With the prospect of lower interest rates and higher inflation are more people choosing Peer to Peer than ever before?
For some Peer to Peer is something they use all the time but for others, it’s a term they have never heard of or just don’t understand.
So what does Peer to Peer mean?
Peer to Peer, or its shortened form P2P, links two parties together directly and is a term being heard more and more across a variety of industries. You may have heard of homeaway.com or the newer trendy airbnb.com, These holiday letting companies are all a form of Peer to Peer as they enable people who want a holiday to connect directly via a website with those who have a house to rent for a short holiday. Uber is another site offering Peer to Peer ride sharing, where people needing a taxi can be linked directly with those offering a ride.
Another form is P2P currency exchange through sites such as Transferwise allowing those who have different currencies to simply swap online, thus saving on the high commission rates charged by the traditional bureau de change. There is even now, the aptly named, Peer to Pier boat rental run by new emerging companies such as Boatsetter. Why own a boat when you can borrow someone else’s for a reasonable rate? After all many boats just sit there in the marina most of the year so it makes sense doesn’t it?
But what does this have to do with my money?
Here is where Peer to Peer meets finance. In the world of finance, Peer to Peer sounds like an odd moniker, it doesn’t actually sound financial at all does it? However, this form of investing which has emerged over the last 8 years may just be, potentially, a decent addition to your investment portfolio if done correctly.
So what is Peer to Peer lending?
P2P lending links people who have money to invest (and who want to make the most of that money by possibly earning good rates of interest) with those who want to borrow money (and who are willing to pay an agreed rate of interest).
P2P lending is made possible by the internet, as online platforms facilitate the borrow and lender transaction. The UK government and stringent FCA regulation have also helped this sector to bloom. Tight FCA controls are in place to help ensure platforms operate in a fair and transparent way, as well as the new tax breaks for investors brought in by the government in April 2016 such as the Innovative Finance ISA or IFISA (a dedicated Peer to Peer ISA account) and the inclusion of Peer to Peer in the new Personal Savings Allowance (PSA).
Crowdstacker - Peer to Peer business lending
Crowdstacker is a P2P platform, but we believe ours comes with some big differences. Firstly, we only allow established businesses to borrow rather than individual borrowers or start-ups (some platforms lend to individuals for personal expenses such as a new car or home improvements and these loans are not generally secured on assets and in many instances only a simple credit check has been taken on the individual borrowing). The businesses listed on Crowdstacker by contrast need to have a proven track record or a strong balance sheet. Furthermore, we don't list a business until we have undertaken an extensive assessment of the company and also ask for security over assets in many situations to protect lenders.
The Crowdstacker due diligence process
Our difference at Crowdstacker, is that part of our process, called due diligence, involves having multiple meetings with each of the management of the business and checking financial statements, verifying the identity of the company and its directors, undertaking an automated credit analysis as well as carrying out a more indepth analysis into the business's financial health. We then package an investment to the investor in a simple and transparent way. We ensure we have made all the great benefits clear as well as the possible risks. Because of course risks are a part of all investments, and Peer to Peer is no different. Just to be sure each investor has fully understood, we have a short questionnaire as part of our investment process to try and ensure that those investing are fully informed about these benefits and risks – we don’t believe many in the industry go this far.
Peer to Peer and the introduction of the Innovative Finance ISA
The introduction of the new Innovative Finance ISA also really shows how the Peer to Peer industry is going mainstream. Some of the investors that we have spoken to have said they are fed up with low returns that they have been receiving over the past few years and are happy to take a higher element of risk for the chance to improve on those returns with higher rates of interest. It is a bonus to be able to add these investments into a tax-free ISA account.*
Our awards and customer feedback speak for themselves
At Crowdstacker, we have come a long way over the past year, winning the Best New Peer to Peer Provider at the Moneynet awards in January as well as runner up, voted by the public, in the Online Personal Wealth Awards 2016. In our reviews investors have also expressed that they feel we offer a high level of customer service and that we are always on hand to answer a question or provide help. If you would like to know more about what our customers think of us check out our Trustpilot reviews. It makes us feel we’ve really accomplished something great when we get such excellent feedback, so thank you to everyone who has visited our site to check out how we aim to do things differently or has made a P2P investment through the platform. We look forward to a successful second half of 2016.
*Tax treatment is dependent on an individual's own circumstances and is subject to change in the future.