Peer to peer lending

It started as a way for individuals to lend their spare cash to someone who needed it  -  it is becoming a way for small businesses to get loan finance which the banks are unwilling or unable to supply.  By removing the bank from the transaction, the lender gets a higher rate of interest and the borrower pays lower rates, and the peer to peer group in the middle takes a fee.    

The UK Govenment is getting quite enthusiastic about this development as a way of helping small businesses get the loan capital they need for expansion, and are committing £100 million to oil the wheels.   But at the moment, peer to peer groups are unregulated and lenders (who are still mainly individuals) are not protected by any compensation scheme -  so it is a case of 'lender beware' .    According to the FT, average defaults on riskier loans are around 6%.  

There is a comparision site for peer to peer lending at www.p2pmoney.co.uk, which will give you an idea of current rates.

For the peer to peer goups themselves, see:

www.fundingcircle.com/
.
www.thincats.com/
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http://uk.zopa.com/
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http://www.folk-folk.com
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www.rebuildingsociety.com

www.marketinvoice.com/ has a different model, which allows companies to auction their invoices.