Since the 2008 financial recession, the restrictions that mainstream financial institutions are putting on their loans and their potential successful applicants are growing. As a result, property developers are searching for alternative funding options, which has led to a growth in peer-to-peer lending and crowdfunding options, such as bridging loan finance.
The recession left an ideal macroeconomic environment for yield-seeking lenders to push their way into the industry as a result of low-interest rates, which led to a boom in peer-to-peer lending. To find out more, read on.
Peer-To-Peer Lending Growth
Since 2005, the P2P lending market has grown to a whopping £9.6bn, and since 2010 the market has grown cumulatively with the growth of over 7000%. In fact, in the first quarter of 2017, over £1bn was lent. With P2P lenders being able to also capitalise on innovative proprietary FinTech, consumer preference is working in their favour, helping to further drive growth in the market.
Examples Of P2P Lending In Property Development
A key example of property development engaging with P2P lenders, is Kersfield, who took out Britain’s largest property P2P loan, totalling £10.8m. These funds were then used to convert a mansion in Bristol into apartments and financed additional homes alongside this renovation.
As a result of P2P lending being quicker to obtain, as well as more flexibility and often with better commercial terms, property developers have begun to turn to this form of funding.
Benefits Of Crowdfunding & P2P Lending
Technology is at the core of innovative lending solutions and with mobile use thriving, the demand for easy-to-access and fast financial solutions is bigger than ever. P2P lending, as well as crowd-funding solutions, are disrupting the lending sector in a similar manner to how Airbnb disrupted traditional hotels and Uber disrupted the taxi market. Since the boom in this market across all elements of finance and property development, there has been a new wave of partnerships with the likes of Revolut pushing lenders towards P2P platforms.
One of the key reasons for property developers turning to crowdfunding is the housing crisis. With falling home ownership and rising rents, crowdfunding offers the opportunity to build more homes and develop substantial levels of projected returns.
Crowdfunding and other P2P lending opportunities also help to diversify the opportunities property developers can acquire due to the opportunity to procure high levels of funding free from strict regulations. Minimum investment amount can also be reduced, as well as investment risk being mitigated as independent reviews of each opportunity can be carried out as part of the process.
Accessibility, transparency and diversification are the three key benefits of opting for crowd-funding.
P2P lending and crowd-funding are helping the property development sector to grow substantially, as a result of new lending opportunities being made available, quickly and efficiently, in a much more convenient manner than traditional financial institutions.