There was a time when all commercial property lending was almost exclusively in the hands of banks, large insurance companies and pension funds, and they made good secure returns quietly lending their investors’ money to borrowers.
How times have changed. Since technology got more sophisticated and a lot cheaper, new lending business models emerged in the form of Peer to Peer (P2P) lenders. This new breed of ‘marketplace lenders’ is now a force to be reckoned with and in the UK alone the P2P market has grown massively since the first platform launched in 2005. In fact approximately £5bn has been lent since then.
The UK government sees P2P as an important alternative source of funding for SMEs and personal finance. Following the financial crisis of 2008, these new lenders have started to take real market shares away from the banks. The government sees marketplace lenders providing funding for housebuilders all over the country, helping to alleviate the housing crisis. In personal finance, people have reduced their cost of borrowing by moving away from credit card debt to P2P lending.
The government has given further legitimacy to the P2P sector through Financial Conduct Authority regulation. And Innovative Finance ISAs are now live and allow investment into P2P platform loans with tax-free income.
The Relendex proposition is a simple one. Since 2013, we have provided funding for commercial real estate through our P2P platform. We bring Commercial property lending used to be the preserve of institutions. Now, personal investors can enjoy these returns too, explains Michael Lynn, founder and CEO at Relendex How P2P gave power to the people together many lenders; individuals, corporations and some small institutions. Using the latest technology with great functionality, we bring high-quality borrowers the funding they need at a fair price. Unlike the old days, most of the borrower rate is passed to lenders. Our lenders get the lion’s share of the interest, usually between 7 and 10 per cent -a-year.
Loans to Value are sensible averaging less than 60 per cent and our underwriting processes are robust and run by a highly experienced team with decades of lending experience. We always ask for an independent professional valuation from a recognised firm. Loans are almost always secured by a First Charge mortgage over the property and we often take additional collateral.
So what do we finance?
Investment property, development and bridging. We lend against retail, residential, industrial and leisure assets.
Diversify risk
Your capital is at risk and loans are not deposits. We recommend that lenders diversify their risk by creating a portfolio of Loan Parts in different loans offered through the platform.
Reporting
State-of-the-art technology gives lenders all the reporting they need, with details of their portfolio, interest and purchases and sales of Loan Parts. A lender’s up-to-date position is shown on the Lender Dashboard.
Secondary market
There is also an active secondary market in Loan Parts that allows lenders to sell their Loan Parts on a matched-bargain basis. So a lender can initially participate in an 18-month loan and decide after six months that they want to sell their Loan Part.You can either draw down the interest you earn on your loans or simply reinvest it in other loans and keep building your portfolio.
