Peer-to-peer pawnbroking has faced reputational challenges in recent years, due to the high-profile demises of FundingSecure and Collateral.
But the launch of a new P2P pawnbroking and property lending platform, Connective Lending, may signal renewed interest in this space.
Unbolted is the only other P2P pawnbroking platform currently in the market. It has been in operation since 2014, proving that this can be an attractive area for investors if platforms can make it work.
Pawnbroking platforms take a personal luxury asset as security for the loan, often with high interest rates for investors.
However, the sector has not received the most positive press coverage, due to the closures of two platforms. Collateral collapsed in February 2018, then FundingSecure entered into administration in October 2019.
In December, FundingSecure’s administrators announced that they had recovered almost £23.5m to date, amid a court battle regarding the payment of investor fees to the defunct lender.
In July, BDO – which is managing Collateral’s liquidation – revealed that Collateral investors are still unclear about how much money they will get back from the collapsed lender, more than two years after it entered administration.
However, these are platform-specific issues and other P2P pawnbrokers should not automatically be tarred with the same brush.
The launch of Connective Lending means that Unbolted is no longer alone in this space.
Connective Lending’s loans will be secured against mortgage-free properties, or personal assets such as jewellery, gold or antique cars. It will be targeting returns of between five per cent and 16 per cent, for both retail and institutional investors.
The platform certainly has the experience for pawnbroking. Co-founder Daniel Grimes has 24 years’ experience owning and running a small chain of pawnbrokers and heads the platform’s personal asset lending division.
P2P pawnbroking has obvious attractions for investors, offering high yields on asset-backed loans, so there may indeed be room for new entrants with the right knowledge and experience.