PEER-TO-PEER lenders have been urged to consider models that combine bank partnerships and local lending, to grow their businesses in the wake of the new regulations. Rebecca Dury, a partner in the corporate team of City law firm Ashfords, said the firm is seeing more lenders coming to market that are sitting between the high street bank and P2P models.
“These lenders are accessing credit via block discounting facilities from banks with specialist sector experience and are then able to utilise these funds to lend, typically in specific areas where the lenders have local real estate knowledge and insight,” she added. She cited an example of this as Exeter Finance, a private lender in the South West of England, which uses banking facilities to lend to local property development projects.
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“For platforms to adapt and be successful in this newly regulated environment, perhaps the key to success is adopting an ethos which is very much geared around meeting customers face to face, as opposed to via a more complex digital platform, so you can work with the right borrower with the right quality of security assets, protecting your investors’ interests,” Dury added.
“We expect to see more banks offering these block discounting facilities in future, as the model of national and international funders providing finance to specialists with local industry experience is clearly effective in providing a sustainable business model.”
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Many P2P lenders have regional business development managers but the only brand with physical branches is rural business lender Folk2Folk.
“We launched the concept of ‘The Local Lending Movement’ in January 2018 to embrace our wider ecosystem and communicate the value of ‘lend local’,” a spokesperson said.
“Our branches are part of that. We do not rely on them for loan origination, instead they have evolved into local relationship points; places where we can connect with new and existing customers and contacts face to face.”
Read more: Business lending special report