Sourced Capital founder and managing director Stephen Moss talks to Marc Shoffman about how has managed to recruit staff and build a successful pipeline of development opportunities despite the challenges of the pandemic
Sourced Capital founder Stephen Moss built a name for himself after launching Legal for Landlords in 2008, which offered products such as tenant agreements and referencing.
It expanded by enabling others to sell the legal services as franchisees across the country and now Moss is bringing that model to peer-to-peer property lending.
Sourced Capital is a P2P property lender that sits within a wider group that sells off-plan developments, finds development opportunities and funds care home properties.
It has 150 franchisees who use the brand name to help originate development opportunities that can then be funded by P2P investors who can target returns of up to 12 per cent, with investments eligible to be held in an Innovative Finance ISA.
Sourced Capital completed its first full year of trading in 2020, funding £10m of opportunities despite a global pandemic and lockdowns.
Marc Shoffman: Has P2P lending become overcrowded?
Stephen Moss: Technology and property have always excited me and I have always thought P2P lending would be a game changer.
I have been in the property sector for 20 years and had a chain of estate agencies and development properties.
There are lots of different lenders coming to the market with different twists.
This year we will see a growth in current lenders, consolidation and some transforming into banks.
A lot of the smaller players are struggling.
It is difficult to operate if you only work as a lending platform. You have a better chance if it is combined with something else.
We are fortunate that Sourced has other aspects.
There is a development arm that we would like to grow and we have started operating in the care sector.
P2P lending is a big focus on our business. Our franchisees spend their days finding development opportunities to be funded.
We want more than 300 franchisees and would like to hit £20m of lending this year.
MS: How did you cope through the first lockdown?
SM: The pandemic was a big shock. We started in 2020 with a million and one great ideas of what we can do and how we can do it.
We had hit £1m in the first month but then it all stopped in March.
It affected us from a capital point of view but we looked at it positively as an opportunity to take stock and look at our systems and processes and what training we could add to the team.
The lockdown became an opportunity to make sure all our processes were correct and to add new benefits to the platform.
There were three months where we didn’t lend anything but we have come back at a reasonable pace and now have a healthy pipeline.
One of the challenges is recruiting.
You can’t carry out face-to-face interviews in a pandemic but we still managed to recruit three extra members of staff and now have 11 working in our P2P lending team.
Luckily, we were not the same position as other platforms as we didn’t have a large loanbook so there were no issues of large withdrawals.
It has made it easier to manage everything in a more sensible way.
MS: How have the new year lockdown restrictions affected you?
SM: We came into the beginning of the year thinking we could hit the ground running.
It was helpful that we had already introduced tech such as Zoom and remote logins but it does make it harder to train people and induct new staff members.
We think we are in a relatively more stable situation as our loans are long-term and are just at the start.
The stamp duty holiday is having a positive effect on the market
There has been a huge rush of people buying properties and we are expecting that to dip if the holiday isn’t extended after the end of March.
The end of the stamp duty holiday could also have a positive effect though, as a reduction in prices could create buying opportunities.
A lot will also depend on how and when lockdown restrictions are eased.
MS: What is your lending criteria?
SM: We will look at the location as well as how much experience the developer has got and their level of deposit.
Our maximum loan-to-value is 70 per cent.
One of the struggles last year was getting materials. Our experienced developers didn’t have these issues as they had suppliers giving them resources quicker but newer developers found this takes more time.
We will also look at the exit strategy. Will a property be sold or rented out?
We have developments all over the UK.
The North is easier as it is cheaper and London is its own market, but every area comes with its own challenges.
MS: What is your focus for 2021?
SM: We are aiming for £20m of lending and plan to launch an auto-invest product in the middle of this year.
This is based on demand from current investors.
People like the functionally of it but it does come with extra compliance and management issues that we are well placed for.
MS: You called for ISA season to be delayed amid the pandemic last year, would you still like to see that happen?
SM: I don’t think a delay is needed as much this year.
There is life at the end of tunnel with the vaccine rollout.
ISA season could potentially be two seasons in one go as people have had time to reflect and look at their investments since last March.
Ultimately people have a better grip and know the vaccine is coming so that will be some comfort.
We think ISA season will be busy.