FundingKnight to boost loan book after acquisition

FundingKnight to boost loan book after acquisition




Gary Mealing, head of property lending at FundingKnight, explained to Bridging & Commercial that the company expects a large increase in activity after GLI Finance acquired its remaining shareholding.


Gary Mealing, head of property lending, FundingKnight

What is your role at FundingKnight and what roles/experiences have you had in the past?

I am the head of property lending at FundingKnight. My role is to develop our proposition alongside our business loans, building relationships with our introducer networks and assess the loan opportunities that come across my desk as I also oversee the credit function for property.

I have worked in the business of lending money for 30 years – always focused around commercial business and property. I have funded hundreds of property deals over the years, including property development, major renovation projects, self builds for commercial clients and commercial mortgages.

How do you think the crowdfunding and peer-to-peer market has evolved over the past 12 months?

The evolution continues to amaze with more new entrants, specialisms and a growing awareness and acceptance from investors and businesses. There are many more tools available to help both sets of customers understand their options – for example, comparison sites and independent reviews, which is a valuable development.

Of course, there is still a lot of work to do, but with the segment now making up 13% of small business lending, I do think that peer-to-peer lenders like FundingKnight can no longer be ignored.

What one thing would you change about the peer-to-peer market?

There are still a lot of misunderstandings and misconceptions about what peer-to-peer is and how it works. Being clear about what we do and what the risks are is vital for consumer protection, so any confusion makes our job a lot harder. As an industry, I think we need to do a better job in conveying a clear message around the industry’s purpose as well as the risks associated. I think this would then help against the backdrop of unhelpful comments made by the likes of Lord Turner.

How is FundingKnight looking to take more market share in an ever-growing market?

As we continue to gain momentum in the second half of the year, we have the benefit of having all the fundamental elements already in place – processes, technology, team and crowd of investors. We now have the backing from an AIM-listed institution, which gives us a fantastic springboard to grow our business.

For me, our routes to market are a key focus to unlock additional sources of sound commercial property proposals. We have always had a strong focus on quality of service and we will continue to maintain that focus. 

What developments does FundingKnight have planned for the rest of the year?

FundingKnight’s origins and our skills are in commercial assessment, which means we’ll be focusing heavily on businesses with a property need and we’ll also have an appetite to fund over longer periods, also for larger amounts – up to £5m.

What is the most interesting deal you have seen completed at FundingKnight?

Frankly, they are all interesting – no two deals are ever the same. Commercial property tends to be individual anyway, but FundingKnight has cultivated an ability to find solutions using our experience.

For example, we have developed a great relationship with a hotel operator in the North West where we are seeing them return to us time and again, but if I had to pick one it would be the funding for a multi-faith cemetery in the Midlands. This was a business that needed a property to operate from. There were many unique elements and complexities to this loan, not least of which was getting an accurate valuation for such a unique property. But fundamentally it was a cash-generating business with opportunity to grow and the necessary skills to make it a success.

How do you think Brexit will affect the funding of crowdlenders?

For us there has been no impact, but I can see that some may face challenges.

In the short term, there may be some investors who are taking stock, particular if they have been London-centric and/or fund high proportions against gross development values, but it does come down to quality of lending. If the platforms continue to do their proper due diligence and don't let standards drop, then peer-to-peer should remain an attractive investment vehicle. 

Significantly, SME lending and commercial property do not have a high correlation with equities, so peer-to-peer lending into these areas will continue to be seen as a useful diversifier especially in turbulent times. 

The industry overall is trending towards institutional funding and we have not seen an indication that institutions are suddenly rethinking their involvement in peer-to-peer lending. When it comes to retail investors, if the Bank of England does reduce the base rate, a drop in interest rates would make P2P an even more attractive investment option.  

How has the Financial Conduct Authority’s (FCA) new regulation of the crowdfunding and peer-to-peer markets changed crowdlending?

Regulation is certainly something we welcome as it lays down a common standard and gives the industry more respectability. FCA oversight has led to an overall tightening of procedure and practice and improvement in risk communication. The FCA’s approach is very much to do with clarity around risk and transparency of information, which was something a lot of the pioneering platforms, such as FundingKnight, were already keen on.

I think it is too early to state the impact to the industry as a whole, but the authorisation process is quite lengthy and time consuming and there is a considerable backlog of applications, so we do expect to see some platforms fail to complete registration or just decide to leave the market.

Is the commercial property market set to suffer from a significant price correction post-Brexit?

There has been a lot of focus around commercial property funds and the pressures from their investors to liquidate, and then there is the uncertainty so far with regards to the UK economic growth post-Brexit.

While I expect that the investor and economic factors will have an impact, I can’t currently see that we are about to enter a 2008-style property recession. My view is that while prices may fall, I don’t see the drivers for a significant price change.

Following GLI’s acquisition of the remaining shareholding in FundingKnight, what expansions/advancements will we expect to see as a result of this?

We are now part of an AIM-listed business with a great pedigree, which allows us to provide a much wider proposition to the market, backed by deeper funds.

We expect a large increase in activity in the second half of 2016, so I would expect you to see us originating more business, growing our loan book and providing our customers with more solutions to support their business growth.

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