement may include a personal guarantee, debenture or other rights.
Directors should understand the maximum guaranteed amount, continuing liability, enforcement process and whether the guarantee covers fees and interest. Independent advice can be sensible before taking significant personal exposure.
Platform and regulatory checks
Check the FCA Register for the legal entities and activities involved. Business lending is not always regulated in the same way as consumer credit, and an authorised platform may conduct both regulated and unregulated activity.
Ask how payments and records will be administered if the platform fails or transfers servicing. Keep copies of the agreement, statements and payment history outside the platform portal.
When marketplace lending may fit
It may suit a business that values a digital application, clear fixed term and wider choice beyond its bank. It can also serve a defined investment where projected cash flow comfortably covers the payment.
It is less suitable when the business is borrowing repeatedly to cover an unresolved loss, cannot tolerate frequent repayments or has not understood the guarantee. Compare bank loans, asset finance, overdrafts and invoice finance before deciding.
Frequently asked questions
Is peer-to-peer business lending FCA-regulated?
The platform or activities may be regulated, but not every business loan receives consumer-style protection. Check the legal entities and permissions for the exact service on the FCA Register.
Are marketplace business loans unsecured?
Some are marketed as unsecured, but may still require personal guarantees or other contractual security. Read the full agreement.
What if the platform closes?
The agreement should explain servicing and continuity arrangements. Keep your own records and identify who owns and administers the debt.