What’s the reaction of finance providers to the introduction of regulation for peer-to-peer lenders? James Meekings, co-founder of Funding Circle says it is overwhelmingly positive and explains why.
Last month, the Financial Conduct Authority published their consultation document for the regulation of peer-to-peer lending.
Perhaps unusually for the financial services industry, it was met with great enthusiasm by peer-to-peer lenders across the board. That’s because when the FCA announced they were planning to regulate the industry at the end of last year, it truly was a watershed moment in the world of finance. There is no doubt that it will help to boost awareness and the credibility of a sector which is already trebling every year.
Non-bank finance has exploded in the last three years.
Since launching in 2010, Funding Circle has allowed individuals and organisations to bypass the banks and lend directly to small businesses up and down the country, through our online platform.
By cutting out the red tape and bureaucracy associated with traditional bank loans, businesses are able to access finance more quickly and at times to suit them.
Since 2005, the peer-to-peer lending industry has facilitated over £600million of loans. Over £170million has been lent through us in the last three years alone.
Manufacturing firms have particularly felt the benefits of this faster and more accessible finance.
It is one of our largest sectors and we have lent over £26million to manufacturing businesses up and down the country. We know that the success of these businesses is absolutely crucial to the health of the economy and the UK’s competitiveness in the global race.
Only last week the business secretary, Vince Cable, and I visited Ambic, a manufacturer and fitter of furniture for schools and universities, based in Chester-le-street, County Durham.
This year they borrowed £100,000 to grow the business and improve the website. As is the case with many small businesses, Ambic sees seasonal peaks and needed capital to cater for this. We talked at length about the need for more manufacturing businesses across the country to access finance quickly, in order to expand and grow.
Many busy business owners don’t have time to go to endless face-to-face meetings during working hours. Alternative finance providers are more able and willing to accommodate this preoccupation than traditional banks and this is a major factor in the increasing popularity of lenders like Funding Circle – currently 50% of all of our initial loan applications are completed outside of bank working hours.
Speed is also of the essence. Our credit assessment team will deliver a decision to applicants within 48 hours, and the funds typically reach the business within two weeks of the initial application.
A recent report by Government think tank, Nesta, predicted that the peer-to-peer industry could be worth over £12billion per year.
The introduction of regulation is the first step to ensuring this is achieved.
There are thousands of businesses across the country who deserve access to finance and I believe regulation will cement the place of non-bank finance in the wider financial services ecosystem.
