Tired of “NO!” From Banks? P2P Loans May Be the Answer!

An article in Thursday’s Wall Street Journal, Peer-to-Peer Loans GrBusiness Loansow, introduces the concept that the Internet may offer small businesses access to money that has otherwise been denied by traditional loaning agencies. These P2P lenders are “filling a niche for small-business credit” since the risk is spread out over hundreds of “lenders.”  This may be good news to cash-strapped small businesses; however, because there are “’fewer hoops to jump through,’” as one recipient reports, there are still hoops.

I don’t know the individual hoops, but these three “KNOWS” may help you prepare for your yes:

1 – Know the direction the market it taking – growing, stagnating or declining – what your business’s role will be in the segment of the market. ArrowAre you going to be part of the growth? Are you going to revitalize the stagnating market? If so, how and why you? Are you going to turn around a declining market because of a new technology or new way of delivering customer satisfaction? If so, how and why you?

2 – Know who is playing in “your sandbox” – your competition. What do they bring to the market, why do customers like them or why are they leaving them (in a declining market) and how will you be different? For a brick and mortar business, do you know average square footage of the stores with whom you will be competing? Can you estimate what their return/sq. ft. might be?  How will that be related to your proposed or existing business? Who plays at the edge of the sandbox, i.e. are there businesses out there that feed your market? How many. Growing/ Stagnating? Declining?

3 – Know how much communication clutter you must overcome to establish presence in your market?  Are the other players in your sandbox making noise in the market? How (what means – newspapers, TV, radio, Internet, Door flyers, Windshield flyers, Street Signs, etc.). How loud (occasionally out there with big campaigns or are they using small, but consistent advertising?)

This P2P market may be willing to loan money and provide fewer restrictions, but they still want you to know your business so they have more confidence that their loan payments will be made. If you are struggling in your business, there are resources like SBA, SCORE, local college and universities and books.  If you are just starting your business, in addition to the resources above, you might want to learn the 10 questions to consider before investing a dime.

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