Peer-to-business lending is now up and running in Scotland as a new entrant hits the quarter million mark in its first month.
Renowned internet entrepreneur Bill Dobbie is the man behind Edinburgh-based LendingCrowd. The platform is an SME facing service that follows much the same pattern as the Funding Circle platform. Investors are able to peruse and actively select from a range of small business investment opportunities. Returns range from 5.95% to 13% – and will vary based on investor demand. The onus is on lenders to de-risk their portfolios through active diversification.
The minimum investment amount stands at just £20. The platform has also indicated that money can be withdrawn by lenders at any time, so long as there is another investor willing to purchase the would-be vacant loan part. In other words there seems to be a secondary market of some kind at play here – but withdrawals will likely take some time to complete.
LendingCrowd points to its credit assessment process as a distinguishing strength. The platform makes use of a proprietary risk engine by the name of ExpertLender to screen prospective borrowers. This automated tool is backed up by an in-house credit team that boasts a collective 100 years worth of relevant experience in the banking sector.
On the borrower side, LendingCrowd funds can be accessed as quickly as 5 days after the security on a loan has been agreed. The platform analyzes a broad range of factors to determine which of the following to take as security on any given loan:
Borrowers will pay a one off fee of 2-4% dependent on the term of the loan – and there are no early repayment fees. As mentioned, the cost of funding is subject to investor demand – the more investors that pile into a particular loan opportunity, the lower the interest rate is driven. All loans are assigned a risk grading to ensure that they are priced sensibly. An “A” rated loan, for instance, will yield anywhere between 7.95% and 8.94%.
Bill Dobbie, Co-Founder of the new platform, commented:
"My involvement in start-ups and SMEs made me realise the difficulties for small businesses to secure loans. We recognised that the traditional model of lending doesn't work for all borrowers all of the time and wanted to develop a credible alternative."
Scotland is home to a vibrant SME scene and as well as a decent number of high net worth potential investors. LendingCrowd will hope to play an effective matchmaking role between these two otherwise disconnected groups. The downside for the platform is that peer-to-peer lending hasn’t really taken off in Scotland in the same way that is has over here in the UK as of yet, but therein also lies an exciting first-mover opportunity. LendingCrowd has made 4 loans worth a combined £250,000 since a soft launch last month – and impressive start.