What is a peer to peer loan?

A peer loan is a loan made by a private investor. Usually, peer to peer loans are not secured loans – there is no real property involved as collateral. You can consider them more like personal loans, but they are for business purposes, generally with a short term contract.

In a typical scenario, a business owner might get a big order – perhaps the biggest in the life of the business. But because of the size of the order, she may not be able to purchase the raw materials with cash on hand. If a bank is not prepared to make the loan (often, business bankers don’t really understand their clients’ businesses), peer to peer lending may be the answer.

How does this relate to refinancing commercial real estate loans? If credit history is not favorable, but you can make a good case for your ability to make the payments, a peer loan may be the loan of last resort if you can’t otherwise refinance a commercial loan.