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Bust the Jargon: P2P and P2B, Loan-Based Crowdfunding

Bust the Jargon: P2P and P2B, Loan-Based Crowdfunding

9th August 2017

The peer to business (P2B) lending industry is full of confusing terms. Let’s explain what some of them mean.

Working every day in the peer to peer (P2P) lending industry, it is often easy to forget that for most investors and some businesses, engaging with the world of finance is a very small part of their day-to-day life.

Some commonly used acronyms such as ‘ISA’ are now fairly well understood because they are used across the media and in everyday life. This has helped with the introduction of new types of ISA, such as the Crowdstacker Innovative Finance ISA .

But as we adopt more and more new language to explain new concepts or help us discuss complex technicalities more easily, we unwittingly create more potential confusion for the very people whose lives we are trying to simplify – borrowers and investors.

In an attempt to explain some of the most commonly used new language we’ve pulled together a quick jargon buster about four of the most commonly used terms ‘crowdfunding’, ‘P2P’, ‘P2B’ and ‘Platform’.

P2P and P2B

These are actually simpler than they might appear.

P = peer, and B = business.

So, P2P is really peer-to-peer, or person to person lending.

P2B is peer-to-business, or person to business lending.

Crowdstacker only facilitates P2B lending because we don’t allow individuals to borrow money. But we use the term P2P more often just because it is more broadly used in the media, and therefore should be more widely understood by the general public.

At Crowdstacker, we have debated the use of these acronyms endlessly! But in the interest of simplicity we have opted to use the more mainstream terminology in line with others in the crowd investment industry.

Crowdfunding – a catch all term, but do you know the differences?

OK, this one might seem like an easy one to begin with. But it can quickly become more complex the more you dig into the industry.

The simplest explanation of crowdfunding is exactly what it says it is – funding via a crowd.

Technically it can be used to describe everything from more than one person giving money to another person so they can spend it in some way, right up to thousands of people giving money to a large organisation.

Of course, the complexity comes when we explain what we really mean by ‘funding’.

Funding as ‘giving’ doesn’t often happen unless the crowdfunding is for a charitable endeavour, when people will donate money for something they consider to be a good cause. It doesn’t necessarily have to be a formal charity. For example, it could be someone raising money via a crowdfunding website to pay off their student debts.

Funding can also mean ‘buying’. This is called equity crowdfunding and this is where organisations (usually) offer a share of their commercial venture in return for funds. Profit is often only realized when the commercial venture is sold, meaning the shares are sold.

Lastly, ‘funding’ can mean ‘lending’. This is called loan-based crowdfunding and this is what Crowdstacker does.

We enable people to lend money to businesses (P2B lending) in return for a good rate of interest over a pre-defined period, with repayment of the principle due at the end of the term.

Crowdfunding Platforms

This is a favourite of ours because we talk about our lending platform all the time, but what exactly do we mean by it?

We use the term ‘platform’ because it refers to our technology – the technology which enables our business to function and money to be lent and repayments processed. The best way to imagine it is as a literal platform upon which all these functions are built.

A good P2P or P2B platform should make managing your money an easy and transparent process.

Crowdstacker’s P2B investors appreciate the simplicity of our website and dashboard, where members can engage with borrowing businesses and easily manage peer-to-business investments. The industry is impressed too, and we’ve won numerous awards, including Best P2P Lending Platform 2017.

Help us see clearly – let us know if we are confusing you with jargon

Crowdstacker puts a lot of time and work into creating an investor- and borrower-friendly experience. So, if we ever use confusing wording or terminology just let us know. We’d be glad to make clarifications, and grateful for the feedback to help us do our job better.

Your capital is at risk if you lend through Crowdstacker and you should not lend more than you are prepared to lose. For more information consult our full risk warning.