Business owners borrowing from family via Rebuildingsociety platform
Rebuildingsociety has seen an uptake in the number of self-employed business owners using its platform to borrow money from family and friends.
Daniel Rajkumar, founder and managing director of the peer-to-peer business lender, said that small business owners use his platform as the third party that arranges the loan for them, holds security and oversees the transaction.
As well as offering the loan conditions, the platform enforces the loan on behalf of the investors. And borrowers can use the platform’s ISA so interest repayments to family members or friends are tax free.
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Rajkumar said this service is proving popular with around 25 customers using it.
“This is a good role for a platform to play in the current climate,” he said.
“We’re getting more people sign up to use this service during this time.
“During difficult times many businesses will turn to friends and family to support their funding needs.
“In a volatile stock market with base rates now at 0.1 per cent retail investors have fewer options.
“The best managed businesses will get through a recession and those businesses who are able to localise their funding needs are better placed to accelerate their growth when the recovery comes.”
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Rajkumar said that Rebuildingsociety sets up automatic direct debit payments and chases for the repayments.
“If the business is in difficulty, we go to the lender, which could be the parents of the firm’s owner and we make it easy to restructure, negotiate or cancel,” he said.
“We take 13.33 per cent of the interest.”
Rajkumar said that the Covid-19 pandemic means the economy will not return back to normal for at least six months and in the meantime, it will face testing times.
“Effectively a lot of small businesses will go out of business,” he said.
“We’re reviewing our loanbook, speaking to borrowers and pivoting what we’re doing.
“We have reasonably manageable overheads and a reasonable level of ongoing business that goes through our accounts so I’m hoping we’re more resilient than most.
“It might be interesting to see whether there will be mergers and acquisitions in the sector, although the due diligence would be difficult.”