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Due Diligence Process Explained 

<article>
<section>
<h2>Due Diligence on a P2P Platform</h2>
<p>If you don't conduct due diligence on the platform or lender to which you lend your money, you will sooner or later lose your investments.</p>
<p>Over the past few years, fraudulent platforms have stolen more than &euro;40 M from P2P investors who got lured into their high-yielding loans. Conducting proper due diligence on the management of those companies could significantly decrease the chances that you end up a victim of a scam.</p>
<p>It's essential to understand that there is no way to eliminate all the risks, but there are methods that you can follow to mitigate risks and hence increase your returns.</p>
<p>We at P2P Empire complete our due diligence of all P2P platforms; you can read these in our <a href="../../en/review">P2P lending reviews</a>.</p>
<p>After reviewing more than 50 platforms, we&rsquo;ve become pretty good at <strong>spotting red flags</strong> and potentially fraudulent behavior, and now we want to pass our knowledge on to you.</p>
<p>But we all understand that investing is time-consuming, and every investor needs to be wise about using those hours. As a result, we have created a quick and straightforward guide to how you can complete adequate due diligence on a P2P platform or lender.</p>
<p>Let&rsquo;s get right to it since time is money, right?</p>
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<p>Prefer to watch a video instead?</p>
<div class="video"><iframe src="https://www.youtube.com/embed/HqDsScgytTs" frameborder="0"></iframe></div>
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<h2>Due Diligence Checklist</h2>
<p>Here is a quick checklist that you can use to get an idea as to whether the platform you&rsquo;re considering investing in seems legitimate. You don&rsquo;t need to leave the platform&rsquo;s website for most points.</p>
<div class="checklist-box">
<h3>Due Diligence of a P2P Platform</h3>
<ul>
<li>The platform&rsquo;s website has a dedicated About Us page</li>
<li>The CEO, founders, and key management are introduced on the website</li>
<li>The listed contact information includes legal address, email, phone number</li>
<li>The address listed on the website matches the legal address in business directories</li>
</ul>
</div>
<p><mark>By verifying this information, you can eliminate at least the biggest fraudulent platforms on the internet. Unfortunately, this isn't enough. Continue reading to learn more about how to conduct thorough due diligence.</mark></p>
<p><strong>Curious about what else we look at when conducting our research?</strong></p>
<p>With our ✅ <button class="redirect externaltext" value="checklist">Due Diligence Checklist</button> workbook, you can spot red flags 🚩 and protect your investment.</p>
<img src="https://p2pgallery.s3.eu-central-1.amazonaws.com/d_list.webp" border="0" alt="checklist" width="auto" height="auto" loading="lazy" />
<p class="question">Protect Your Money!</p>
<button class="redirect external_link_button promo" value="checklist">Get Your Checklist</button></section>
<section></section>
<section>
<h2>About Us Page</h2>
<p>When lending money through a P2P lending platform, you should make sure who is responsible for managing your funds. The About Us page is excellent for learning more about the platform's management.</p>
<p>A proper platform will present at least the core employees on their website to show their credibility.</p>
<p>If an investment site isn't bothering to give insights into who is managing your money, then it's better to stay away from this platform.</p>
<div class="alert-box">
<h3>Management Research</h3>
<p>The About Us page is an excellent introduction to the platform's management, but you should not simply rely on the presented information. We highly recommend researching the people in charge and ensuring you know the platform's beneficiary owner.</p>
<p>While specific platforms present the CEO as the person in charge, often he or she is just an employee following the strategic decisions of the founder or owner of the platform, who is often not publically present.</p>
<p>It's essential to understand who is really in charge and what's the person's background, track record, and moral compass. Start your research on LinkedIn, check business registries, and research related companies. The P2P lending space is relatively small, so finding all the necessary information won't take long.</p>
<p>If the decision maker <strong>in charge of the platform</strong> has a questionable past or you stumbled upon controversial credible information, you should perhaps stay away from the platform.</p>
</div>
<h2>Contact Information</h2>
<p>Every platform should provide support to its investors. Some platforms provide an email address, others even offer a Live Chat. It's essential that a platform presents the legal address of its business on its website.</p>
<p>We would also appreciate it if the investment company provided information about its offices, so we could come to visit their headquarters and review its operations. While this isn't very common, we aim to provide you with the address of the platform's office in our reviews.</p>
<p>Be aware that specific platforms don't provide any information about their whereabouts. Nexo, for example, is a crypto lender misleading its users by stating that the company is based in Switzerland or England while most of the team is operating from Sofia, Bulgaria.</p>
<h2>Blog or FAQ Section</h2>
<p>Every investment website should educate its users about the platform's development and available investment offers. Using the platform's blog is good to inform investors about relevant positive or negative news.</p>
<p>When browsing the platform's blog, evaluate whether the presented information is informative and valuable. If you feel that the investment website only publishes positive news and marketing statements, it's likely not the best option.</p>
<p>A more established P2P platform typically provides a dedicated FAQ page, where you will be able to find all the answers to frequently asked questions.</p>
<h2>Statistics &amp; Reports</h2>
<p>P2P lending platforms that have been operating for several years should provide their investors with insights into the performance of its loan book. It's good practice to show the number of funds under management, paid interest, average yield, and the number of active investors.</p>
<p>Additionally, you should be able to review the number of funds in recovery or the default rate. If you can't find this information, you should be cautious.</p>
<p>Legitimate platforms publish their annual financial statements. If the platform has been operating for at least two years, you should be able to get your hands on its financials. Most of the financial reports you will be able to find in our dedicated reviews.</p>
<p>Established platforms provide insights into their audited financial statements that follow the IFRS. The reports published by smaller platforms are often not audited as they don't have the budget to pay an auditor, nor is this a requirement by the regulators (unless the platform is regulated).</p>
<h2>Loan Originators</h2>
<p>If you are investing on a P2P lending marketplace that is funding loans from various lending companies, you should be able to review information about the active lenders on the platform.</p>
<h3>Lender Due Diligence</h3>
<p>Conducting due diligence on lenders is more complex than on platforms as there is not so much information on the internet. Many lenders are active in emerging markets, so you won't be able to retrieve much information in English. As it's difficult for retail investors to obtain critical data, we often conduct interviews directly with lenders, which are available for our members on buymeacoffee.com/p2pempire.</p>
<p><mark>Note that P2P Empire is the only independent source in this space. We cover the cost of research and the production of videos, including interviews with top managers. Some information is available only to readers willing to pay for exclusive information.</mark></p>
<p>Those interviews cover many risk-related topics, so if you plan to invest thousands of Euros into a single lender, we highly encourage you to watch the interviews to get an idea about the risks that you are taking.</p>
<p>Here is a short checklist that will help you conduct due diligence on a lender and get insights into its risk management.</p>
<div class="checklist-box">
<h3>Lender Due Diligence Checklist</h3>
<ul>
<li>Check for audited financial reports</li>
<li>Research the beneficial owner of the lending company</li>
<li>Research the CEO of the lending company</li>
<li>Inform yourself about the regulation in the dedicated market</li>
<li>Inform yourself about the political stability in the region</li>
<li>Retrieve information about the portfolio performance</li>
</ul>
</div>
<p>Some of the data is hard to come by, so you should follow our newsfeed and watch relevant interviews with the top managers of various lending companies.</p>
<h2>Protection</h2>
<p>Some P2P lending platforms offer various protection schemes that should decrease the risk of you losing money. An educated investor should understand the protection scheme entirely before investing your money.</p>
<p>It's not uncommon for specific platforms to use the offered buyback guarantees to make it appear risk-free investing in loans. You should understand that any type of protection system won't protect 100% of your investments.</p>
<p>The buyback guarantee (obligation), the most common type of protection scheme for European investors, is only as good as the financial situation and the performance of the lender's underlying loan book.</p>
<p>If you decide to invest in property-backed loans, you must understand that the protection is only as good as evaluating the collateral backing your loan.</p>
<p>Various risk factors may impact the protection scheme's quality, which you should understand before lending money online.</p>
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<p><mark>Are you just starting with P2P lending? In that case, you should manage your expectations. Watch our video, where we debunk some of the most common disbelieves about P2P lending.</mark></p>
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<h2>Terms and Conditions</h2>
<p>Terms and conditions are clauses that represent the rules that you and the platform shall follow. You should understand that the platform is setting up those rules so they will always protect the platform before the investors.</p>
<p>The team behind P2P Empire has analyzed the terms and conditions of more than 50 platforms, including various versions, as many platforms changed their terms over the years.</p>
<p>While we can provide you with clauses you should pay attention to, it won't be as valuable as the platform <strong>can change the terms and any time without any consequences. </strong></p>
<p>Unfortunately, the terms and conditions of unregulated platforms can be amended or not honored at any time. If you decide to lend your money through any investment site, you must understand that there is a chance that you might lose all of it.</p>
<p>During our review of T&amp;C, we focus on the clauses containing information about pricing, segregation of funds, and amendments.</p>
<p>We have also seen platforms simply copying terms from other market players.</p>
<p>If you decide to use one of the investment platforms, we always recommend studying the terms so you are fully aware of your rights.</p>
<h2>Social Proof</h2>
<p>Many investors evaluate social proof when doing their due diligence on a lender or a platform.</p>
<p>The truth is that <strong>any information about the platform you may find online can be manipulated</strong>. It's just a question of marketing budgets.</p>
<p>P2P lending and crypto lending platforms are <strong>happy to pay influencers, news outlets, and marketing agencies</strong> to promote their product and establish credibility in the industry.</p>
<p>This isn't only valid for lenders or platforms but also for the actual management of those companies. The investment websites are paying hundreds of thousands to spread positive news about the CEOs of various platforms.</p>
<p><mark>This is particularly true for questionable crypto lenders like Celsius Network or Nexo. </mark></p>
<p>If you are researching companies and people from the industry, you should be wary that they might have paid the news outlet to publish only information that fits their agenda.</p>
<p><mark>P2P Empire doesn't accept any type of sponsorships from any platforms we review, as we always aim to provide the most accurate information we get access to. </mark></p>
<h2>Conclusion</h2>
<p>The goal of any due diligence is to avoid potential losses from investments in loans.</p>
<p>You should understand that many <a href="https://p2pempire.com/en/is-peer-to-peer-lending-safe">P2P lending risks</a> are directly correlated to the management of the lender or platform.</p>
<p>This means that if the result of your due diligence about the people in charge is positive, you significantly reduce all the known risks that impact your investments.</p>
<p>We can confirm that many risks that may harm your investments are directly correlated with the competence and ability of the management to monitor the situation in the market and exercise proper risk management.</p>
<p>The risk of losing your money is much higher if you invest in a platform <strong>that promotes high yields but is managed by inexperienced or incompetent people.</strong></p>
<p>If you want to learn more about P2P lending, join our <a href="https://mailchi.mp/p2pempire/newsletter_lp" target="_blank" rel="noopener noreferrer">newsletter</a> to stay updated with the latest news from the P2P lending industry.</p>
<center>
<p>⚠️ <a href="https://p2pempire.com/en/p2p-lending-mistakes">Avoid these 6 P2P Lending Mistakes</a></p>
</center></section>
</article>

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Conduct due diligence on a P2P lending platform ⏩ Lender due diligence ✔️ Investment Due Diligence ⭐ Due Diligence in loans.

How to Conduct Due Diligence of a P2P Platform

Due diligence might protect you from future losses of your P2P investments. We will show you how to do it.

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Due Diligence Process Explained

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