A Rich new Mix of Funders
By Steve Grice, Director
There have been many changes within the P2P industry over the last few years – not least of these is the increase in size of P2P loans; as cash has come into the industry, platforms are looking for larger, better quality proposals.
Deal times are consequently lengthening as due diligence takes longer.
This development has meant that a gap is opening up at the foot of the market.
SME’s that need a loan agreed quickly, in order to take advantage of a limited opportunity, or plug an unexpected cashflow gap are looking at other sources – and a rich new mix of funders is opening up.
These are typically institutional lenders who are giving themselves exposure to UK SME’s through setting up their own direct lending operations rather than investing via a traditional P2P platform.
This is a feature of the market that we have been seeing for some time now.
The typical credit sanctioning process is more straightforward, and generally much quicker.
Funds can be paid out in some cases within a few days.
Security is generally restricted to unsupported personal guarantees making it ideal to sit alongside incumbent bank funding.
The downside is that amount are more limited – up to £250,000 at present, and interest rates are higher: typically around 14%.
Because there are no early repayment fees, a profitable trading business that needs fast access to cash to take advantage of an opportunity can access this type of funding as a first step; it will get the deal done, allowing time to refinance later at your leisure.
At Ludgate, we view your funding lines as a dynamic process, with different lending solutions for different issues. It’s a view we have practised with our clients for a number of years, seeing business finance as a steady transition rather than something to be reviewed simply every five years.