Peer Lending and Asset Finance – The Opportunity

The alternative finance industry is buoyant right now with peer lending and crowdfunding hitting the headlines almost daily. The recent news that Zopa has crossed the $1 billion mark is a huge milestone for the UK industry. The exponential growth we are seeing is being driven by more exposure, by investors becoming more familiar with the space, by innovation of new entrants and, dare we say it, by the comfort of regulation.

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One of the areas that has seen huge growth is the asset backed peer lending sector. Firms such as Assetz Capital, Saving Stream and Thincats have seen massive growth in 2014 and the future looks very bright indeed.

The growth of the peer lending industry was always going to see various niches being filled by new entrants and one such notable platform is Ablrate.com. The company aims to service the leasing industry in capital equipment and is the first platform in the world to offer access to lenders in aircraft leasing transactions.

According to the Finance and Leasing Association, its members financed £22.4 billion in asset based finance in 2013, representing 30% of all fixed capital investments (excluding property). In an industry that is financing at least £60 billion per annum in transactions it would seem that there is a huge growth potential for those peer lending companies that can gain a foothold in the asset backed finance market.

John Lutterloch of Ablrate and former Managing Director of GE Capital Europe says:

“The asset based financing and leasing industry is a sector I have been in for many years so I have seen every innovation in the alternative financing industry from the front seats. Peer lending, in its infancy at the moment, has the potential to be a game changer. Nobody is going to replace the banks in this sector, but companies like Ablrate and the other platforms, who are essentially facilitators of deals for companies and lessors, have the opportunity to make huge inroads into this multi-billion pound industry and the banks and asset financiers I talk to everyday are very much aware of it”.

For lenders the opportunity is to lend alongside banks and lessors, gaining access to well-structured transactions with credit worthy companies. Access such as this has been very restricted for the average investor. Exposure to this sector in the past would have been through specialist funds, through buying the equity of lessors themselves or purchasing bonds. In reality such a strategy is probably not something that the average investor has considered so making it simpler to invest and giving access to direct deals is giving investors a better opportunity to evaluate the space. In fact the past 18 months has seen family offices and HNWI become more interested in direct deals rather than funds of pooled money. Feedback from meetings we have had has been that some investors feel they were not serviced too well by the fund industry and are now looking to gain direct exposure to transactions; it seems that investors on peer lending platforms are taking this path also.

The peer lending sector started with Zopa facilitating loans between peers and has now grown to encompass a myriad of opportunities for lenders to invest across a range of assets with varying degrees of risk. Financial advisors will tell you that a well-structured portfolio has diversification at its core, the opportunity to now do this in peer lending with asset backed transactions should be viewed as an exciting and welcome development.

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