The new buzz word in the financial sector is an alternative source of funding. As institutional investors increasingly see a piece of peer – to – peer grabbing, many call it the next banking level. A look at the frenzy – fuelled segments:
- Equity – based crowdfunding as an emerging alternative to fund business: equity – based crowdfunding generally involves start – ups and early – stage firms generating funds by offering equity in the firm instead of money. The company requests funds online in such a scenario and does not tap into the primary capital markets. In this case, a crowdfunding platform acts as an intermediary between investments.
- Financing for business loans through peer – to – peer platforms: Online P2P sites seek to connect interested lenders with borrowers, eliminating intermediaries and costs. Borrowers now have an attractive option to raise money to fund their business needs, mostly without the need for collateral and at much lower rates than banks, while investors sitting on idle cash can get very lucrative returns.
- Personal loans financing through peer – to – peer platforms: Personal loans on a P2P platform are one of the most popular products and are actively involved. An unsecured loan, personal loan is used for a wedding, holiday, refurbishing their homes, paying outstanding credit card among other purposes.
- Crowdfunding education loans: crowdfunding education loans are in vogue in countries like the US where education costs are significantly high and the country faces about a trillion dollars in student loan debt. Student loans today have some of the highest delinquency rates in the background of a slow economy.