THERE is a limit to how much peer-to peer lending platforms can grow, according to Funding Options’ founder Conrad Ford.
The head of the online small- and medium-sized enterprise (SME) finance aggregator told Peer2Peer Finance News that there are lots of “smallish, niche opportunities” for P2P firms but that they would not be able to graduate to originating larger facilities.
“I’m not convinced P2P works for bigger loans,” Ford said. “That’s a market that is full of direct lenders and I’m not convinced that P2P has much to add there.”
“For bigger loans, the platforms would need a banking licence to lower the cost of funds.”
Ford cited the example of commercial property, where he said that P2P could not compete
with the rates offered by conventional banks.
“Perhaps they could compete on flexibility or risk appetite, but not on price,” he said.
Speaking on a broader level, Ford said that “organic is the only way” that P2P lenders can grow, unless they were already successful in another type of funding such as bridging loans and switched across into P2P.
“Going into larger loans without the experience is a dangerous thing to do,” he said, citing Funding Circle as a good example of how platforms should steadily increase their loan sizes instead.