With the massive potential in the marketplace lending, there has been significant growth in the number of entrants in the market. Peer-to-peer lending allows people to avail easy loans at low interest rates. It also presents an opportunity to avail loans for the individuals with low credit score or higher risk. Probably these are the reasons why peer-to-peer lending business is gaining immense popularity.
If you are a budding entrepreneur or a seasoned businessman aspiring to start a business in P2P lending, then this the ultimate guide for you. We have discussed in-depth about concepts and pre-requisites of the business.
Why P2P Lending Business?
Conventional banks have become reluctant to offer loans to high-risk individuals, and peer-to-peer lending has come as a scalable solution. Even tough starting P2P lending business seems easy and fruitful; it is, however, a serious business that is operated under heavy government regulations.
Apart from the fact that the business is heavily regulated, P2P lending has gained significant popularity and has become a new model of revenue generation for investors. The critical reason behind P2P lending’s rapid popularity is the high level of simplicity in the loan processing compared to conventional banks. Banks follow a long procedure to assess the creditworthiness of an individual before approval which could be a time consuming and expensive process.
Peer-to-peer lending has grown to $64 Billion industry in the United States alone. And it is poised to reach the mark of $1000 Billion by 2025.
What do you need to start a P2P Lending Business?
Loan Products & Services – The first and the foremost thing you need is to determine the products and services you are going to offer. The market is already filled with numerous alternative lending companies; therefore, you need to choose your business strategy skillfully. Decide whether you are going to offer a wide range of services like P2P lending, crowdfunding, invoice factoring, etc. or focus on a specific product like a personal loan.
Credit Scoring – Credit scoring process is an integral part of online and P2P lending platforms. It helps to identify the creditworthiness of an individual which helps to decide the loan amount he can get. Numerous credit scoring companies are available in the market that provides credit scores for your customers. Moreover, you can also alter the algorithms in the calculation to become more relevant and accurate.
Invest in Technology Platform – A lending platform is arguably the most essential element of your P2P lending business. It significantly impacts your business’s scalability, flexibility, and overall cost. You can create your own platform from scratch or use an existing software from a vendor. However, buying a lending software that offers you customizing options could be the most viable option through which you can start.
Compliance with Government Regulations – P2P lending is a heavily regulated industry with stringent rules to be followed by the business owners and the people operating in the market. It is mandatory to be compliant with all the state and country level rules to run your business smoothly within the legal boundaries.
Akeo Lending Framework – A P2P Lending Platform
Akeo Lending is a robust and feature-rich P2P lending platform and perfect solution for your P2P lending business. The framework comes with modular back-and-front end architecture that proves to be a superb technology platform to kickstart your business.
Unlike other platforms, Akeo Lending is GDPR compliant and offers you a pre-built framework with many features already integrated such as accounting, rule-based calculation, reports, and facility to integrate with CRM, emails, etc.
Akeo Lending could be a perfect partner for your P2P lending business. The framework will provide all the technical support you require, leaving you to focus on your business growth.
Peer-to-peer lending is going to transform banking as we know it today. And that needs businesses that are built with the right business models, product strategy and technology platform in place. Those who get everything right will become successful, profitable and stable institutions.