The U.K’s first peer-to-peer pawnbroker community has this week received its largest ever loan request – evidence it says that Britain’s peer-to-peer lending industry is increasingly viewed as a mainstream source of financing. It comes as small and medium sized businesses continue to accuse banks of putting up barriers to lending.
FundingSecure has received a request for Â£40,000 on a Â£100,000 yacht from a business owner whose current cash flow problem has been exacerbated by the intransigence of current banking policy.
Co-founder of FundingSecure, Richard Luxmore states, “Like many of those who come to us, this client was being massively let down by his bank. He had tried mortgaging his boat, but the process was taking far too long. In the end he turned to us, because he felt that the peer-to-peer system could offer extremely competitive terms, speed and convenience.
“There has been a lot of talk about banks being vigorously encouraged to lend to businesses but little of this has resulted in any actual action being taken to improve the situation.
“Already we have noticed that most of our client base consists of entrepreneurs trying to get a business off the ground, or owners of established companies with temporary cash flow issues or who are looking to expand their existing operations. Indeed, in the last quarter, 68 per cent of all our borrowers were SMEs.”
Michael Fallon MP, Minister of State for Business, Innovation and Skills, has recently stated that the Government had spent a great deal of time and effort ensuring that the Enterprise Finance Guarantee scheme is more flexible and easier to use, but despite this has admitted that “it is only scratching the surface of the problem.”
According to official figures, almost Â£84 million was lent to businesses by banks via the EFG scheme in the second quarter of the year, compared to Â£73 million in the first. Although this was the highest level since the beginning of 2011, it was still considerably less than the 2009 peak of just over Â£203 million.
In the meantime, the peer-to-peer lending sector continues to thrive. “These days the idea of a pawnbroker being merely a port in a storm for the seriously strapped for cash small borrower is long past: online services are now lending serious amounts of money to serious businesses,” says Richard Luxmore.
FundingSecure enables its clients to secure a loan of between Â£500 and Â£100,000 for up to six months using personal assets, such as jewellery, as security. These assets are valued by an auction service.
After signing the loan agreement, borrowers can usually receive the funds within 24 hours. Loans can be up to 50 per cent cheaper than other asset-backed lenders because the finance is provided directly from a community of trusted people seeking higher returns on their money, and not institutions.