Peer2Peer Finance News September 2019

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Regulation update

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ISSUE 36 | SEPTEMBER 2019

P2P sector poised to fill SME funding gap as recession looms • Brexit woes and global trade war raise threat of downturn • Alternative lenders “well placed” to capitalise on opportunities • But weaker players could fall by wayside PEER-TO-PEER business lenders are poised to fill the funding gap if high street banks pull back from the credit market in the next recession. The industry benefitted from the so-called credit crunch at the time of the 2008 financial crisis, lending money to businesses when the banks withdrew. This spearheaded a period of substantial growth for the P2P sector. With mounting concerns of an imminent recession due to Brexit uncertainty and global trade wars, P2P platforms say they are well positioned to step in again this time around. “A recession is coming, it is just a question of when,” said John Mould, chief executive of P2P business lender ThinCats.

“In a recession, many lenders stop lending or pull back on lending. However, there are many great companies that will still need funding! The country needs good companies to be funded to help drive the economy out of recession. “So for those lenders that can keep their heads there is great opportunity to lend well through a recession whilst others have stopped. This means that the platforms have to have good relationships with their funders to allow them to keep

going and take advantage of this opportunity. “A slowdown will challenge all lenders but is a great opportunity for the brave and well-run lenders.” Graham Toy, chief executive of the National Association of Commercial Finance Brokers, noted that credit conditions were starting to get a little tighter and said the trade body’s broker members “are having to work harder” to place business as a result. “I think that the more lenders we’ve got in the

alternative and challenger space, the better for smaller firms,” he added. “That can only help in a recession.” A historic reluctance of banks to lend to smaller businesses in a downturn had created liquidity challenges for many smaller firms, particularly those operating in tightmargin sectors such as retail, according to Mike Cherry, national chairman of trade body the Federation of Small Businesses. He said only one in >> 4 seven small


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