There can be no direct answer for it. Each case is unique as for other assets classes such as Stocks (blue chips vs. pink sheets), Bonds (AAA bonds vs. C-D junk bonds), etc. Even Banking deposits have only a theoretic defense as their are backed by assets and trust of the banks and a National Treasury dep. (as a guarantor).
Therefore, the investment outcome is highly dependent on investor's assets selection skills. P2Port's team and our community will try to do the best in terms of providing our friends with suggestions on how to select assets for your P2P portfolio (check our Blog). We highly welcome any constructive opinions on the topic and promote active discussions at our forums and blogs.
Why do some companies offer to investors higher expected return rates than others?
1) Usually more riskier assets require higher return - e.g. a borrower which can get a loan at 4% is usually a more reliable counter-party than his colleague, qualifying only for 15%. So, logically the key question here is a validity of a risk assessment model - how effective it is in terms of defining default rates.
2) The companies experiencing financing hunger usually offers higher return rates - due to excessive unexpected growth of demand by qualifying borrowers there might be a need to get financing ASAP even at temporary cost of diminishing profit margins.
3) As a part of promotion, marketing activities to attract new investors.
Summarizing all the above, an ideal P2P target company for an investor is a Company with a proven risk assessment model backed by the consistent return according to the expected returns. At the same time, this company requires additional funding to meet the needs of its borrowers and conducting marketing campaign offering higher return rates. This might be an ideal situation which is not very common, unfortunately.
Let's discuss it!