Investors have a similar possibility to diversify their investment portfolio into numerous business loans as on the p2p lending side. You can invest in business loans manually or by setting up your own terms into an automatic Loan Allocator. Loans can also be bought and sold on the secondary market. Business loans have at least an entrepreneur’s personal guarantee and often a collateral such as real estate or enterprise mortgage. Fellow Finance always provides a comprehensive description of the company applying for a loan together with a loan purpose description. Before a loan application is published for investors at the marketplace, the company must have an adequate credit rating, collateral and/or entrepreneur's own personal guarantee as well as a positive overall estimate of the applicant's solvency.
The second business investment option is invoice funding which is investing in companies’ 14-90 days trade receivables. In practice, invoice funding is a short-term business loan where a trade receivable is used to secure the loan. Invoice funding offers rapid invested capital circulation. The average loan duration has usually been 30 days. As the interest rate is between 6-10%, invoice funding offers attractive high returns compared to any other short-term investment product on market. Further, the credit risk is not transferred to investors but it is retained by the company financing the bill. Investors have credit risk towards the company that took a loan against the invoice receivable. Fellow Finance does credit rating for both parties.
Funding purchase invoices is investing in selected purchase invoices of businesses with maturity of 1-12 months and annual interest of 6-12%. Fellow Finance pays the funded purchase invoice directly to the seller of the good meaning that the exact funding need is already known when the funding is raised. One significant difference compared to the invoice funding is the slightly longer average loan period, which is compensated by a slightly higher annual interest rate. Purchase invoice funding is suitable for investors looking for an investment of less than 12 months at a competitive interest rate.
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