JustLend aims to unleash the "bank of family and friends"

A startup that aims to remove the stigma of borrowing money from family and friends is gearing up for a funding round.

JustLend is billing itself as a “new form” of peer-to-peer (P2P) lending, aimed at easing the process of lending between family and friends.

To date, the startup, which is coming out of beta mode, has raised a total of £175,000 courtesy of £150,000 from angel investors and £25,000 via a competition win. 

Co-founder and CEO Craig Smith told AltFi that JustLend is now gearing up for a formal funding round, but would not reveal further details.

JustLend works by a borrower creating their own loan campaign to raise funds for a personal goal, like learning to drive or buying a home. 

The borrower sets the repayment terms for family and friends who provide the loan to help them achieve their goal.

JustLend, which provides affordability assessments for the lender, makes money by charging the borrower a five per cent fixed platform fee.

Smith says over 100 campaigns to date have used JustLend, which was founded in 2017, but only entered beta form late last year.

Smith says JustLend’s main user cases are likely to be those using it for educational purposes, like funding a university course.

Smith rebuffs the suggestion that most family and friends would be happy to help out someone close to them without wanting a return on their loan.

He tells AlitFi: “It depends on the user case. What we see is when the borrower comes onto our platform, they are normally quite embarrassed or feeling a bit of shame and it’s a difficult thing to ask family and friends for money. But it shouldn’t be that way.

“We’re not about huge APR returns here, it is benevolent lending.”

The current ceiling on a campaign is £10,000 with £200 the minimum amount to be lent out, says the co-founder of JustLend, which has five staff.

The current average campaign amount is around £3,500, he says.

Smith is hoping the proposition will appeal to those who have been rejected or ill-served by banks.

Peer-to-peer lending has struggled in recent years, with the likes of Funding Circle this year permanently closing its retail platform to new investments, joining others including Zopa and Landbay in retreating from the sector.

The sector was hit by tougher new rules while the sheen came off the peer-to-peer sector after the collapse of some smaller players.

But Smith says JustLend is a different proposition.

“When it comes to P2P, it [JustLend] really is what P2P should be, in the sense of one family member lending to another family member," he says.

“That is really what P2P is, rather than P2P being between an investor and a borrower. It is P2P but it’s a different type of P2P."

He adds: “By transforming the bank of family and friends in this way, JustLend will unlock the far bigger potential that people-powered lending has to improve the financial wellbeing of our loved ones. “With rising costs of living, runaway house prices and ongoing threats to job security, this better source of financial help could make a pivotal difference, especially for young people who might be feeling the strain the most.     “We wanted to unlock the bank of family and friends to help their own as it makes so much more sense as the first option than the commercial lending industry. 

“The fact that we are launching at a time when economic circumstances are making things tougher and tougher for people makes our mission feel all the more worthwhile and timely.”