RateSetter is first and foremost a peer-to-peer consumer lending outfit – facilitating loans from a large base of individual investors to individual borrowers. But this update, which comes accompanied with a statistical breakdown of RateSetter’s outstanding loan book, suggests that the platform’s focus is evolving and expanding.
We already knew that RateSetter engaged in some level of small business lending. In mid-July the British Business Bank channeled £10 million through the platform. That £10m was destined to comprise 40% of any qualifying loan until the first £4m had been lent, after which time the Bank’s money was to make up 20% of loans until it became exhausted. In this way the £10m should have facilitated a grand total of £40m of lending – to businesses.
The following quote, extracted from the RateSetter blog post, offers an explanation for the platform’s increasing number of business loans:
“On the borrowing side, we have been seeing more business-orientated loans. This is a natural evolution from our lending to individuals because for sole traders, self-employed individuals and small businesses the finances of the individual and the business are closely intertwined.”
The blog post in question also reveals that commercial lending has indeed extended beyond sole trader loans. Loans to limited companies have also been underwritten via the platform:
“At the moment the majority of this commercial lending is to the individual but over the last six months we have invested to ensure we have the right people and infrastructure to underwrite loans to limited companies as well. We are doing this prudently and step-by-step - as we do with everything.”
RateSetter has also been engaged in a degree of lending against property. 16.6% of the platform's borrowers are businesses – of which half (8.3%) are taking out secured property loans. RateSetter’s average loan size to businesses is a great deal higher than its bread and butter loans to consumers; £71k vs. £5k respectively.
Finally, and as is the case with most of the major platforms, the range of RateSetter's capital sources is constantly developing. We’ve already made mention of the BBB’s involvement, but RateSetter loans are also home to institutional capital (the blog post makes mention of Eaglewood), cash from small businesses, and from charities and livery companies.
The timing of this sweeping update from RateSetter feels very deliberate. “Transparency” is undoubtedly the industry buzzword at present – one that was banded around the AltFi Global Summit in New York and the LendIt Europe conference like nobody’s business. It was at the latter event, in fact, that Zopa announced that it would be opening its full loan book (Funding Circle-style) to AltFi Data initially, and to the general public in Q1 of 2015. There’s little doubt that all of this chatter has served as a key impetus behind RateSetter’s attempt to provide more in the way of clarity.
Here’s the final say, from the platform itself, on the evolution of its marketplace:
“We encourage this breadth and think it is healthy - we are big believers in an open and fair market with a diverse group of lenders all lending on the same terms.”