Posted on 07/03/2019 16:38:21   by   CrowdLords Team

What are the differences between peer-to-peer lending and crowdfunding?

In a nutshell?

The UK property market has embraced the peer-to-peer lending and real estate crowdfunding models. While the two models are often grouped together, there are differences between them. Equity crowdfunding platforms are attractive to sophisticated investors with a great deal of financial knowledge under their belts.

Peer-to-peer lending offers a different model with its own appeal for some investors. The CCAF's UK Alternative Finance Industry Report said volume generated by Real Estate Crowdfunding increased dramatically from 2016 to 2017, rising almost 200 per cent from £71m to £211m.

Since the CCAF first began tracking Real Estate Crowdfunding in 2015, the model has generated £369m, 57 per cent of which was recorded in 2017 alone. P2P Property Lending represents an important segment of the industry and contributed the third largest volume within Alternative Finance in the UK. P2P Property Lending generated £1.218bn, a six per cent increase on 2016's volume of £1.147bn.


The UK property market has entered a revolutionary new phase of investment liquidity with the introduction and adoption of peer to peer lending and property investment crowdfunding models.

While the two models are often grouped together, there are differences between them.

So, what are the differences?

The P2P lending model allows investors to lend to individuals and small businesses, or even to property developers who need additional finance for a project. On the other hand, the crowdfunding model sees an investor buy and hold equity or debt, with the opportunity to perhaps sell it back to the borrower, or trade on a secondary market.

Equity crowdfunding platforms are attractive to sophisticated investors with a great deal of financial knowledge under their belts. These investors will probably have hands-on experience, or a comprehensive understanding of the demands placed on early-stage businesses.

Peer to peer lending offers a different model with its own appeal for some investors. Investors do not own a stake in a business. Instead, investment money is matched with an individual or business looking to obtain a loan.

Comparing the two models, equity crowdfunding is perceived to be higher risk, but many say the associated rewards reflect this. Peer-to-peer lending provides more predictable returns, claim industry experts, which means both the risks and returns are comparatively lower.

And the UK's investment industry is being shaken up by both models, according to data compiled by the Cambridge Centre for Alternative Finance (CCAF) as part of its annual UK Alternative Finance Industry Report.

The latest report, issued at the end of 2018, marked the seventh consecutive year of significant market growth for the UK alternative finance industry. The growth in alternative finance comes during a period when lending from traditional banks to small and medium-sized enterprises remains subdued.

The CCAF's UK Alternative Finance Industry Report said volume generated by Real Estate Crowdfunding increased dramatically from 2016 to 2017, rising almost 200 per cent from £71m to £211m.

Since the CCAF first began tracking Real Estate Crowdfunding in 2015, the model has generated £369m, 57 per cent of which was recorded in 2017 alone.

P2P Property Lending represents an important segment of the alternative finance industry and contributed the third largest volume within Alternative Finance in the UK. P2P Property Lending generated £1.218bn, a six per cent increase on 2016's volume of £1.147bn. Since the CCAF categorised P2P Property Lending as an independent model it has raised £2.97 billion, 41 per cent of which was in 2017.