App version: 0.1.0

Guide to Peer-to-Peer Lending for Business

Top Options for Peer-to-Peer Business Lending
Nancy Bilyeau
Nancy BilyeauUpdated April 14, 2023
Share this article:
Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
For some small business owners, securing capital is crucial, but getting a bank loan is challenging, especially as a startup or a venture not yet showing a lot of revenue..Peer-to-peer (P2P) lending is an option for those who want to look beyond traditional banks or credit unions.

What Is Peer-to-Peer Business Lending

With P2P lending, a business receives a loan directly from an investor or a group of investors. It eliminates the bank as a middleman, making it easier for borrowers and lenders to connect via online platforms. For many borrowers, this is a viable form of financing as it offers faster approval and financing at desirable interest rates, even for borrowers with less than perfect credit. For investors, it can be an opportunity to support businesses they believe in.As with any form of financing, there are pluses and minuses to consider for this form of loan crowdfunding. Before you choose a lender, check out our guide to learn about typical P2P rates and terms, types of peer-to-peer business loans, and how to apply.

How Does P2P Business Lending Work?

Peer-to-peer business lending is an alternative form of financing that allows borrowers to directly connect with investors via online platforms. P2P lending platforms are not the lenders as a bank or credit union would be. This can be helpful for borrowers who may not qualify for a bank loan, those who desire a faster loan turnaround, or those looking for competitive interest rates.  Peer-to-peer lending for businesses follows this basic process:
  1. A borrower’s credit is assessed with a soft or hard credit pull via the P2P lending platform to begin the process of establishing eligibility. These platforms have different qualifications regarding credit ratings, with some more strict than others. 
  2. Based on their credit history and score (among other factors), applicants will be assigned a “loan grade” to help lenders and investors choose the applicant that presents the least amount of risk. The loan grade will typically dictate what interest rates and loan terms you receive. 
  3. Borrowers make a listing for their loan, complete with what the loan will be used for, why they’re a smart investment, and other introductory information that helps lenders and investors make a decision. 
  4. Lenders then have the opportunity to bid on listings, including the amount they can lend and interest rates offered. 
  5. When the business’ listing ends, all qualified bids from lenders combine to form a single loan, which is then deposited directly into the borrower’s account for immediate use. 
The P2P lending platforms typically make money by charging fees to investors in addition to some fees charged to borrowers, like origination or closing fees. When comparing a bank loan to a P2P loan, it’s important for borrowers to consider these fees and interest rates to ensure they’re receiving the right loan for their needs. 

Typical P2P Rates, Terms, and Amounts

Rates, terms, and loan amounts for peer-to-peer business loans can vary greatly depending on the applicant’s qualifications, investor criteria, and the P2P platform being used. Generally, the platform will determine the interest rate for borrowers based on their qualifications.Recommended: Small Business Funding Guide

Pros and Cons of P2P Business Loans for Borrowers

Peer-to-peer business lending offers both borrowers and investors numerous benefits, but there are also risks involved. Understanding some pros and cons, can help you make an educated decision when looking at peer to peer lending for small business. 


  • Typically quick loan application process and funding
  • Competitive interest rates for well-qualified borrowers
  • Access to funding for those who may not qualify with traditional lenders
  • More personal process as lenders can get to know the borrower’s story based on their profile
  • Many loans are unsecured


  • Limited regulations on peer-to-peer business lending could make this riskier than loans with traditional lenders. Some are not backed by FDIC, as banks are.
  • Some P2P lenders offer small loan amounts leaving borrowers to seek additional funding elsewhere
  • Interest rates can vary greatly depending on borrower’s qualifications

Common P2P Business Loan Uses

One of the advantages of P2P business lending is that funds can be used for numerous purposes making it a viable option for many small business owners, although it’s important to check with the P2P lender on loan restrictions, if any. While peer-to-peer business loans may be sought by businesses that don’t qualify for a loan at a traditional bank or lender, almost anyone can apply for P2P loans. Common uses for P2P loan uses include:

5 Tips on Qualifying for a P2P Loan

Before applying for peer-to-peer business lending, check out these valuable tips to help you prepare and could help you qualify:

1. Collecting Documents Before Applying

You may need to provide items like:
  • Tax returns
  • Bank statements
  • Business tax returns
  • A business plan
  • Identifying documents
  • Personal story to share with investors reviewing your P2P inquiry
  • Documents regarding income and outstanding debts

2. Checking Your Credit Score

Check both your personal and business credit (if you’ve established business credit). Knowing your credit score will help you determine which P2P loans you’re eligible for. If your credit rating is low, you can take steps to improve it such as paying down debt and paying bills on time.

3. Checking Your Eligibility

 Most P2P lenders will have basic requirements to apply such as proof of citizenship, age, residence, and bank account.

4. Determining What You Can Afford

 Assess your business needs and finances to determine how much money you need to borrow and if you can responsibly pay back the loan. 

5. Seeing About Pre-Qualifying

P2P lenders who offer pre-qualification typically do so via a soft credit pull (does not affect credit score) to check if you meet basic eligibility requirements before applying. 

How to Apply for a P2P Business Loan

As with any loan, you’ll want to take steps (like those noted above) to make sure you are eligible for the P2P loans you’re applying for. After you’ve determined eligibility, you can follow common steps like these to apply for business financing:

Determining the Loan Amount

After assessing all your financials to see what you can afford and what you need, determine your loan amount. You may also be able to use this amount when seeking pre-qualification or joining a P2P platform. 

Comparing Peer-to-Peer Lending Platforms

Research different loan products offered on P2P lending platforms. Take note of the different loan amounts, interest rates, qualifications, and restrictions. Remember that P2P loans are typically for smaller amounts, which means loan terms may be short. 

 Applying Through a  Peer-to-Peer Lending Platforms

Different platforms will have different requirements for approval. However, most will likely assess your credit score and history. From there, they may assign you a “grade” that lets investors know how risky of a borrower you are. Most P2P platforms will also provide you with an interest rate for your loan request. If you approve the rate, you can move on to securing funding.

Setting Up Your Peer-to-Peer Loan Listing

If you’re approved to join the P2P platform, the next step is to create a loan listing (loan request). The process for setting up your loan listing will differ from one P2P platform to the next. In general, you’ll likely have to provide information regarding what your business is, how much money you need, and for what reason.Investors will then have the chance to review your loan request. Depending on the listing, there may be several investors who each lend a small amount or there could be one or two investors who lend a large amount. Once the bidding period is over, the funds are combined into one loan and made accessible to you. Recommended: Crowdfunding Guide for Businesses

Alternatives to Peer-to-Peer Business Loans

Peer-to-peer business lending offers loans for a variety of business purposes, but if you need additional funding, consider these other financing options:

Restaurant Loans

Restaurant loans serve the needs of restaurant owners looking to start, renovate, or expand a restaurant business. 

Commercial Real Estate Loans

Commercial real estate loans are granted to business entities (individual or group) for a commercial property or land that is solely for business use.

Franchise Financing

If you’re preparing to open a franchise, a franchising loan can help with the expenses including the franchise license, franchise fees, and necessary startup capital associated with starting a business. In addition to general lenders, there are also franchise companies who specialize in offering loans specifically for franchise owners.  

Equipment Financing

Equipment loans are used to purchase equipment necessary for business operation. Loan terms are typically equal to the expected life span of the equipment and the equipment acts as collateral for the loan. Interest rates can vary depending on the industry, type of equipment, and qualifications.


Microloans are those given for smaller amounts, generally $50,000 or less to support small businesses without access to other types of funding. They are often offered by nonprofits, government agencies, or individual lenders to be used for a variety of business expenses and often focus on specific types of borrowers, such as female entrepreneurs, underserved communities or veterans.

Working Capital Loan

A working capital loan is used to cover everyday expenses like payroll, monthly bills, and repairs. Many small businesses rely on working capital loans to manage short-term cash flow fluctuations due to seasonality, economic changes, or when expanding their business. 

Business Line of Credit

A business line of credit is a short-term loan option that gives borrowers access to a set amount of credit, which is determined by the lender, to be used for business expenses like repairs, emergencies, or working capital. Some lines of credit are revolving, while others end once you pay off the loan amount.

SBA Loans

SBA loans are short- or long-term business loans ideal for helping with starting or expanding a business. They are guaranteed by the US Small Business Administration (SBA) making them less risky for lenders and have competitive rates and terms for well-qualified borrowers. 

Compare P2P Lenders with Lantern by SoFi

Peer to business lending offers borrowers flexibility when choosing the right loan for their particular needs. Whether you’re just getting started or you’ve been in business for years, P2P business lending can help you get the capital you need in a timely manner. With so many P2P platforms and lender options, it can be overwhelming to know which is right for your business, which is why Lantern makes it quick and easy to compare lenders. You get instant access to a network of small business financing options and a list of our approved lenders all in one place, so you can find the capital you need, when you need it.

About the Author

Nancy Bilyeau

Nancy Bilyeau

Nancy Bilyeau writes about student loans, mortgages, car insurance, medical debt and many other finance topics for Lantern. A veteran of the magazine business, she has edited stories on personal finance for Good Housekeeping and DuJour magazines and has written articles for The Wall Street Journal, Readers' Digest, Parade, Town & Country and Lifetime/A&E, among others. She is a graduate of the University of Michigan.
Share this article: