Side by side
| Criterion | Peer to peer lending | Bank loan |
|---|
| Funding source | Individual and institutional investors via a platform | The bank's own balance sheet |
| Speed | Often days to a few weeks | Typically several weeks |
| Eligibility | More flexible, wider range of trading profiles considered | Stricter policy, favours established businesses |
| Cost | Can be higher, reflecting investor risk appetite | Generally lower for businesses that qualify |
| Relationship | Transactional, managed through the platform | Often part of a wider banking relationship |
| Facility sizes | Typically smaller to mid-size | Full range, including larger facilities |
How the funding actually works
Peer to peer platforms pool capital from many investors and lend it out to businesses, with the platform handling underwriting, servicing and collections. This structure allows platforms to consider a wider range of trading profiles than a bank might, since risk is spread across many investors rather than concentrated on a single balance sheet.
A bank loan is funded directly by the bank, and pricing and eligibility reflect its own credit policy and cost of capital, which is generally lower than that demanded by individual investors seeking a return.
Speed and eligibility trade-offs
Peer to peer platforms have generally built faster, more digitised application processes, which suits businesses that need a decision quickly or that do not fit neatly into a bank's standard credit boxes. The cost of that speed and flexibility is usually a higher rate of interest than a comparable bank loan.
Which to approach first
If your business fits conventional bank criteria and timing is not urgent, a bank loan will usually be the cheaper option. Where speed matters, or your trading profile falls outside standard bank policy, a peer to peer platform can be a practical alternative worth exploring alongside other specialist lenders.
The short answer
Approach a bank first if you fit standard policy and can wait; consider peer to peer lending where speed or a less conventional trading profile matters more than achieving the lowest rate.
Questions
Is peer to peer lending regulated?
Platforms operating in regulated markets are typically authorised by the relevant financial regulator, though the underlying business lending itself is often less regulated than consumer credit.
Do peer to peer loans show on my business credit file?
Generally yes, in the same way as any other business borrowing, so it should be factored into future credit applications.
Can a start up access peer to peer lending?
Some platforms will consider newer businesses, particularly with a personal guarantee or asset backing, though many still prefer at least a short trading history.
Not sure which route fits? Describe the requirement once and we will structure it and approach the providers whose criteria match. No upfront fees — charges are due only once funding is in place.
Start a funding request