Peer-to-peer investing may provide a better return than many other investment possibilities. It allows the investor to diversify her or his portfolio further. Sometimes, p2p investing with the crowd allows investors to follow a certain mission by supporting those pursuing it.
For the person receiving the investment, this method allows for much more flexible repayment terms, a more personal relationship with the investor, and greater flexibility about how the investment is spent and when. It may allow disbursement at more favorable intervals, and a greater amount is available in the first place. And, of course, the bottom line is that peer-to-peer investing may allow the person to receive money for a project that a traditional source would not give.
We expect peer-to-peer investing to expand as investors see a return to be had that helps diversify their portfolio, and those receiving the money find an advantage over traditional funding. We provide our services for both groups, but first, we wanted to provide this overview.
Peer-to-Peer Investing Overview
Peer-to-peer investing and crowdfunding are often confused, which is understandable because each definition often overlaps. Sometimes, the crowd is providing a loan, and in that case, you could accurately describe the transaction as both p2p investing and crowdfunding. For our purposes, however, we would call that transaction only “peer-to-peer investing.” We reserve the term “crowdfunding” for transactions that involve equity or lead to certain rewards and perks. In this section, we attempt to provide even more detail about this difference and more information to help you decide which one is for you.
Peer-to-Peer Investing vs. Crowdfunding Payoffs
One of the best ways to determine whether your opportunity fits under peer-to-peer lending or crowdfunding is to look at the expected payoff. Peer-to-peer investing involves a website platform cutting out a traditional bank and instead inserting peers as lenders. The borrower pays a certain interest rate, while the lender collects interest + principal payments minus some fee that the peer-to-peer lending website charges.
Conversely, crowdfunding aggregates funds, but the investor is expecting either equity in the project or some reward. Examples of the latter might include meet-and-greets with the entrepreneur, getting a new prototype before the general public, receiving inside information about the project, attending early shows by the artist, etc.
Risk Profiles of Peer-to-Peer Investments
Of course, there are major differences in p2p investing and crowdfunding risk profiles. Equity crowdfunding may be the most risky but likely has the highest reward profile. You could literally lose all of your investment as an investor, and on the entrepreneur side, you could give away too much equity for too little money. Peer-to-peer investing also carries risk, but the entire investment is less likely to be lost. You must do your homework as an investor to see whether the peer-to-peer investing you are considering will likely meet your financial goals. For example, you should look at the history of investments made at the platform you are considering.
There is less risk on the side of the person getting the loan, but you should still compare interest rates, terms, and other factors before arriving at a decision about which platform to use.
Of course, our connection services can help on both sides of the equation!
P2P Investing Example 
Green environmental peer-to-peer investing is an increasingly popular form of P2P lending and often comes with incentives for the person receiving the loan that can make it cheaper than other options. There are many reasons why investors might choose to enter a green person-to-person lending agreement.
Some investors want to make sure they will get a return that makes sense in their portfolio, and they realize that many people are trying to go green but do not have the financial resources to do so.
Others turn to peer-to-peer investing because they want to do something that fulfills a personal interest or mission, and renewable and alternative energy would accomplish just that.
Finally, some investors want to choose specific projects that have a guarantee of paying off for the person completing them. In other words, they like that a renewable energy project will likely bring some economic advantage to a homeowner or small business owner and that that saved money could be used to pay off the P2P loan.
Given these three reasons, it is no surprise that green peer-to-peer investing is so popular. There are investors interested in helping homeowners make their homes more green, small business owners build renewable and alternative energy into their businesses, and groups to build green co-ops.
Advantages of Green P2P Investing
The advantages of Green P2P loans are as follows:
High Chance for Return
There is a high chance for a return given that these projects have a high completion rate, and those undertaking them have a high rate of paying back the investment. History is on the side of this kind of peer-to-peer lending investment, making confidence high in the chances of repayment.
MIssion-Based P2P Investing
Many investors facing peer-to-peer investing choices are drawn to funding renewable and alternative energy projects that will help save energy, reduce oil dependence, and reduce the harmful effects of burning fossil fuel. Some offer a discount because this area taps into a personal mission, while others do not but are still offering a helpful service.
Means of Payback
Most homeowners and small business owners save money quickly after installing a renewable energy system, so the project somewhat directly generates their means of paying for the peer-to-peer loan. This is not always the case with other types of peer-to-peer investing.
Availability of Green P2P Investing
For these reasons, peer-to-peer investing that helps a person or small business go green is increasing in popularity and availability. These loans also point out investors’ decision-making process when considering their choices.
Drawbacks of Green P2P Investing
Of course, there are potential drawbacks as well. Green peer-to-peer investing is not as secure as other types of p2p investing for the investor, such as those based almost solely on creditworthiness (though, of course, the investor can fund only those green peer-to-peer lending pitches made by those with high credit scores). Also, the fact that some investors are willing to take a lower rate because green investing is part of their mission means that the overall rate may be deflated. Finally, some types of renewable and alternative energy take a while to pay back the initial investment, so the idea that a project will pay off quickly may be unfounded.
Even with these disadvantages, green peer-to-peer investing is increasingly available and popular, and it may grow as green technologies come down in price and go up in efficiency and the speed of payback.
Peer-to-Peer Investing, Our Work
Peer-to-peer investing can be a win-win, allowing a person to get the funding they need for a meaningful project while allowing investors to feel good about investing in a person whose project they connect with. There are many types of peer-to-peer investing, so your choices will be significant. Choosing the right path is important, and we can help, usually for free.
We can help connect investors to the best peer-to-peer investing platform for their goals and connect those looking for funding to the p2p investing website that best matches them. Feel free to contact us to discuss this further.
