RATESETTER has signalled the end of unsecured business lending on its platform, so what impact will this have on the company’s loan book going forward?
The peer-to-peer platform announced earlier this week that it is winding down its unsecured business lending, so its commercial finance product suite will focus solely on property-backed and asset-backed lending.
Peer2Peer Finance News has analysed the lender’s loan book, as of the end of 2017, to assess how important unsecured business lending has been to the company.
More diversified than most P2P platforms, RateSetter started life as a consumer lender and now offers commercial finance, property finance and motor finance.
Consumer loans still make up the lion’s share of RateSetter’s £2.2bn loan book, while its commercial arm – both secured and unsecured – makes up 9.8 per cent, equating to £223.4m.
The data shows that RateSetter has typically provided more unsecured than secured commercial loans by volume, but unsecured business loans tend to have a lower value.
Of 2,213 commercial loans in total, including those that have been paid and repaid, 1,622 were unsecured and 591 secured as of the end of last year.
But its secured loans tend to be larger. 42.5 per cent of the value of RateSetter’s commercial loan book are listed as unsecured. This represents £95.1m worth of unsecured business loans compared with £128.2m of secured business loans.
One way to offset the lost unsecured business volume could be to increase the loan sizes, but RateSetter’s average loan size in its secured business lending division is already more than three times larger so it may not need to.
The average unsecured loan is £58,675, compared with £217,089 for secured business lending.
It may not need to make anything up as the overall lending volume is already pretty small compared with the 482,803 loans in total.
This may be because the platform started with more of a focus on consumer loans, but it has already signalled an intention to grow its secured lending division as well as its car finance market so only time will tell how the balance shifts.