What is peer-to-peer financing?


A strong financial base is necessary for your business if only to manage that perennial of problems, cash flow. Although the normal day to day activities of your business are likely to include measures to help control that cash flow, there may be times when you need to look for alternative ways of financing your business.

For example:

  • Seasonal / cyclical business - a beach cafe may need money to buy in seasonal summer stock (e.g. beach towels, buckets and spades, etc.), but not have the money for the outlay;

  • Growth/improvement - a hairdressing salon looking to expand by renting a second premises, or renovating its existing premises, may need an influx of cash.


Conventionally, banks have been the first place to which many businesses turn when in search of additional finance. This has taken the form of overdrafts and loans, the latter typically secured against some proportion of your company’s assets.

The problem with overdrafts is that they may prove expensive if required over the longer-term, and are repayable on demand, putting you at the mercy of the bank’s changing financial policies.

The problem with secured loans is that you may be limited by the amount and value of any security your company may offer.

Since the economic crisis, a more general problem in seeking business finance from the bank is a general reluctance by many banks to advance such funding, even going so far as to discourage applications (according to the market research group BDRC Continental).

Invoice financing

Also known as factoring, invoice financing allows a company to reap a large part of the value of its sales in advance, thus offering a solution to many cash flow problems.

Factoring simply involves passing your issued invoices to a third party agent, who in turn advances you the greater part (typically up to 95%) of the value of your total invoices. You then collect the remaining 5%, less the charges raised by the invoice financing agent.

The downside, however, is that any invoices that are defaulted on may still leave you out of pocket.

Equity investment

This is the kind of investment that may have helped to launch your company in the first place – an investment made in return for a share in the ownership of the company.

Further equity investment may be attracted by offering further shares in the company.

Lease back

Your company may own assets such as vehicles, computers, equipment and machinery, which might be sold and leased back as and when necessary. Clearly, in order to benefit your cash flow, there needs to be a profit rather than a loss on the sale and lease back of such assets.

Flexible business loans

Many cash flow problems may be much shorter-term than those suited to the solutions suggested above.

If the problem is relatively temporary, you might want to consider a short-term business loan from companies such as ourselves, where you can choose the repayment term – typically up to 24 months – for sums ranging between £1,000 and £50,000. 

Given the relatively small sum borrowed and the early repayment date, such loans are typically much easier to arrange than those from a bank and the advance of funds, if your application is approved, made on the day after.