P2P funds 'unaffected by Brexit'

P2P funds 'unaffected by Brexit'

Peer-to-peer (P2P) lenders could stand to gain a greater market share as some banks have reduced appetites to lending in the wake of Brexit, according to Chirag Shah, CEO of Nucleus Commercial Finance.

Chirag’s comments followed claims that some lenders have begun to lose their funding lines as a result of financial turmoil caused by the EU referendum.

“Bank appetite will reduce, we are already seeing them pull out of a few transactions,” Chirag insisted.

“Some of the larger lenders in the bridging space will come under pressure as their bank lines are scaled back.

“This will enable [the] likes of Nucleus [and other] P2P lenders to gain market share.”

Chirag explained that P2P lenders were at an advantage as investors were less likely to withdraw their funding.

“…[This is because] most loans are matched with investors’ investment horizons, which is the total length of time that an investor expects to hold a security or portfolio.

“This means that no loan will be matched against an investment horizon that is shorter than the length needed for the loan.”

Jasper Ehrhardt, managing director at FundingKnight, agreed that P2P lending was untouched by post-Brexit uncertainty.

“P2P has an added advantage of having access to non-institutional funds, which are unaffected by Brexit, as the underlying driver continues to be the low level of returns available from more traditional vehicles, such as savings accounts.

“The underlying dynamics that incentivise P2P investors haven't changed, and they continue to see above-average rates of return on platforms, compared to bank and savings deposits.”

Louis Alexander, managing director of The BridgeCrowd, echoed this sentiment, noting that returns on P2P investments were a driving force behind the sector’s popularity.

“We have seen more and more investors join the platform as investors seek to get reliable returns secured over a strong asset class,” Louis explained.

John Goodall, CEO and co-founder of Landbay, added: “…Since Brexit we have seen no change at all to average investment levels of both current and new investors on our platform.

“...We have diverse funding sources [for borrowers], without relying on any one party to fund our mortgages.”

Meanwhile, Jasper suggested that the P2P market stood to gain even further as traditional lenders shift their focus away from small business loans.

“We have a view that traditional lenders will continue to exit the SME lending sector, leaving P2P platforms with more opportunities to fund small businesses.

“In the short term, businesses will first have to weigh up any potential impacts of Brexit.

“In the medium term, once they have finalised their lending requirements, P2P platforms will pick up more business due to traditional lending exiting the sector.”

Luke Jooste, head of real estate and broker introduced finance at Funding Circle, also believed that Brexit could create further opportunities for P2P firms.

“Historically, banks are known for withdrawing from small business lending during times of uncertainty, which could present an opportunity for direct lending platforms, such as Funding Circle.

“We have conducted rigorous stress tests on our loan book, which show that even in the most stressed conditions, investors will still earn positive returns.”

And with over 330,000 borrowers now utilising P2P loans, Kevin Caley, founder and chairman of ThinCats, said lenders would remain committed to growth.

“Our economy is in unknown waters, and this will be putting some businesses off borrowing for major new investments, but amid this turbulence the UK’s leading peer-to-peer platforms won’t be sitting on their hands.

“As a sector we continue to bring disruptive innovations to the market, offering an alternative route for businesses tired of traditional lending institutions.”

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