Peer To Peer Leading

It’s becoming more and more popular with amateur investors, but what is a peer to peer lending in Australia? Is it suitable for commercial borrowers, or is the bank or a more traditional lender a better route to finance?

What is a peer to peer lending?

 

Peer-to-peer lending in Australia usually happens on specialist digital platforms. It’s essentially a way for investors and borrowers to connect, but in this article, we’ll discover that these platforms are not unique. Specialist investors and borrowers had been forging productive links long before the digital operators got in on the act. In fact, for some borrowers, there are better alternatives than peer-to-peer lending in Australia. And likewise, digital peer-to-peer lending investment isn’t the only way to make returns from commercial borrowers.

So, what is a peer to peer lending in Australia? Primarily, it allows businesses in need of capital to fund growth or ventures like building houses, offices, and apartments, by borrowing from investors who want to make their money grow. Digital P2P lending is typically carried out via a website with its own rules and conditions.

P2P lending in Australia works in much the same way as traditional forms of finance. Borrowers sign up for property investment loans, construction loans, asset finance, or cash flow funding and repay it over a set term with interest.

The attraction for many businesses and borrowers is that peer-to-peer lending allows them to bypass banks and traditional lenders. They often encounter fewer obstacles to funding online. Digital P2P platforms apply criteria for borrowing, but they can be more flexible than some of the more conventional commercial funding routes.

Investors who dabble in peer-to-peer lending in Australia can sometimes choose who they invest with, although that differs from platform to platform. For that reason, many investors with ethical concerns prefer P2P over banks and other traditional investment options. Peer-to-peer platforms may also offer better returns than such options, and in most cases, the platform takes care of everything from credit checks to repayments.

Despite the growth in peer-to-peer lending in Australia, many active investors and business owners don’t realize there are similar alternatives. Peer-to-peer lending essentially utilizes a managed fund. Private mortgage managers are identical and have been operating for a relatively long time. They provide what’s arguably a more direct route to investors, many of whom specialize in specific areas, such as property development, business expansion, or construction. This article examines how Australian P2P lending platforms operate for investors and borrowers. It will also consider the advantages of talking with a private mortgage manager.

Peer to peer lending for investors: the risks and rewards

Peer-to-peer lending for investors can be a pretty straightforward way to make money. However, that’s not to say it’s free of risk. Before a borrower can qualify for finance, the platform will carry out credit and eligibility checks, much like a bank or traditional lender. The way that happens varies across different websites.

The pros of peer to peer lending in Australia

Different peer-to-peer lending investment platforms have different rules. For instance, some will permit investors to pick and choose which loans they fund. Others will make such investment decisions internally. When everything goes according to plan, interest rates on P2P platforms may offer better value than other traditional investment forms. Many investors also like the fact they can connect easily with borrowers who need funding to help a worthwhile business grow.

• Borrowers can typically get a cheaper loan than they would from a bank.

 

• Investors can earn more interest than they would from a bank.

 

• The lending platform also wins because it takes fees.

 

• Some platforms allow tiny minimum investment amounts, as low as $100

 

• Some platforms will allow investors to specify loan periods that suit their needs.

 

• Websites may also permit investors to choose a minimum interest rate.

 

• A few platforms allow investors to receive returns regularly during the loan term.

The cons of peer to peer lending in Australia

P2P returns can rise and fall, and nothing is guaranteed. If a borrowers experience financial challenges, the term could lengthen, and returns get diminished. P2P platforms also have fewer government guarantees and safeguards than many other investment options. Suppose there is borrower fraud, or the digital medium makes an error. Depending on a specific website policy, an investor could lose a sizeable chunk of their money.

• There’s a certain amount of risk with peer-to-peer lending for investors.

 

• Many peer to peer loans are unsecured, and it’s not always immediately apparent to investors.

 

• Investors shoulder all of the lending risks in a peer-to-peer lending investment situation.

 

• For platforms, the risks are minimal.

 

• Some investors only receive a lump sum at the end of a loan term, and exiting the agreement can be challenging or impossible.

 

• With some peer-to-peer lending investment platforms, you’ll need a minimum stake that can run into tens of thousands of dollars.

What is a peer to peer lending in Australia? Qualifying for and repaying commercial P2P loans

 

Over the last decade, peer-to-peer lending has become relatively popular with business borrowers. While websites provide faster, more convenient options than banks, they might not be the best option for every borrower. However, P2P lending indeed offers some distinct advantages. Business owners can do everything from registering to accessing funds more quickly than with a bank or traditional commercial lender. P2P lending marketplaces also provide short-term loans and longer-term borrowing. While, just like with a bank, you’ll likely need to be a company director, the P2P platform may not require a minimum period of trading, opening up solutions for more borrowers.

Remember, though, that ease of access comes with caveats. Like more traditional lending, peer-to-peer interest rates are based on risk. Although it’s sometimes easier to qualify for a P2P loan, it means you’ll likely pay a higher interest rate.

Who uses peer-to-peer lending in Australia?

Peer-to-peer lending might not be the best solution for all businesses out there. Still, it does offer a source of funding for some individuals and organizations who would otherwise have trouble meeting strict bank criteria. Peer to peer lending investment is accessed by several types of commercial borrowers, including but not limited to:

• Start-ups sometimes find it challenging or impossible to qualify for funding with banks and traditional lenders. Without extensive accounting and tax records, they can fail to meet requirements.

 

• For SMEs, P2P platforms are often filled with solutions that meet their day-to-day cash flow needs. Many offer invoice financing and smaller commercial loans.

 

• Businesses without premises or property equity often find cost-effective borrowing hard. Unsecured borrowing almost always comes with higher interest rates than the alternative, but P2P platforms can be a little more competitive than banks and traditional lenders. For that reason, they’re popular with companies that don’t require premises and business owners who either don’t have or don’t want to risk personal property equity on a new venture.

 

Peer to peer lending in Australia: Private Mortgage Managers

 

It all means that although peer-to-peer lending investment suits certain parties on both sides of the borrowing equation, others will be better off looking for an alternative that better exploits their assets.    Many businesses that use peer-to-peer lending in Australia tend to be asset-poor. It’s a great way to access short- and long-term funding when you need unsecured commercial finance, but it’s not ideal for every organization or venture. There are several ways businesses can stick with the peer-to-peer concept but exploit assets and property equity to source more cost-effective, tailor-made solutions.

In reality, peer-to-peer lending investment is nothing new. Private mortgage managers have been connecting investors with borrowers for many years – often matching sector specialist investors and funding with relevant businesses and projects to drive better value and more efficient operations.

One significant difference between private mortgage managers like Prudential Custodians and P2P operators is that investors aren’t grouped haphazardly according to finance applications. For instance, private mortgage managers can access investors who specialize in construction finance or business growth. Private mortgage managers know their investors inside-out, developing long-term relationships, and enabling faster, custom-made funding solutions.

Private mortgage managers can assess individual commercial projects and borrowers according to their unique strengths. Private mortgage managers are real people, often with specialist knowledge in property development, construction, or business growth. Many businesses appreciate that they can pick up the phone and discuss their needs, solve problems quickly, and get things done more efficiently.

Private mortgage managers: Growing or moving a business

Many business owners have considerable equity in personal property. They can use this to fund business expansion. That could involve borrowing to move to bigger premises, improving, replacing, repairing manufacturing equipment, or extending an office building.

Likewise, many of the same objectives can be achieved by using the equity in commercial property. Businesses can fund everything from new premises to product launches or research and development by utilizing commercial property equity. Some businesses also hold significant business assets like machinery and plant, and they can use them to source more cost-effective funding solutions.

 

Property development and construction finance

Builders and developers can access a range of ways to put equity to work. At Prudential Custodians, we help source finance options based on apartment block construction to subdivisions and business park development in Sydney, Melbourne, and Australia’s major cities.

When it comes to real estate and development, we apply expert knowledge to evaluating projects. It means we can consider the total costs of a particular site and the end value. That unlocks more possibilities for developers and builders. It also allows us to exceed what a bank, P2P, or non-specialist lender is prepared to offer.

• Specialist construction finance loans: End-to-end funding solutions with fewer conditions, pre-sales requirements, and delays than the bank.
• Residual stock loans: If you’ve completed a project and want to move on to the next one without rushing stock sales on your current site, borrow against the equity in completed apartments, offices, or houses.
• Gross realization value Vs. Total development costs: We consider the potential and value tied up in the construction process and allow you to unlock that to fuel better funding solutions.
• Unlocking equity from a DA application: Property developers regularly create equity by applying for a DA. At Prudential Custodians, we allow you to put that value to work and get projects moving faster.