How P2P lending will improve the Cyprus Economy
- May 30, 2016
- 2 min read
The big idea behind Crowd-lending or Peer to Peer (P2P) lending is to stimulate the Cyprus economy.
And, there's no better way to do that in our time and age, than by supporting small businesses -- the economic and job engine of our economy -- and helping them flourish.
Peer to Peer lending offers a bold vision of enabling everyone to invest a small amount into small businesses, stimulating the economy and creating thousands of jobs along the way. P2P lending is the glue connecting small companies and investors.
P2P lending's Impact on the Economy
Lead by Lending Club, peer to peer lending sites, which allow people to lend small amounts of money to one another, have enabled billions of dollars of loans to individuals and small businesses as an alternative to the banking system. With all this activity, P2P lending is indeed making an impact on the economy even in a era before the full effects of P2P lending are felt. So, how does P2P lending improve the economy? By creating jobs.
P2P lending Creates Jobs
According to a report by Capital Advisors, companies that use P2P lending to raise money inevitably make new hires in the wake of the fundraising. 41% of companies hired an average of 2.5 new people after P2P lending. An additional 54% of companies intend to use the proceeds from P2P lending to hire new staff.
Creating new jobs isn't the only way that Crowdlending impacts the economy. It is also a great way for companies raising money to increase their revenues. Companies that raise money from Crowdlending find that running public fundraising campaigns provides them a lot of visibility, leading to an increase in sales.
In fact, companies raising money via P2P lending, see an increase of 26% in quarterly revenues following their Crowdlending campaigns. Equity Crowd-lending provides the greatest boost. Companies turning to equity Crowdlending platforms like Landbay or my firm, Crowd4funds, see an increase of >300% following a fundraising. That's serious money and directly related to Crowdlending.
Crowd-lending Leads to More Funding
The Crowd-lending study also looked at how raising money via this channel impacted future fundraising efforts. Again, it appears that Crowd-lending creates a positive follow-on effect. The momentum created by Crowd-lending contributes to companies raising more investment soon after. Specifically, within 3 months of a Crowd-lending campaign, 30% of companies had closed another round of investment (either with an angel investor or venture capitalist) and an additional 45% were in discussions with institutional investors.
The Future of Crowd-lending and the Cyprus Economy
Equity Crowd-lending appears to dramatically accelerate the growth of these companies suggesting that equity crowd-lending should be considered as one of the main mechanisms for economic development and job growth policies. When a relatively small investment results in several hundred percent growth in revenue and an average of nearly 2.5 new jobs, Crowd-lending deserves the serious attention of Cyprus policy makers.
If every hour invested in Crowd-lending returns more than €1,000 for participating companies, that's a very positive return on investment. With numbers like these, it's entirely conceivable that Crowd-lending becomes an everyday accepted practice for companies of all sizes to raise capital. And Cyprus desperately needs this.
Comments