Rothschild backs peer to peer lending as new meets old

old leaf on new grass

Following Friday’s news that peer to peer lending, including peer to business lending  is set to be regulated by the FCA (the regulator about to replace the FSA), the industry has received a further boost with news that RIT Capital Partners, Lord Rothschild’s London-listed investment trust has invested in Zopa, the UK’s first peer to peer lender who started the alternative finance wheels in motion back in 2005.

It’s a move which will inevitably prompt a whole host of “old meets new” clichés as one of the most famous bastion’s of banking joins forces with a disruptive player on the alternative finance circuit.

Speaking to the Financial Times, Lord Rothschild said,

“We are witnessing the growth of the non-banking lending market.  Following the 2008 crisis many of the banks remain under capitalised.  In these circumstances alternative forms of credit will be developed on a significant scale.  This is happening.”

UK peer to peer lending enthusiasts will no doubt watch to see whether the involvement of such an internationally renowned name does for Zopa what the arrival of John Mack did for Lending Club.

Lending Club have now processed over $1bn of loans in the US and their success has often be credited, in part, to the fact that they managed to engage the support of a recognised industry chief who could bring Lending Club the gravitas it needed to go mainstream.

Although Lord Rothschild left his family bank three decades ago, his name remains synonymous with what was once the globe’s most impressive banking group.  The decision of RIT Capital Partners to invest in Zopa will surely be seen as a rubberstamp for an industry which is rapidly growing from a small stream of niche financing into a genuine alternative to mainstream banking.

FSA to regulate peer to peer lending: Crowdlending gets a boost

FSA

...and we were already talking to the FSA 

The government has announced that it plans to regulate peer to peer (P2P) Lending.

The P2P Finance Association welcomed the news, saying:

“The Peer-to-Peer Finance Association has provided clarity and protection for consumers and businesses, but we have always strongly believed that introducing proportionate regulation was necessary to enable the sector to continue to flourish. “

Well, we’ve always been convinced of that here at FundingKnight, too.

That’s why our CEO, Graeme Marshall, explained months ago why peer to peer lending is an industry that wants to be regulated, but we also took some more concrete action…

 

FundingKnight has been talking to the FSA for several months and is well advanced with its application to become FSA regulated for those parts of its activity that fall within the FSA’s regime.

Rather than simply campaign for regulation, FundingKnight took the view that some of P2Ps current processes already fell within the regulatory regime and applied on that basis.  We hope to be the first regulated P2P Lender

FundingKnight CEO, Graeme Marshall, commented:

“FundingKnight welcomes the prospect of regulation of crowdlending / peer to business lending.  It may be that the news this week relates more to pure peer to peer lending and the extraordinary rates that are being charged to some individual borrowers but, regardless, some clarification and rules would be welcome.

Whereas FundingKnight believes that although matching lenders with business borrowers does not in itself fall to be regulated under the current rules, there are many peripheral activities that are less clear and so Government clarification and regulation would be welcomed.  This will also assist with the setting of standards for this new and exciting activity.  FundingKnight is seeking authorization for those of its activities that are covered by the Financial Services Authority.

FundingKnight has a team well experienced in financial markets who collectively believe that regulation of this industry will help crowdlending to become recognized as a new model for lenders and borrowers to be matched, using the power of an online marketplace.  We look forward to participating fully in discussions with the FSA and Treasury concerning forthcoming regulation.”

Whilst we’re not claiming that our discussions with the FSA prompted the Treasury’s response, we’re glad to see that the move towards regulation is now gaining momentum.

An introduction to peer to business lending – part 1

introducing...

FundingKnight is delighted to be spreading the crowdlending message over at Smart Accountancy Systems blog this week.

Peer to business lending (P2B), also known as crowdlending, crowdfunding or peer to peer lending is a relatively new way for businesses to access funding and business loans.

Put simply, a business applies to borrow some money via a P2B website or online marketplace.  Their application is credit checked and analysed and, if successful, offered up to the general public using a P2B Lending platform to share details of the loans on offer.

Everyday savers and investors bid to participate in loans, each contributing as much or as little as they choose, so that one business loan is made up of lots and lots of little loans from individual savers.

Businesses benefit from a new source of business finance and savers get a chance to make their money work harder.

So how exactly does peer to business lending work?  Where did it start and what are the key things to be aware of?

Continue reading the full post at Smart Accountancy Systems.

Do you want to be in our gang? Join Crowdlending UK, our new LinkedIn group

Crowd listening to someone

If it’s your love of crowdlending or all things alternative finance that brings you to the FundingKnight blog you might well be interested in our new LinkedIn group, Crowdlending UK.

It’s still very early days – in fact, it only sprang into existence yesterday – but we’re excited to have a new way of sharing content and generally prompting discussion about crowdlending and peer to peer lending.

The group won’t be another avenue for FundingKnight self-promotion but rather aim to share genuinely interesting content about the industry.  If you head over now, you can even be one of the first to vote in our “what type of content do you want” poll and, if you’re a new finance pioneer and want to get involved by sharing some content feel free to leave us a comment below or send a message via LinkedIn.

After all, crowdlending is all about the crowd – so let’s get sharing some thoughts…

And don’t forget to head over to LinkedIn and  join Crowdlending UK

We like…Muddy Carrot

What would the world be like if we invested 50% of our assets within 50 miles of where we live?

It’s an interesting thought brought to our attention by Slow Money, a US based movement acting on and exploring a vision that, to quote, is;

“bringing people together around a new conversation about money that is too fast, about finance that is disconnected from people and place, about how we can begin fixing our economy from the ground up… starting with food.”

The ideals, vision and ethics Slow Money are creating and living by can only bring positive and empowering results to the communities involved. It’s exciting stuff and has been inspiring us at Funding Knight to look for similar UK models and likeminded businesses as we continue our series of profiling ethical company models we admire.

Which brings us to Muddy Carrot, an online farmers market. It is a fabulous and relatively new enterprise. The company, based in Dorset, sells everything you might find at your local farmers market, but through a one-stop shop website where you can pick up your purchases from individual sellers or get them delivered directly to your door. Customers are able to buy countless different locally produced products varying from crafty kits to local preserves, meats, cheeses, toiletries and even, yep that’s right, livestock.

Muddy Carrot’s creators say;

“Having spent many years attending markets, both local and national, we were aware of the rich range of beautiful, carefully handmade things that were hidden away down country lanes only to appear at occasional events.

We realised there was a need to bring all these hidden gems together in one up-to-the-minute and convenient marketplace showcasing businesses that have a genuine ethical heart.   Everything beautifully produced, either from their local soil or upcycled.  A combination of a farmers’ market and village fair full of gorgeous things you couldn’t find anywhere else.”

It’s a fantastic concept echoing the Slow Money vision.  We at Funding Knight like their style for the following reasons: 1) They represent a whole community of local makers, growers and farmers in one central, globally accessible location 2) It aids the growth of local businesses 3) It provides customers with high quality, locally sourced products 4) And last but not least, its principles are ethically sound and sustainable.

Now just when you think it couldn’t get any better, this is where Muddy Carrot stands out from the crowd. The site not only provides a platform for products created by their local community, it wants to grow its local community, too by providing up to date listings and information on local events, groups and holiday opportunities.

A local map on the Muddy Carrot site allows purchasers to see exactly where their food and products have come from, helping customers to keep it local, make a positive change and, ideally, plough assets back into our local community.

So, why not check out their website.  You can support your town and best of all, shout about it to other likeminded people?

We like… West Country Radio

One of the reasons we set up our crowdlending business was to provide a way for people to invest in the things that are important to them. You see a business model you like, an ethical standpoint you admire or simply a gap in the market and then invest into a company that fits with your beliefs. You have the power to make good things happen.

As we build up our business we hope to make that dream a reality but in the meantime, we’re keen to help local causes in whatever way we can.

Over the next few weeks, we’ll be looking at business models we admire, want to be involved in or just think are worth sharing. We’ll also follow progress as these companies grow, taking our readers, lenders and investors on a virtual journey.

First out the bag is West Country Radio. Just launched on 13 August 2012, their business is a not-for-profit radio station aimed at promoting the south-west, increasing tourism and promoting businesses, resorts and events. It is a local business aimed at improving the lives of local people.

Its uniqueness comes in the form of how the radio station is broadcast. All presenters broadcast from home studios, transmitting their shows live and pre-recorded. This of course reduces costs enormously and allows money acquired by the station to be used on other things such as marketing and promotion.

What’s more, the station is completely run and produced by volunteers, minimising costs and providing fantastic volunteer opportunities, internships and training for people keen to get involved and learn about how a radio station works.

Opportunities like these are incredibly valuable for a local community and are applicable to all ages, from young people looking to gain experience for the future through to retired volunteers looking to give something back in their spare time.

Whilst relying on volunteers and therefore reducing overheads considerably, West Country Radio are also looking for funders, advertisers and sponsors to aid and increase capacity and grow the station’s listenership. The hyper-local nature of the station means that local businesses and events would benefit enormously from getting involved in the station whilst also helping out in the early stages of growth and helping to benefit the local area.

Local ventures such as West Country Radio are exactly what Funding Knight want to promote. Sometimes, we’ll help by providing business finance via our crowdlending model, and when that’s not viable we’ll help spread the word about local people committed to helping local people. We believe life is about more than just business, it’s about getting back to the roots of community and the warm fuzzy glow you can get as a result.

Business funding: The green shoots of growth are there but business loans must improve

green shoot on black and white background

Business funding – just what is the issue limiting funding for business in the UK?  Do banks not want to lend? Or, do businesses not want to borrow?  That’s the long running debate that’s run and run throughout the British media, but, whatever the case might have been, new research by Experian shows there are plenty of business investment opportunities now.

 

Despite ongoing economic difficulties, British small businesses continue to demonstrate high levels of growth and present ripe opportunities for sound business loans. That is, at least, according to the latest research carried out by Experian for the Business Growth Fund (BGF).

The survey found that there are currently 4,000 mid-sized businesses in the UK who can boast turnovers of between £2.5m and 3100m and who have grown by at least 33 per cent in the last three years.

Investing in one of these 4,000 small businesses via a small business loan would surely represent a sound business investment, as well as helping to get the British economy back on track, but there’s a whole raft of opportunities beyond that.

These 4,000 are merely the independent businesses classified by the report as ‘high growth’. In all, there are 25,533 UK companies with turnovers of £2.5m – £100m and whilst not all of them are positioned for expansion, many are established businesses with a clear route to exploit additional business funding.

Stephen Welton, CEO of BGF, commented:

“This data highlights that despite challenging market conditions, there is a steady base of UK (small businesses) and fast growing UK companies that continue to thrive across the UK and that operate in diverse industry sectors.  It demonstrates the resilience of the group and the underlying quality of UK entrepreneurship.  This is good news for the overall UK economy as these companies play a significant role in job creation and innovation and are a critical part of the economic recovery. “

It is Welton’s job to use the Business Growth Fund to assist some of these companies but it’s becoming increasingly clear that private sector help is required.

The banks are unable to meet the needs of UK businesses and government funding initiatives are, at best, a drop in the ocean.  We were glad to hear that David Cameron has asked the Chancellor what more can be done to support British business and welcome his promise to do “even more” to promote growth.

Perhaps regulating peer to peer lending should feature on the to-do list.  FundingKnight would definitely support that cause.

Photo used under creative commons license

P2P Lending and why FundingKnight aims to stand out from the crowd

blue arrow standing out from the crowd of black and white arrows

As media coverage of the peer to peer lending industry grows and a lack of business funding continues to stifle British small businesses, FundingKnight CEO, Graeme Marshall, explains why FundingKnight offers something quite different from crowdfunding.

 

I doubt I’m the only one watching with interest as the media shine a spotlight on the growing industry in alternative finance.  In little more than a week we’ve had Wonga’s entry at the less competitive end of small business loans and then Crowdcube, a website which allows people to buy shares in start-ups, being accused of misleading potential investors with the way they advertise fundraising companies.

As another new entrant to the world of alternative finance, these developments have shown me the importance of being clear about FundingKnight’s objectives, what we are – and are not – when it comes to business funding.  So, here are four things that set us – and peer to peer lending – apart from the crowd.

1. We want to lend to well established, proven businesses which have been trading for at least two years.  We recognise the importance of start-ups and entrepreneurial zeal, but our goal is to maximise returns for our lenders and that means only selecting the very best UK businesses to lend to.

2.  We provide debt financing – through small business loans – rather than equity funding.  Our lenders don’t take a stake in the businesses they invest in, in fact, they’re encouraged to spread any investment over a wide selection of businesses where possible to minimise the risk of placing ‘all their eggs in one basket’ or ‘concentration risk’ as it’s known to the trade.

3. Whereas crowdfunders talk of the ‘newfangled’ we like to focus on the tried and tested.  Our approach is traditional cash flow lending, helping to support well established businesses manage their funds more efficiently.

4.  Where others might revel in ‘bank bashing’ we know that a healthy banking system is in everybody’s interest.  We’d like to bring back certain elements of ‘traditional banking’ that we think have been lost along the way.  We’ve built the FundingKnight team using years of industry experience because we want to capture some of the sense of trust and community that big banks have recently struggled to offer.

Finally, we think it’s time to forget zero sum games.  We don’t think that everything needs to be good for one person, bad for another.  There’s a growing sense of collaboration sweeping many aspects of society, a sense of mutual reward and shared objectives.

We think it’s high time that the ‘what’s good for you is good for me’ mentality hit financial services and we’re convinced that FundingKnight has a bright future ahead making that happen.  If you agree why not subscribe to the FundingKnight blog or head over to www.fundingknight.com to find out more about the higher interest rates we can offer lenders or the competitive, flexible terms we apply to our small business loans.

Photo used under creative commons license