Today I take a look at the recent development of investor numbers on several p2p lending marketplaces. I chart relative numbers with the index set to 100 for June 1st, 2018. The advantage of using indexed numbers for this comparison is that platforms use very different definitions for their investor base size. Some count registered investors, some count investors with deposits, some count active investors, some count recently active investors, … .
The disadvantage of showing indexed numbers for growth is that it gives smaller, younger an advantage as their percentage increase of investor base is likely still higher because they come from smaller absolut numbers. An example for this effect is Peerberry where percentage growth of investors is rapid, but the absolute number as of Sep, 1st has reached only 2468 investors as it is a very young marketplace.
Indexed investor numbers (with June 1st, 2018 = 100). Peerberry exceeds the choosen display scale – value for Apr. is 66 and value for Sep. is 183
Reading example: On Sep 1st the index value for Mintos was 123, meaning Mintos had 23% more investors than on Jun. 1st
Flender launched a year ago. What did you achieve since launch?
We have funded c. 1,300,000 EUR deals through our platform and we are proud that our defaults have remained at 0%.
We have just finished equity fund raise where we raised successfully 800,000 EUR from world’s biggest VC Enterprise Ireland and private investors.
We have strengthened our credit team with head of credit Colin Barry who came from AIB Bank and David McNamara ex director of Merrill Lynch International Bank. David has joined our credit committee and board of directors. This all means that our lenders can be assured that Flender has best in class underwriting practices.
Following due diligence, Price Waterhouse Coopers is heading our debt raise from institutional finance providers.
We offer very attractive 10-11.5% interest rate to our lenders. Current default rate is 0% and our world class credit team will ensure great returns to our lenders.
You now want to raise a 50M Euro debt package. What will that be used for?
Funds will allow:
Accelerate funding of the deals on our pipeline
Loans on our marketplace will get funded quicker
Offer bigger variety of credit options to borrowers such as higher ticket loans and property backed peer to peer loans
Can you please give details about the planned launch of property finance loans?
Our target market will be property developers and builders looking for working capital towards last phases of construction. Target loan size is 250,000-750,000 EUR.
How will these loans be secured?
Loans will be secured against 1st legal charge on the property
What interest rates can investors expect on the property loans?
When will we see the first property loan listed on the marketplace?
We are aiming for May 2018
You recently repaid a convertible loan. Why did you decide to repay that loan rather than convert this into equity stakes in Flender?
This was condition of our new equity investor. Investment allowed us to repay our loan participants with very generous 12% return.
Flender holds permission to lend in the UK. How are your plans progressing to offer loans in the UK market?
Our plan is to expand and grow our brand in Ireland. We will review our launch plan for the UK towards end of this year.
What are the main challenges in growing the business right now?
Now that our platform and model have been proven then our goal is to scale up. We would need to grow both the number of retail lenders and involve institutional finance for this.
Six months ago I started a portfolio on Irish p2p lending platform Linked Finance. As my overall p2p lending investment was heavy on Baltic and UK platforms I wanted to diversify geographically. And Linked Finance is an established player. The marketplace started 4 years ago and attracted institutional capital earlier this year.
Linked Finance offers loans to Irish SMEs; click for larger image
I started in February with a 1,000 Euro deposit via SEPA transfer. Loans on Linked Finance have terms of either 12, 24 or 36 months and are assigned credit grades by Linked Finance. Both together determine the interest rate.
I use the Autobid (autoinvest function) to invest. While it is possible to make manual bids, many of the smaller loans are funded in minutes.
My Linked Finance autobid settings – Click for larger view
Over time I have done multiple deposits and increased my total deposited investment to 6,350 Euro. The processes are smooth, there have been no bugs and Linked Finance is a most hands-off platform requiring almost no attention by me. Loan supply is a little volatile. It has slowed down in summer. However most loans are for 36 months; due to my autobid settings I skip many of those.
My Linked Finance dashboard – click to enlarge
The best part of my Linked Finance experience is that so far all payments have been made on time. Certainly I expect that there will be delays and defaults, but I appreciate that there have been none so far and this confirms the very low overall default rate Linked Finance shows in its statistics
The only disadvantages of Linked Finance are:
1.2% fee for investors
No secondary market
My self calculated ROI so far is 5.6% (XIRR), but some of that is due to the initial cash drag and this figure will rise. I plan to further increase my Linked Finance investment to a portfolio size of 10K.
Linked Finance announced yesterday that it secured full approval from UK regulator:
I’m delighted to announce that we recently gained full authorisation from the Financial Conduct Authority in the UK. This approval is the culmination of a rigorous 2-year application process and a lot of hard work.
In the absence of any regulatory framework in Ireland, we originally began this process as a way to demonstrate our commitment to operating Linked Finance in line with best practice from the much more developed UK market.
This UK approval also opens several exciting avenues to us in terms of our plans for future expansion. It gives us the opportunity to attract lenders form the UK to support Irish SMEs. It would also allow us to start supporting SMEs north of the border, as well as paving the way for a full UK roll-out.
The P2P industry in the UK is the largest in the world on a per capita basis and platforms there are originating more than €1 billion in lending each quarter. It would be a logical next step in our evolution.
That said, our primary focus remains on Ireland and helping to grow the sector here as market leaders.
This authorisation in the UK won’t have any major impact on how you use Linked Finance but you may see some slight changes and modifications on the site, as we look to implement some of the various requirements, such as warnings and disclaimers, that would be required when operating in the UK.
The fact that we have gained full authorisation from the FCA should simply serve to underline that Linked Finance has developed the type of management processes and controls that are in line with industry best practice.
The timing couldn’t be better too.
This announcement comes as the Irish government have launched a public consultation in relation to regulating the sector here.
It’s a move that we wholeheartedly welcome. We believe that all platforms who want to operate in Ireland should be required to operate to the same high standards as Linked Finance.
Obviously, this approval from the FCA demonstrates that we are well ahead of the curve in the Irish market and we are encouraged that the Department of Finance is now considering a similar set of rules here.
We recognise that the development of P2P lending in the UK owes a lot to the introduction of government initiatives that promote the industry, including tax-free Innovative Finance ISAs and direct government lending to SMEs, via the British Business Bank, on platforms such as Funding Circle and RateSetter.
We would love to see the same type of support here and we will be using the current public consultation as an opportunity to promote similar initiatives in Ireland.
For our Irish lenders, this approval from the FCA in the UK should serve as further evidence of our commitment to developing a strong and stable platform that will continue to deliver healthy returns while providing much need credit to great local businesses.
Flender, which recently soft launched a p2p lending marketplace in Ireland, received full FCA authorisation last week, saying it took two years of consultation with the FCA and the legal team to achieve approval. This will be needed for the launch in UK, planned for later this year.
Limited time offer: Cashback: 10% cashback on any investment over 1,000 GBP for P2P-Banking reader. Sign up to use. (Update Aug. 2017: the cashback offer has been extended to August 31st, the minimum investment requirement is now 2,500 EUR)
Flender offers both SME and consumer loans on the marketplace. The main points for investors are:
no fees for investors
50 Euro minimum bid
open to international investors (prerequisite is a bank account in the European Union)
interest rates of the currently listed loans range from 8.1% to 10.4%
reverse auction bidding (though at the moment, loan supply outstrips lender demand, therefore I don’t expect any underbidding soon). currently no autoinvest
Flender charges origination fees for business loans from the borrower. While there are no origination fees for borrowers for consumer loans, Flender does have a margin income on those (same with business loans).
Once the UK operation launches, investments can be made cross-border. An interesting aspect is that the borrower will take the FX charges.
Flender does have big plans. On the list are an IFISA offer, several features for investors and borrowers to customize the experience and mid term a secondary market. Flender currently has a team of 7 employees.
As my experiences with another Irish p2p lending marketplace are good so far (it has low default rates), I registered on Flender too. There are currently 4 business loans listed seeking a total amount of about 150K Euro.
Screenshot of Flender marketplace loan listings (excerpt)
Linked Finance, an Irish p2p lending marketplace for SME loans active since spring 2013 , announced it has secured backing from French investment group, Eiffel Investment Group, who will contribute up to 20% of funding for new loans listed on the platform. Eiffel’s dedicated online lending team has been involved in the space since 2011. It currently manages close to 200 million EUR on behalf of several multi-billion institutional investors across a range of leading P2P platforms, including Lendix in France and Funding Circle in the UK.
The agreement will further boost liquidity on Linked Finance’s platform, which has already provided loans to more than 700 SME since its launch. With plans to further accelerate lending in 2017, Linked Finance’s ultimate goal is to become the country’s biggest source of non-bank SME finance.
Commenting on the news, Niall Dorrian Chief Executive Officer of Linked Finance, said:
“This agreement with Eiffel is a vote of confidence in Linked Finance’s business model and recognises our strong growth trajectory. Eiffel monitors over 100 lending platforms worldwide. They know the industry well and what it takes to succeed. A diverse funding mix is important for our long-term development. Eiffel’s support will complement our existing lenders, ordinary members of the Irish public, who will still continue to play a crucial role in helping us to fulfil our mission of providing fast and affordable finance for Ireland’s SME sector.”
Etienne Boillot, CEO and co-founder of Eiffel eCapital, said:
“We are experienced investors in online lending platforms and believe they are transforming borrowing opportunities for small businesses around the world, and reducing reliance on traditional bank financing. In Linked Finance, we have identified a leading player in the Irish market and a business that we are confident will deliver on its ambitious expansion plans. As institutional investors, we not only bring more liquidity to the market, but also more confidence in this method of fundraising, which should help attract more SMEs to borrow and more retail investors to lend, a win-win for all involved.”
Eiffel’s online lending activity is backed by several large insurance companies including Aviva France, AG2R La Mondiale. One of their key objectives is to finance loans for small and medium sized enterprises (SMEs) via lending platforms in France and Europe; they are one of the leading players in Europe in this market.
Linked Finance recently completed Ireland’s biggest ever P2P loan, raising 250,000 EUR in two tranches for serviced office and flexible workspace provider, Iconic Offices. The loan was funded by Eiffel eCapital alongside more than 400 individual lenders; just some of the over 14,000 investors on the marketplace.
In 2016, Linked Finance saw a 132% increase in lending activity over the second half of the year. In total Linked Finance has funded over 700 loans since launch. Key sectors using the SME loans include retail, food, agriculture, manufacturing, professional services, education, construction and distribution
The P2P lending platform is already in talks with other leading institutional investors, in Ireland and internationally, and they are actively looking for further funding partners who want to deploy capital via the site.
Peter O’Mahony, Linked finance founder and CEO Niall Dorrian
The peer to peer lending market remains small in the Republic of Ireland. Across all types of peer to peer finance (donation, equity, lending and donation) we estimate that the size of the market in Ireland in 2015 is a maximum of 50 million EUR. This is however growing quickly, particularly with the arrival of Kickstarter in 2014 to the Irish market. GRID Finance is one of two peer to peer lending platforms in the Irish market – both provide access to small business loans. There are currently no consumer focused peer to peer lending platforms in Ireland. GRID focuses on small business loans up to €75,000. Irish based peer to peer lending platforms are both an alternative and competitors to the Irish banks. In aggregate, 4 billion EUR in small business lending is secured by Irish SME’s (Small, Medium Enterprises) annually.
Small business lending in Ireland continues to be dominated by AIB and Bank of Ireland, the two ‘Pillar’ banks of the Irish banking system. These banks struggle to serve the small business lending market due to the cost of product delivery, credit risk profiles, regulatory challenges and legacy distressed debt issues in the sector.
The Irish government has recently launched a platform investment fund, through the Irish Strategic Investment Fund, to support the development of platforms that originate loans online. This is another positive step in establishing the peer to peer lending market in Ireland.
Peer to peer lending is not regulated in the Republic of Ireland. The Central Bank continue to monitor the space and are seeking a pan-European directive to regulate it. The recent announcement of the Action Plan for the Capital Markets Union has dispelled this as it outlines its reluctance to regulate the space at a Pan-European level while the industry is in its infancy. Local peer to peer lenders are seeking the Irish Government’s Department of Finance and The Central Bank of Ireland to support the development of the P2P lending space with a regulatory approach based on the UK’s FCA regime. The government’s strategy for the International Financial Services centre also calls for supporting Dublin as a premium location for Domestic and International Fintech start-up businesses. The introduction of a regulatory regime is key to building confidence and trust in this emerging sector and will act as a buffer from the arrival of weaker platforms into the market. Continue reading →
Sage, the business software and services provider, announced two partnerships that will help SMEs unlock the UK’s growing alternative finance industry, which was worth 1.74 billion GBP in 2014.
Integrating with one of Europe’s peer-to-peer business lenders for short term finance, MarketInvoice, Sage’s flagship small business accounting package – Sage 50 Accounts – now enables small businesses across the UK and Ireland to apply for business-critical funds more quickly and easily than ever before.
Working with Funding Circle, an marketplace for business loans, Sage aims to help even more businesses across the country understand how they can borrow all important growth capital between 5,000 GBP and 1 million GBP (and up to 3 million GBP for property finance) in days not months.
‘Sage has been at the forefront of payment and funding innovation for years, and alternative finance is no exception,’ said Lee Perkins, EVP and UKI Managing Director for Sage Group plc. ‘Sage Pay already provides a key piece of the business growth puzzle, and when it comes to small business accounting, Sage 50 Accounts offers the deepest and broadest hybrid accounting capabilities on the market. By partnering with MarketInvoice and Funding Circle, we’re giving Small & Medium Businesses in the UK the ability to swiftly and easily apply for additional funding to support their business development and growth.”
Lack of finance remains a critical issue for UK companies, with almost 40 per cent stating it holds them back from growing, according to UK Bond Network. Whether they need to invest in stock, new premises, product development, or even cover day-to-day costs, alternative finance can provide faster, more convenient lending than traditional sources. Marketplace lending platforms have provided over 2.1bn GBP in funds to UK small businesses in recent years.
James Meekings, co-founder of Funding Circle, said: ‘The Funding Circle marketplace is currently the fifth largest net lender to small businesses in the UK, in just under five years. But there’s still a long way to go – many small business owners remain unaware of the choice they now have when looking for finance. Partnering with Sage will allow us to grow awareness and trust, bringing more competition and efficiency to the small business lending market.’ Continue reading →
Linked Finance brings p2c lending to Ireland, enabling Irish residents (and companies) to lend to Irish companies. Borrowing companies are grouped into one of four categories (consumer, Manufacturing, industrial and agricultural, young businesses or knowledge, information technology (IT) and expertise). Linked Finance reviews each potential borrower and only allows businesses to borrow if they have successfully completed a full credit vetting process. The process is based on validating key up-to-date financial information and ensuring the creditworthiness of each borrower posted on the site. Linked Finance had start-up investment from Enterprise Ireland, and partners and investors in the venture include entrepreneurs Bobby Kerr, Senator Feargal Quinn, and Kingsley Aikins, as well as Irish American businessmen Peter Hooper and Carl Shanahan.
Like several other internet companies MYC4 was hard-hit by the outage of Amazon’s Data Center in Ireland. Days later the MYC4 site is still down with only the blog (which resides on WordPress) functional.