The lending platform feels fellow peer-to-peer companies must keep building on best practices and look to behave like more mainstream lenders, while also differentiating themselves in the market through excellent customer service and rigorous due diligence.

“It’s vitally important to ensure that every peer-to-peer and crowdfunding platform is operating to the highest standards, in an open and transparent way and, therefore, we welcome the FCA’s focus on the P2P sector,” said Liam Brooke, co-founder of Lendy.

Lendy itself has seen dramatic growth since launching in 2012, especially over the past year, which saw the number of registered users double to around 16,000 and adding £150m in funds raised, resulting in a new total of £300m.

The platform also made a number of significant hires over the past 12 months with Alan Darling joining from Santander as head of lending and Mark Whitburn becoming head of credit having previously served at HSBC.

“As the Lendy platform grows, we want to ensure that every aspect of the lending process is evolving to meet the business’s needs – and this includes our credit and compliance arms,” Liam added.

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“As we’ve grown, we’ve made sure to invest in the resources and manpower needed to undertake thorough checks into each loan we receive.”

Lendy also explained the four key steps in the due diligence process of factual investigation, research, analysis and discovery into the relevant borrower, their assets and any sponsors or principal parties. 

1. Initial due diligence

Lendy’s business development managers carry out an extensive ‘know your customer’ (KYC) process when they first source a loan. 

The checks include background searches into the prospective borrower, credit and anti-money laundering checks, and in most cases interviews with the borrower. 

2. Legal panel

After the loan has passed the first stage, it is then reviewed by a member of Lendy’s legal panel. 

The panel is made up of three top 100 law firms: DAC Beachcroft, Shakespeares and Clarke Willmott. 

All three law firms on the legal panel hold a minimum of £10m professional indemnity (PI) insurance. 

For certain projects Lendy also uses Warner Goodman, which has £3m PI cover, and for loans secured against Scottish property it uses Gillespie MacAndrew, which has £25m PI cover.

Lendy’s solicitors ensure that a legal charge is properly made against each security property and that each of the security properties has good title. 

The solicitors also ensure that if a borrower grants additional security, such as guarantees and debentures, that these securities are properly executed and enforceable.

3. Valuation

Lendy uses a number of highly rated independent firms to value security properties. 

Each firm will be a specialist in the region where the property is located. 

The firm will use a Royal Institution of Chartered Surveyors-registered valuer who is able to carry out a full red book valuation. 

They will also have significant PI cover. 

4. Credit checks

Lendy’s head of credit puts each lending proposition under extensive scrutiny to determine its viability. 

This includes an analysis of the borrower’s/sponsor’s and/or other principal parties’ experience, credit record, business plan and financial projections and forecasts with particular regard to the borrower’s financial situation, including their ability to service the debt and repay the loan at maturity.

Once the full process has been completed, the platform’s credit committee will then consider and approve each lending opportunity before it is put to investors. 

“With the added knowledge we have in place, we have a due diligence process that rivals – if not surpasses – the major high street banks, with our use of expert lawyers and specialist Royal Institution of Chartered Surveyors-registered valuers, along with our own internal expertise,” Liam added.

“Strengthening our customer experience is also paramount and a key USP, so we are investing a huge amount in our brand and service proposition with a new website, help and support centre and corporate image.”