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26/1/2014

London developer takes on largest P2P loan - FT.com

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January 23,  2014  9:51  pm

London developer  takes  on  largest  P2P  loan By  Elaine  Moore  and  Andy  Sharman

A London  based  property  developer  has  secured  the  world’s  largest  peer-­to-­peer  loan. Hundreds  of  private  investors  hoping  to  benefit  from  London’s  booming  housing  market have  clubbed  together  to  provide  just  over  £4m  through  online  platform  LendInvest.

©Dreamstime

Investors in  the  residential  housing  project  in  Croydon,  south  London,  have  been  offered  a  12 per  cent  annualised  rate  of  interest,  an  appealing  return  at  a  time  when  interest  rates  in  the UK  remain  at  0.5  per  cent.

The loan  marks  a  dramatic  shift  in  the  sorts  of  funding  undertaken  through  peer-­to-­peer  websites. Before  Lendinvest’s  £4.1m  loan  the  largest  loan  provided  through  a  peer-­to-­peer  platform  is  believed  to  be  £1.75m  via  Assetz  Capital. “The  fact  that  the  largest  loan  has  more  than  doubled  in  a  year  shows  how  quickly  the  sector  is  growing,”  said  Christine  Farnish,  head of  the  UK  based  peer-­to-­peer  Finance  Association.  “What  we  thought  was  astonishing  a  year  ago  is  now  normal.” peer-­to-­peer  websites  allow  investors  to  lend  directly  to  individuals  and  small  companies,  cutting  mainstream  lenders  out  of  the equation.  The  sector,  which  has  been  described  as  Ebay  for  loans,  is  praised  by  consumers  and  industry  figures  keen  to  see  high  street banks  cut  down  to  size.  Platforms  have  received  endorsements  including  government  funding  in  the  UK  and  backing  by  high  profile investors  such  as  Google  in  the  US. However  peer-­to-­peer  has  yet  to  be  tested  by  serious  default  in  the  west.  A  recent  spate  of  failures  in  China’s  booming  P2P  industry is  a  stark  reminder  that  rising  interest  rates  could  pose  problems  for  the  sector  in  the  US  and  Europe,  where  the  industry  has expanded  rapidly  in  recent  years  as  banks  scaled  back  their  lending. Most  platforms  limit  the  sums  that  individuals  and  small  companies  can  borrow.  Lending  Club,  the  largest  P2P  lender  in  the  US,  will not  provide  more  than  $35,000.  Zopa,  the  UK’s  oldest  website,  sets  a  £20,000  limit. Yet  as  the  sector  grows  these  limits  could  rise.  Funding  Circle,  one  of  the  UK’s  largest  platforms,  said  that  it  expects  to  loan  out larger  sums  as  it  moves  further  into  property  development  services. Like  LendInvest,  Funding  Circle  sees  residential  property  developers  as  an  untapped  market  for  alternative  funding.  Small  to medium-­sized  housebuilders  and  property  developers  have,  like  many  SMEs,  struggled  to  access  funding  during  one  of  the  deepest downturns  in  the  construction  industry’s  history. “The  London  residential  market  has  been  booming  for  quite  a  few  years,  but  it’s  taken  a  long  time  for  the  funding  environment  to catch  up,”  said  Dominic  Grace,  head  of  London  residential  development  at  Savills,  the  estate  agent. LendInvest  was  spun  out  of  Montello,  a  London-­based  bridging  finance  lender,  last  year.  Martin  Skinner,  director  of  Inspired  Asset Management,  said  he  had  no  qualms  about  using  a  new  funding  model. “What  we  needed  was  to  move  quickly  and  traditional  lenders  are  too  slow,”  he  said.  “There  is  a  lot  of  money  out  there  for  property in  London  and  we  have  been  in  bidding  situations  with  50  other  buyers  who  can  offer  immediate  payment  exchanges.” Ian  Gurney,  who  runs  the  independent  P2PmoneyUK  website,  said  that  the  peer-­to-­peer  industry  was  likely  to  grow  at  a  faster  rate  if property  loans  took  off. “It  doubled  in  size  last  year  and  this  sort  of  funding  could  take  it  to  another  level,”  he  said. “Crowdfunders,  which  facilitate  equity  investment  rather  than  loans,  are  already  into  this  in  a  big  way  and  they  show  how  large  it  can get.” Last  year,  New  York  based  website  Prodigy  Network  crowdfunded  $200m  from  over  3,000  investors  to  fund  the  first  skyscraper built  in  Colombia  in  40  years. http://www.ft.com/cms/s/0/0c8587a8-835d-11e3-aa65-00144feab7de.html#axzz2rXKmmI00

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26/1/2014

London developer takes on largest P2P loan - FT.com

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London developer takes on largest P2P loan  

FINANCIAL TIMES Jan 23, 2014 By Elaine Moore and Andy Sharman

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