THE SCOTTISH peer-to-peer lending market is “under-served” and “under-represented”, according to industry experts, as England-based P2P platforms start to expand into the country.
RateSetter, Assetz Capital, ThinCats and The House Crowd are just four of the national lenders who have expanded their presence in the country. Scotland’s only homegrown P2P lender is LendingCrowd, which has demonstrated strong growth over the past year.
The Edinburgh-based firm has expanded its team and secured a £18.75m funding deal with Scottish and Dutch investment banks. Meanwhile, recoveries specialists Wrights Recoveries told Peer2Peer Finance News recently that it established a base in Scotland due to rising demand and the lack of coverage.
“Scotland has been very under-represented,” said Stuart Law, chief executive of Assetz Capital. “It’s getting better now but the banks don’t seem to operate much in Scotland, so it’s massively underserved as a market.”
Frazer Fearnhead, founder and chief executive of property lender The House Crowd, agreed that Scotland is an underserved market. “The mainstream lenders retrenched in 2009/10 to markets they felt were less risky,” he added. “The different legal structures in Scotland also made more mainstream lenders cautious. However, there is an opportunity for sensible lending to be done that generates a good return for investors as long as they operate within the legal system.”
However, Scotland’s potential appears to be weighted towards the borrower side, with business financing, property-backed lending and consumer finance forming the backbone of the lending community.
LendingCrowd has built up a £72m historical loanbook by offering lending services to the hospitality, manufacturing and e-commerce sectors, while Assetz Capital has used its Edinburgh office as a base from which to expand its care home loan business.
However, Law pointed out that while there is a huge trove of borrowers north of the border, “we don’t have a hot spot of investors who come from Scotland.”
“People in England are funding Scottish loans primarily,” he said. “We could target investors there but in terms of our marketing we’re agnostic on our location.”
From a borrower’s perspective, Fearnhead said that “borrowers are looking for alternative lenders who are prepared to put boots on the ground and come and see them on their own turf,” whereas The House Crowd’s investors are primarily looking for better yields, regardless of their location.
“Scotland is underserved and needs new lenders,” added Fearnhead.
“Independence might change things, but an independent Scotland will still need investment.”