Guest post by Dan Azeroual.
There’s no question that the big banks & Wall Street are under Congressional and regulatory siege (or is it the other way around?).
The reason, of course, is that if Washington is going to bailout the too-big-to-fail banks, then Washington needs to show everyone, from the “Occupy Wall Streeters” to the Tea Partiers, that it’s going to be calling the shots, all the way down Wall Street, to keep the bankers in line to prevent another financial fiasco. Oh yeah, it will get the banks lending to businesses again too.
Easier said than done.
Unfortunately, the bottom line is that lending to businesses is just not happening, for reasons that run the range from there’s still too much toxic debt on the big bank’s books (because the original Geithner plan back in ’09 had a snowballs chance in hell of saving the big banks, which were effectively insolvent) to regulation unintentionally hamstringing the smaller banks, who are, paradoxically, more likely to make small business loans, but now it’s not worth the headache & cost in paperwork and oversight.
The troubles besetting the banks, their reaction to Washington’s reaction, and the effect on us all will be dissected and analyzed in the financial chapters of history books and regulatory journals for years if not decades to come and there’s no point in waiting for Washington to straighten out the mess, if that’s even possible. It’s time for small businesses to start looking at other means of raising capital.
Benefits and Opportunities of Peer-to-Peer Lenders To Small Business Owners
Right now, the biggest benefit of peer-to-peer lenders to small business owners is that those lenders are just about the only ones . . . uh, lending. This is because the credit crunch has been a boon to the P2P industry. While bank earnings have gone over the cliff, the P2P lending industry has continued to grow.
True, small and community banks are lending too, but because of the current regulatory environment, it’s harder for them to lend and when they do, they have to pass the extra regulatory costs onto borrowers. While the big financial lending institutions have been bailed out, they have nevertheless still been effectively washed out to sea by waves of toxic debt and reactionary regulation, so they’re basically out of the picture as far as smaller business borrowers are concerned.
While the small P2P business loan amounts are, on average, smaller than what you could get at a traditional bank, at least you can get one and you won’t have to go through a long & torturous, and probably ultimately futile, application process.
A second benefit is that peer-to-peer lenders typically offer better interest rates than traditional banks. This happens in part because peer-to-peer lenders operate online through sophisticated borrowing online platforms and therefore they don’t have all the traditional overhead costs of a bank, such as rent, and they’re somewhat freer from the cost of regulation (at least so far).
Another source of savings is increased efficiency through state of the art cutting edge technology and personalization: peer-to-peer lenders are one of the most innovative lenders out there, using the newest models and risk analysis algorithms to not only give borrowers the best rates but the best rates personally designed for them. This is a level of optimal borrowing conditions and personal attention that is unprecedented in the world of traditional banking.
Finally, if you’re a small business, you’re probably fairly innovative and unconventional yourself. Traditional banks like lending money to innovative and unconventional businesses about as much as a cat likes taking a bath. With P2P lending, you’re not dealing with one bank and one guy (or gal) in that bank – you’re pitching your small business loan application to an entire community of lenders who are also, in many cases, your peers, e.g., other small business owners and small investors. While some may choose not to fund you, many others probably will.
Is a peer-to-peer personal loan or small business loans for you? There’s only one way to find out and – you have nothing to lose by trying to register on Peerform.