Peer-to-peer lending set to hit £1bn

Peer-to-peer lending set to hit £1bn




Low interest rates on savings and continued frustration for businesses looking for funding are set to fuel a rise in peer-to-peer lending in 2013, according to one of the industry's early.

Low interest rates on savings and continued frustration for businesses looking for funding are set to fuel a rise in peer-to-peer lending in 2013, according to one of the industry’s early adopters and MD of rebuildingsociety.com, Dan Rajkumar.
 
To date nearly £400 million has been loaned through peer-to-peer and peer-to-business lending and Rajkumar expects that to comfortably top £600 million in 2013, with the £1 billion mark in sight before 2014.
 
On increasing sector regulation, Rajkumar says: “This industry is undoubtedly on the cusp of a huge growth curve. Those who have already reaped the rewards of borrowing and lending in this innovative way have confidence in the model. Adding an extra layer of security for potential users through regulation can only be a positive move for those yet to become involved.”
 
Rajkumar says high levels of confidence has led to increased competition from lenders on established sites and subsequently driven down the rates lenders receive on their cash, but created lower cost borrowing for businesses.
 
“The exciting auction element of the transaction means that lenders and borrowers will forever see their returns rise and fall. At the moment, lenders would do well to shop around to make sure they’re not lending money at rates lower than the risk they see in the business or individual borrower.
 
“The important part for those facilitating the market will be to keep raising the industry’s profile and ensure a steady stream of new borrowers and lenders to keep the market turning over. I anticipate further variations on the theme to arise in 2013. If the security and returns are right, you can fund almost anything using the method.”
 
He also foresees a rise in competition for borrowers and lenders from rival platforms: “I expect to see a rise in online platforms, like rebuildingsociety.com or Funding Circle this year as entrepreneurs realise the potential of facilitating the industry.”
 
According to Laura McMullen, Business Development Director at Funding Circle, its own business arranged more loans in the final quarter of 2012 than the whole of 2011 combined and is growing at 300 per cent per year.
 
Laura McMullen said: “We are delighted to have reached £70 million in lending, much of which was completed in 2012. We have seen a strong increase in demand for our products in the intermediary market and with £20 million from our products in the intermediary market, and, with £20 million from the Government to be lent on the platform we look forward to assisting even more business in 2013.”
 

Funding Circle is on course to facilitate more than £100 million of loans in 2013. 

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