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Who decides what type of investment to make and who controls the loan’s destination through Peer-to-peer lending

The one who decides what the amount received with the loan by means of Peer-to-peer lending is the promoter requesting financing, that is, the SME or the individual requesting the loan, is therefore the one who must express in the financing request clearly how much money he wants, in how much time he plans to return it since he wants to assign it exactly and for that he must provide reliable proof of all this, such as proforma invoices or budgets that support the destination for the requested financing.

However, it is possible that the Peer-to-peer lending company, as an additional free service, can advise the developer when to make such request, both in the destination and in the amount to be requested or in what is the most appropriate repayment period so as not to have payment problems in the future; but the final decision on the destination of the investment, the amount or the term of return of the loan always belongs, ultimately, to the developer requesting the financing.

It is important to decide well the type of investment that the developer will make with the loan that they will give through Peer-to-peer lending because investors look at it so much that if they ask for financing to grow the company or to expand the facilities or to buy machinery or to be able to implement an export policy that allows the company to grow bigger, it is essential to say so, since all these investments would result in an increase in assets and in the size of the company, and this leads investors to believe that this company is going to make bigger, with more heritage and that, therefore, will bill more and will be worth more in the future.

If the destination of the loan is to make the company grow then it is much easier to attract the investor to invest their savings in this type of project than in another type of investment that is only to finance the current or only to refinance accumulated debts and collect them all in a single loan and thus be able to pay a lower fee. This type of loan destinations through Peer-to-peer lending is not liked by investors and it is very likely that the applicant does not obtain 100% of the requested amount and therefore either has to renounce the project or has to comply with the money that could have collected.

Who and how does it control the allocation of the loan granted through Peer-to-peer lending?

At first, who should control what the loan granted by Peer-to-peer lending is intended should be the company itself Peer-to-peer lending because investors, as many and small, can not devote themselves to check anything either a priori or a posteriori; but what actually happens is that the final destination of the loan obtained through Peer-to-peer lending can not be controlled by anyone, not even by the Peer-to-peer lending company, and this is due to the fact that it is very difficult to know what the real destination of these funds has been.

All the studies are always done a priori, that is, the solvency of the company is studied, the destination of the loan money is adequate, it is verified that there are actually proforma invoices or budgets that indicate that this will be the destination of the loan, its reimbursement capacity, its annual accounts, its legal incidents and up to the honesty of who its administrators and shareholders are verified and if everything is correct, then the financing request is published on the platform of the Peer-to-peer lending company and if the investors they see it well and in the end they decide to invest their money there until they complete 100% of the requested, because everything is correct, the objective has been achieved, but nothing else, because the loan contract is signed online, the money is delivered To the borrower by means of a transfer and end of the matter, nothing is controlled anymore on what the loan is intended for, the Peer-to-peer lending company is only It will be charged to collect the corresponding fees from the borrower to be paid to the investors until the repayment term of the loan is met.

If the borrower then does nothing of what he said he was going to do, this is very difficult to verify, since you can not put a detective to each borrower, however, investigations are usually done through questionnaires and information requirements and similar acts, but sometimes they do not answer and when they do, they do it reluctantly and not always answering what the Peer-to-peer lending companies request and want to know, although it is true that most promoters applying for funding through Peer-to-peer lending usually allocate the money obtained to what they said they were going to allocate, it is also true that there are a few promoters who make a tad of “trap” and destined to something else, but you know, there is nothing perfect in this life and much less in the world of loans and investments.


Elena Baker