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Crowdfunding vs P2P lending
There has been a lot of coverage recently with a new peer-to-business concept called "crowdfunding". Crowdfunding is similar in many ways to peer-to-peer (and peer-to-business) lending except that as a lender you are not "lending" your money. In most cases you are "funding" the business, and receiving equity in exchange. The concept is great for start-ups and growing companies with "funders" becoming dragons (as in Dragons Den). The equity will usually be in the form of shares.
Like peer-to-peer lending there will be bad debt, in this case companies that fail. With most P2P companies, there the borrower will have some form of risk factor applied. With crowdfunding the funder needs to judge if the funding is worth the equity they are receiving. In addition the equity is only worth what someone else is willing to purchase it for. With P2P lending, as a lender you know when you will receive repayments (unless there is a default), but with crowdfunding there does not appear to be an easy exit route.
Clearly there is a big market for crowdfunding and we wouldn't want to detract from this exciting market, but unless anyone can convince us otherwisewe, we'll stick to peer-to-peer lending.