The company said that the decision will enable it to focus on its core small business lending product in the UK, US, Germany and the Netherlands. It will continue to service listed property loans and meet facilities to which it has already committed over the next 12 to 18 months. 

However, housing is hot on the political agenda with news coverage across the board focusing on what has been dubbed a housing shortage, as well as successive government plans to increase home ownership. There is a need for the UK to build 300,000 dwellings (houses, flats or apartments) a year to try to plug a massive shortfall – particularly in affordable housing. It seems a strange decision, therefore, for any lender to retreat from funding property deals in a market that should be, and is, increasing.

Risk is always a factor in construction, but it is how that risk is managed that is important. Funding Circle’s withdrawal could allow other lenders to enter this space, and increased competition will be no bad thing in giving developers greater choice.

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Our method of managing risk is to ensure significant security is taken on any funding that is applied for, usually in the form of property. Our model, therefore, is to fund already established businesses that have a portfolio of property. We also conduct thorough research into the business, its track record, and its individuals. In doing so, we are able to reduce risk as far as possible, and create viable and attractive propositions to potential investors.

At F&P Sponsors, we have had a significant amount of success in doing this, and have a number of high-profile clients in the property sector. One in particular is Beech Properties, which buys derelict city-centre properties in the North West and converts them to meet the needs of young professionals. It has recently completed its 22nd round of funding and has secured £7.5m in total to support its schemes. Such has been its success that it is now in the process of finishing off its eighth development.
 
While we appreciate that there are always certain areas of the market that give cause for concern, many of our clients have a clear appetite for further growth. While demand is strong, and developers continue to be starved of funds by traditional lenders, the market for alternative finance – and peer-to-peer lending particularly – will come to the fore.
 
That is in essence our very raison d’etre: to provide funding to those businesses that have been turned away by the banks because they are considered too high risk. Risk is a factor that can be controlled, however, and it is disappointing to see a company like Funding Circle disappear [from the development finance market] at the very time that demand is at its highest.

SMEs are the very lifeblood of this country and without the support of alternative sources of finance, many of them simply would not exist.