The growth of peer-to-peer lending, or marketplace lending, as an alternative source of finance for property development is providing a welcome boost to business.
Bruton Knowles advises Funding Circle, the UK’s leading marketplace lending platform, on potential property investments, providing audits and valuations to ensure schemes are viable and to minimise the risk for the investors.
With traditional high street banks still reticent about lending on residential and commercial property developments, borrowers are increasingly turning to marketplace lending platforms to fund their projects.
In the last 18 months, investors at Funding Circle have lent more than £120 million on property finance loans, with £25 million of that already repaid in full back to investors as schemes complete.
To date, through valuations provided by Bruton Knowles, Funding Circle has financed projects, ranging from single, detached private developments to large development schemes.
Nicole Hudyba, an associate in the valuation team at Bruton Knowles in Birmingham, said: “Peer-to-peer lending has grown in popularity as a credible alternative to traditional bank lending. Since the recession, when peer-to-peer lenders filled the gap left by the banks, this alternative funding market has continued to grow.
“In its first year, Funding Circle surpassed the £25m target it set itself for lending on property, such was the high level of demand.”
Peer-to-peer lending works by matching investors with businesses or individuals in need of capital through an online lending platform.
Unlike crowd funding, in which investors usually back a project or start-up business in return for an equity share or other reward, peer-to-peer investors directly invest in businesses by way of a loan, which is then paid back with interest.
Figures from the Peer2Peer Finance Association (P2PFA) show the industry originated more than £507 million in the second quarter of 2015, up from £459m in the previous quarter. Lending on property in Q2 totalled £48,140,590, with total cumulative lending now standing at £3.15bn.
Nicole said: “As a proportion of overall lending, property is still relatively small, but it is growing. The biggest demand is from residential developers, particularly in London, albeit we have valued a number of commercial property schemes on behalf of Funding Circle.
“As confidence continues to return to the residential property market, we expect to be valuing a lot more projects in the future.”
Find out more about Funding Circle at www.fundingcircle.com/uk/