"Alternative finance, particularly peer-to-peer (P2P) property lending and crowdfunding, has emerged as widely popular, trusted and secure source of funding among finance brokers"
In a recent column, I explained why a solutions-focused lender is worth its weight in gold.
However, another hugely important figure in the property development process is that of development finance advisers and brokers who have long been an important part of the entire process to ensure the right lender is found for the right project. Data from IRESS suggests that up to 80% of all mortgages are now sold through brokers, and as development finance lenders at Blend Network we believe this figure is not enormously different in the development finance industry. The importance of development finance advisers and brokers comes from the fact that they hold the key to finding the the best deals from the right lenders.
As an alternative lender providing development finance and working with many development finance advisers and brokers in the industry, one interesting trend we have witnessed at Blend Netork in recent months is that advisers are increasingly turning to alternative lenders. Alternative finance, particularly peer-to-peer (P2P) property lending and crowdfunding, has emerged as widely popular, trusted and secure source of funding among finance brokers and financial advisers trying to secure the best development finance deals for their customers. Throughout the past year as the pandemic led to the 'lockdown on lending' at traditional lenders who were busy administering the Coronavirus Business Interruption Loan Scheme (CBILS), alternative lenders were often the only ones with an appetite for non-CBILS loans. This, of course, has helped build strong and long-lasting relationships between finance advisers and alternative lenders who have helped dynamically change the finance landscape.
Alternative lenders are flexible, nimble and agile organisations fuelled by data technology. They are young dynamic organizations filled with entrepreneur-minded doers and go-getters and offer higher flexibility and one-on-one customer relationships compared to traditional lenders. They offer a less automated approach to traditional due diligence processes, so there is no ‘computer said no’ for borrowers. Furthermore, due to their nimbler size and the lack of heavy legacy processes, alternative finance platforms and P2P lenders offer a smoother, faster and more tailored customer service. While traditional lenders are often slowed down by complex practices and multiple management layers, alternative lenders are able to offer faster decision-making due to shorter and more effective reporting lines. Their user-friendly fintech platforms, innovative loan options and streamlined approvals driven by data analytics has allowed alternative lenders to take advantage of technology to meet the underserved needs of finance advisers and their customers while changing the lending landscape. As the past decade has seen incumbent banks and traditional lenders pull back from lending to property developers, especially SME developers and small construction companies, the opportunity to penetrate the lending market allowed the fast ascent of fintech companies.
In 2019, a survey of over 500 medium sized UK businesses about their experiences when seeking external funding revealed a shift towards alternative finance for younger businesses. The survey showed that for businesses less than ten years old, only around a third approached their bank first when seeking funding compared to almost two-thirds for businesses established between 10 and 20 years ago. It also showed that younger businesses were much more likely to pick an alternative finance platform as their first-choice lender. And the SME Finance Survey 2020 revealed that awareness of who to approach for specific products is in line with 2019. In summary, we are witnessing how alternative lenders' ability to leverage technology and provide more efficient lending services to the underserved is allowing them to penetrate the market by building strong relationships with finance advisers looking to assist their customers with the best finance options.