The sky’s the limit
Ivor Freedman (pictured) is director at F&P Sponsors
The news that members of the Peer-to-Peer Finance Association (P2PFA) have exceeded £8bn in cumulative lending is remarkable for what is a young industry. Such levels of funding cannot be ignored, nor understated. They confirm that the sector is booming, and – what’s more – the potential is limitless.
Looking deeper into the P2PFA’s figures, £1bn of the £8bn of lending was sourced in Q1 2017. This is, perhaps, the clearest example on what we are seeing on a daily, weekly and monthly basis; that the growth of the industry as an alternative measure for firms to achieve their funding goals is rapid and ongoing.
Furthermore, it is set to continue, no doubt helped by the ongoing lack of confidence in the primary and secondary capital markets, and falling volumes of Initial Public Offerings (IPOs). In Q1, IPOs were down to just 14. This, however, is not representative of the finance industry as a whole; certainly our sector is not experiencing such a negative outlook. In actual fact, private funding (although P2P is ‘public’, ownership is private), is moving forward.
Within our own business, and reflecting the national picture, we have recently exceeded the £100m marker – with clients using our expertise to raise funds on P2P platforms. We are justifiably proud of this record. What surprises me, however, is the announcement that Funding Circle is to cease providing all development finance for the property sector and that more platforms are expected to follow. This is a surprise for one very simple reason: demand.
The demand for development finance in the property sector is high, and we see it as a key opportunity. Of our total funding, property development has accounted for in excess of £75m. Put another way, almost three quarters of the demand has come from property. The news that platforms are ceasing to lend in this area then is an interesting one.
Funding Circle cited that it represents a diminishing share of revenue globally, and that it wants to focus on its small business lending products in European countries where it has a presence.
Yet in our view, this means the market share for those platforms that are willing to lend to property developers will increase – and that market share is significant in terms of the demand that we see coming through our doors.
This is a demand that is unlikely to decline. Where one leaves, others can gain – and we are well placed to suit the needs of the industry in providing clear and quick advice to provide funding for SMEs who require it.