BUSINESSES’ growing appetite for alternative finance has prompted peer-to-peer “sponsor” F&P to consider setting up its own platform to become a fully-fledged P2P lender.
The P2P advisory firm is mulling a platform launch in the summer, looking to offer retail, high net worth and hedge fund investors annual returns ranging between eight per cent and 12 per cent.
The new platform would focus on loans to small- and medium-sized enterprises (SMEs), small property developers and green energy projects, the firm told Peer-to-Peer Finance News.
If the plan takes shape, F&P, which currently carries out due diligence on SMEs looking for growth finance and sponsors them at lending partners such as ThinCats and MoneyThing, would become a double-structure business consisting of the lender-facing arm and the new borrower-facing platform under a separate brand name.
“In the industry we’re in, people don’t value the originators enough,” said the firm’s co-founder Ivor Freedman.
“So we figured if we wanted to get value in our business we would need to take this step.
“We now have the right deal flow and continue to see strong value in businesses that have been turned down for credit by traditional lenders.”
The proposed platform would build on F&P’s existing borrower base, which includes almost 300 companies.
F&P has arranged £100m of funding through other platforms so far, with every loan guaranteed by the borrower’s assets.
“Our reputation is on the line in every deal we arrange,” said Freedman.
In a recent funding venture for production company 3DD, it arranged 12 funding rounds secured against the firm’s film archives.
This allowed the borrower to increase gross profit margins by 10 per cent to 48 per cent, halving film editing time by bringing the process in house, and doubling its annual programme output to more than 70 hours.
“You can’t tell me that something that produces a regular income every year has no value in it – unfortunately many high-street lenders fail to recognise that value,” he said.
Freedman co-founded F&P in 2013 to provide management guidance and financial advice to businesses looking to scale up and with a track record of at least two years – thus excluding start-ups. Not wanting to take the leap into outright P2P lending without the appropriate technology in place, he found the right partnership in ThinCats’ sponsor-network model.
“We are big supporters of the sponsor model: it gives businesses the best of the old with the best of the new,” said Freedman, referring to the tight-knit relationship once built with local bank managers matched with the flexibility and technology of P2P lending.
To kick off a separate lending business, the firm would need to obtain authorisation from the Financial Conduct Authority.