Bank of Dave boosts appeal of peer to business lending

a bank renamed with a sign reading "The Alternative"

Just after Bank of Dave was shown on Channel 4, I wrote this post about how the seeds of change were starting to sweep across the financial services industry.

Since then, the momentum has gathered.  Today the Daily Telegraph reported the results of a survey carried out on behalf of Myvouchercodes.co.uk  in which more than half of those surveyed said that they would switch to the “Bank of Dave”.

So, it seems like the public appetite for alternative finance is more than just a flash in the pan.  It seems like commonsense banking – the type that we’re interested in delivering here at FundingKnight – has really captured the imagination of the masses.

Of those who said they’d bank with Dave, 64% were attracted by the better rates of savings interest available.  That’s hardly surprising.  As I wrote in my last post – peer to business lending… more than just a romantic notion – trying to pretend that peer to business lending is not about competitive rates – for both borrowers and savers – would be naive.  Of course people want to manage their money well… but there were also large groups of people attracted by more social concerns.

57% liked the fact that Dave’s profits were headed straight for charity, whilst 41% mentioned the lack of bonuses for bosses as the reason they’d get involved.

Now, of course, FundingKnight is not a charity.  We are, however, committed to providing an alternative to bank based lending and borrowing.  We can’t promise a silver bullet to solve the world’s problems, but we do think that lending person to person, peer to peer can help make the financial world a little bit better for us all.

If the idea of better savings rates appeals to you, or you are a small business looking for a business loan why not register on the FundingKnight site.  We’ll keep you in touch with developments as we build a brand to shake up the way people lend and borrow money and we hope you’ll join us as we help small, independent businesses access the funds they need to grow.

Photo

Business loans – should the computer say no?

computer screen saying, "computer says no"

Last time, I wrote about Dave Fishwick and his one man bank the Bank of Dave.  Since then, I’ve enjoyed reading about Dave and his exploits.

As Dave’s enthusiastic charm begins to fade from memory, I’m no less convinced that the great British public are ready for a pretty hefty change when it comes to financial services and business finance in particular, but I do think we perhaps need a dose of realism when it comes to who should be able to borrow money or easily find a small business loan.

There’s an interesting post called Bank of Dave: credit ratings do us no credit over at www.realbusiness.co.uk.  In it, Joe Carstairs – of Funding Options – uses the story of Tariq to consider the role of credit checks when it comes to lending and borrowing money.

Tariq, a local Burnley caterer who Dave lent money to, needed a Halal loan to buy new machinery for his business.  He was facing difficulties because of a blot on his credit history that arose over a mobile phone contract several years ago.

When Tariq’s case was reviewed, a sharp intake of breath was followed by Dave’s Financial man – also called Dave – saying, “We can’t help every application that comes in.”

It seems that even Dave’s own team hadn’t entirely grasped his can-do attitude by then and, lo and behold, Dave did lend some of the money that Tariq required, Tariq repaid the loan and all was well.

So, that should be the end of credit scores and ratings histories yes?

No, not quite.

In his post, Joe Carstairs argues that:

“The reality is that we are still yet to emerge from one of the deepest recessions this country has ever seen, and many businesses and individuals will come out of it with a blot on their credit history.

Businesses that had one of their key customers go bust; individuals who lost their jobs. Unfortunately, bad things happen to good people and good businesses.”

I wholeheartedly agree.  I also agree that it was great that Dave could help Tariq out.  I also agree that credit scores need to be less rigid and less black and white…

But I also think it is important we don’t get carried away.  The global financial crisis that has brought the world to its knees began, in no small way, because of loans that were promoted to people who really couldn’t afford them.

There is a line between the unlucky person who’s hampered by a credit history they’ve overcome and the person who, for their own benefit, should not be taking on more debt.  Unfortunately, it’s a very fine line, and one that’s easy to get wrong.

So what’s the answer.

Well, in my opinion, it’s not to say goodbye to credit evaluation entirely.  Done properly, it is a very useful tool that not only helps to protects investors money but helps prevent small businesses leveraging themselves to dangerous levels.

Peer to business lending is based on everyday savers lending to everyday businesses – real people helping other real people, if you like.  But just because it’s connecting savers and borrowers it doesn’t mean those savers don’t want to get their money back.

In Burnley, they were lucky.  Dave can afford to underwrite his loans, and that’s great.  In most cases, though, investors are stumping up their own cash and – quite rightly – expecting a good rate of return on their investment.

We think that rigorous credit evaluation has a vital role to play in a successful lending economy. We think it should be academically sound and as up to date as possible and we think it should be regularly reviewed and updated to take the latest circumstances into account.

But we also, and this is really important, believe in flexibility.  The time for “the computer says no” is over.  These are real people, real businesses at stake and they deserve a real person to look at their case.

So whilst there is a lot to be said for efficient online processes, there’s room for a personal touch every now and then too.  It’s about combining the best of both worlds and it’s about the human side of business lending.

Bank of Dave… helping the seeds of change to take root in small business funding

minibus on an empty road

If the reading matter mentioned in our last post – Seeds of Change, the latest report into alternative funding for small business from the Centre for the Study of Financial Innovation – didn’t quite measure up to your idea of a good holiday read, here’s a slightly lighter, but no less relevant option…

One of the books I’ll be packing in my suitcase is Bank of Dave: How I Took on the Banks: The Story of One Man’s Heroic Attempt to Take on the Banks.  As its name suggests, it is the companion book to the recent Channel 4 documentary, Bank of Dave, in which we saw self-made Burnley millionaire, Dave Fishwick, do his best to take on the big boys and set up his very own bank.

The programmes certainly captured the public’s imagination.  Twitter was full of #BankofDave, highlighting huge swathes of support for this charismatic character prepared to take on the banks at their own game.

In the end, it’s perhaps that – I mean the public reaction – more than Dave himself that will stick in my mind.

Clearly, Dave has a heart of gold.  He loves Burnley and loves giving something back to the community he grew up in.  For the people it helps, locally, the Bank of Dave is a lifeline whose role cannot be underestimated.

When it comes to a national level, however, it’s less clear how these things can scale. Dave can lend to Tariq – the caterer with a poor credit history – because

  1. He had funds available to underwrite all of the loans made by Bank of Dave
  2. He could look at Tariq in the white’s of the eyes and make a decision about his ability to repay
  3. He had local insight into a local situation and that made it easier for him to “bend the rules”

When it comes to national solutions to the crisis of business finance, controls will inevitably need to be tighter.  After all, no-one wants more lending to people who can’t pay back their loans – that’s what got us into this mess – but if we learn one thing from Bank of Dave, it should be that the public are reading.. and waiting… for change.

The amount of enthusiasm for transparent, no-nonsense banking was immense.  The respect for someone willing to look beyond “the computer says no” credit scores was huge and the desperation for people – and brands – to come along and shake up business funding in the UK was palpable.

It’s time for change.  Dave has started a journey that it’s up to all of us to continue.  Peer to business lending is one way for everyone to get involved in helping their local community.  All it takes is enough borrowers and lenders and soon everyone will have the chance to put something back, while making a decent return.

So, this summer, be inspired by Dave, enjoy learning more about his life and business background in his book… but don’t forget the real message Dave had for us all.

Action is needed.  And action – and progress – begins at home.  It only takes a little step from everyone to change the world, start adding your voice to change today and sign up with FundingKnight for peer to business lending.  It’s a new way to lend and borrow money.

Photo – chosen in homage to Dave and his pimped up minibus tour