From bridging to P2P: Interest will ‘make other funders re-examine their offerings’

From bridging to P2P: Interest will 'make other funders re-examine their offerings'

With the potential for cheaper funds and greater competition, an increasing number of bridging lenders are entering the peer-to-peer (P2P) market.

However, while some extol the value of offering borrowers a wider range of options, others remain unconvinced about the safety of the sector.

“For responsible bridging lenders who really understand the market it can no doubt be a positive, provided that underwriting and risk evaluation standards are maintained,” explained Benson Hersch, Chief Executive of the Association of Short Term Lenders.

“My concern is that it does entice a lot of people who know nothing about the risks of lending on property to invest money that they maybe cannot afford to lose. 

“How losses in these circumstances are dealt with is something I expect to see much more talk and investigation around in the future.”

Despite this uncertainty, Benson recognised the appeal of P2P lending.

“There is little regulation in the sector and as it is a lower-cost way of getting funds it makes sense that more people will move into this market, but an element of caution is required.

“It is still a very new market and just one negative event could well damage the reputation of the whole sector.”

Bridging lenders, such as Dragonfly Property Finance and Kuflink Bridging have already made the leap into the P2P market so far this year.

Kuflink Bridging announced on Monday that it was launching a P2P platform as part of a major rebrand.

Narinder Khattoare, Sales Director at Kuflink Bridging, said: “Basically, more choice means better terms and can only be good for the customer.

“It is already having a liberating effect in the sense that access to more funding means greater competition and therefore potentially cheaper funding.

“Conventional funding lines are still important, but sometimes the covenants applying to some funding lines can be restrictive.”

However, Narinder admitted that P2P lenders had to make certain compromises. 

“The key will be in the ability of lenders to provide an attractive return for investors from prudent lending.

“Obviously guarantees are not possible, which is why we have taken the step of taking on the first 20% of any loan we put on to our platform.”

Regardless, Narinder believes that P2P bridging could have a bright future.

“P2P interest will also make other funders re-examine their offerings and adapt.

“Personally, I see P2P as an additional resource which has the capacity to grow.”

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