Quite a few business owners need, at some point or another, a loan of a certain size. For many years, the main option for them, if not the only one, was to turn to the branch of the bank where their account was conducted and to hope that their officials would approve a loan on reasonable terms – which is not at all obvious. The good news is that in recent years various solutions have been added to the equation, which can make the process of receiving money easier or even more rewarding for each of the parties.
Social loans meet this definition precisely. Today, it is customary to divide them into three main categories: loan for product production, business loan and loans / grants for economically weak people. Here’s all that’s important to know about.
On a social loan
At the level of basic definition, a social loan (also known as “peer to peer”) is a loan made between private and business entities without the involvement of a financial entity such as a bank. Most often, the loan platform is websites, which are designed to connect those who offer a loan to a specified amount of money and those who need it, even immediately. The interface, by its very nature, tends to be anonymous, so that one does not know the specific characteristics of the one doing the deal.
From the moment the connection is created, the specific terms of the loan are determined, including the amount of money, the interest and the duration of the repayment period. The lender, from the moment the loan is approved, receives the loan amount in the form of monthly repayments. In order to improve the level of security of the parties involved, the factors behind the sites invest appropriate efforts to control the quality of the players entering the field of play, for example, through economic and social data definitions. Some of the interfaces are followed by a “risk spreading” tactic, so that the lender’s amount of money is distributed over several loans automatically, which increases the confidence in the process and reduces its risks many times.
The good news: a lot of advantages
Already from this review, you can learn about the various benefits of social loans. First, those who provide the loan can enjoy particularly lucrative conditions (high interest rates, for example), making it a prime investment channel. This advantage becomes more substantial when we set aside the zero interest rate that characterizes quite a few other investment channels, such as those offered through the Bank (various savings plans).
Even from the other side of the equation, conditions tend to be more favorable for loan recipients. For small businesses, it is superfluous to point out that raising credit from the bank is not a simple task: it requires a lot of forms and financial proofs, with approval of the request all but obvious. Even when business owners are successful in raising credit, a scenario where the interest rate on the amount is high is considered quite logical. On the other hand, the social loan has the power to remove the banks from the field of the game, which raise profits, and some will say that they also “cut a coupon” at the expense of those who need money – the businessmen, in this case.
A loan for any purpose
At this point, it is necessary to delve deeper into the field and examine different models of social loans as well as distinct objectives. It starts with loans for creating or marketing a product. The world’s best known example is a copyster, a website based on the model in which entrepreneurs offer their wares and can ask the masses for financial aid. This model has been very strong in recent years in the world economy, along with the entire field of social loans. In Israel, for example, a few years ago, singer David Broza managed to finance his album on this platform. However, it can be argued that the model is suitable for entrepreneurs, creators and inventors more than businessmen Pere Excellence.
Another type of loans, as mentioned above, is business loans, which include the most fascinating subject of all: small business loans. These loans include a wide range of uses, including a loan to open a business, loans to expand the activity of the business, a loan intended to allow the business an economic breathing space (for example, in the case of debts), and so forth.
Other loans, whose “social” aspect is even more prominent, are given to those who need them most, even if they do not touch a business world. The clearest example of this is grants given to people who are financially viable, as well as people who are defined as disabled.
In Israel, one can find these or other interfaces related to social loans. The field has received a serious push in the past year, but is still in its infancy. Various projects, such as the Ofek social bank, have tried to rise for years but seem to have given up due to the regulation that characterizes the field. Not long ago, companies such as Blender, headed by Doron Aviv, as well as the “Be The Bank” (BTB) project, whose CEO, Shlomi Turgeman, Both in the world and in Israel.