Earning Residual Income by Investing Online in Small Businesses

  NEW YORK, NY - 05/12/2017 (PRESS RELEASE JET)

A new popular financing option for small businesses that has emerged over the past decade is online business loans. This is due to banks scaling back on loans to small businesses. According to a Harvard Business School study, nearly half of all bank loans were to small businesses in 1995, dropping to about a third by 2012.

Alternative lenders use algorithms and technology to analyze conventional credit standards, including cash flow and personal credit scores. They also evaluate alternative metrics such as vendor payments and social media. This results in them offering easier and quicker access to capital, including lines of credit, term loans and accounts-receivable financing.

This new trend has opened up new investment opportunities for those looking for a passive income or alternative retirement investing. The money loaned by the alternative lenders does after all have to come from somewhere. There are a number of different online platforms that potential investors can invest in. Each have different characteristics and are often aimed at different target markets.

Peer-to-peer (P2P) lending is one of the new methods of debt financing enabling people to lend and borrow money without using traditional financial institutions. Utilizing the power of big data and technology, P2P platforms put investors and borrowers in contact with each other cheaper and faster than any bank is able to do.

P2P lenders have recently grown rapidly and provides passive income to investors. P2P investments have a lower correlation and less volatility than stock markets do. They also offer a higher return on investment.

Interest rates are at the lowest ever since 2008 and many investments that have historically been “safe” e.g. government bonds, currently carry negative yields. This makes P2P loan investments in 2017 a very attractive proposition.

Debt-based crowdfunding commonly referred to as “crowdlending”, is another type of crowdfunding that is getting a lot of attention. This crowdfunding model works by asking for resources and support from other investors in return for interest.

When an investor invests in debt crowdfunding, they receive shares for the investments and expect that the company or startup they are funding will eventually pay dividends. The startup may also develop and grow over time and hopefully reach a stage where the investor will be able to sell the shares for a profit.

With debt crowdfunding, investors invest in some type of debt instrument, where the objective is to lend money to the company with fixed interest and repayment terms.

Investors can choose from a number of debt instruments if they want to invest in a debt-based crowdfunding platform. Some instruments are strictly interest-based while others cater for buying shares that are based on potential company growth. There are also unsecured and secured debt instruments. The interest rate offered is based on the risk profile of a specific company.

The third option in the online investment space is Crowdadvance. This is an online marketplace where investors pool their capital to offer debt funding to businesses. Investors have to be accredited first, but once this is done, they can invest as little as $500 in a range of commercial investments using a sef-directed retirment account. This option seems to be particularly attractive for retirement investing looking for diversity and passive income.