Top 3 Myths Busted on the Risk of Investing in P2P Platform
Peer-to-Peer (P2P) financing is a method of alternative financing that matches investors with businesses looking for financing. In doing so, investors such as yourself are able to invest in businesses that they deem trustworthy. Thus, one of the potential challenges an investor might face is finding a suitable business to finance that is both able to repay your funds on time while also providing attractive returns.
P2P financing platforms can address this problem by creating a bridge between you and the business, allowing for the direct transfer of information. In doing so, you would be able to access the platform to better understand the businesses that require funding and make informed decisions in financing the business most suitable to your risk appetite. This allows you the opportunity to understand who you are providing financing to, the returns you can expect as your investment matures, and when you can expect your returns – all within the shelter of a credible P2P financing platform.
In spite of this, many people still regard P2P platforms as a high-risk investment as they are perceived to have returns that are not guaranteed. This however, may not necessarily be true. In fact, in this article, we will be busting 3 prevalent myths surrounding P2P financing.
3 Myths Busted on Why P2P Financing Platforms are NOT High-Risk Investment after all!
1. Only businesses with bad credit scores seek financing from P2P platforms as a last resort
Many people think that businesses seek funding on P2P platforms as a last resort when they are rejected by banks or have a poor credit score. In reality however, a business with a good credit score may also struggle to get bank approval for financing.
This may happen for a number of reasons. For example, a business may not have enough collateral to meet the bank’s stringent criteria, or may be a new company that may not have any historical credit scores that can be crucial in acquiring financing from a bank.
A key reason businesses may choose to obtain financing through P2P platforms is the speedy application process. Whereas banks may take months to vet and approve applications, P2P financing platforms can conduct the necessary due diligence procedures in only 2 to 3 weeks. The ability to obtain financing in a timely manner is crucial for businesses for cash flow purposes. P2P financing also represents a much more convenient source of financing for those who prefer flexibility in timeliness and costing, with less surprises along the way when compared to banks.
2. P2P financing platforms are not regulated… Oh my!
Many people have the misconception that P2P financing platforms are not regulated and therefore are not credible enough to invest in. On the contrary, P2P financing platforms are strictly regulated by the Malaysian Government. The Government actively supports platforms such as P2P platforms that provide innovative digital solutions that benefit both businesses and investors simultaneously.
In fact, the Securities Commission Malaysia (SC) has recognised 11 P2P financing platforms, one of which being CapBay, under the name of Bay Smart Capital Ventures Sdn Bhd. On 17th May 2019, the SC approved us as a Registered Market Operators (RMO). Our platform actively operates in line with SC’s rules and regulations.
3. P2P financing platforms are only for investors with a high-risk appetite
This is the most common misconception against P2P. While it is true that P2P financing carries a certain degree of risk, this is no different than any other form of investments. While potential default risks may be frightening to some, a well-diversified P2P portfolio allows you to mitigate such risks by limiting your financial exposure to only a small portion of invested funds. Thus, choosing a P2P financing platform that offers well-diversified investment notes and robust risk management allows you to earn greater returns with relatively lower risk. However, it should be highlighted here that diversification does not eliminate or remove all risk in respect of investment.
Get to know the new low risk investment in town, CapBay P2P Invest. Our platform prides itself on providing great returns, offering only the highest quality investments notes in order to minimise risk while maximising returns for our investors.
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