Peer-To-Peer Commercial Lending
There are numerous financial institutions that provide commercial mortgages whether the funds are required to buy or renovate a business premises or for some other purpose such as to purchase plant and machinery. One source of such finance that has been growing in popularity in recent years is peer-to-peer lending.
Peer-to-peer lending comes in various formats but typically involves a peer-to-peer lending company offering an Internet based platform that brings together borrowers and lenders. For instance, if your business were looking to borrow a sum of money repayable over a number of years say to purchase new business premises then you could submit your request on a peer-to-peer lending platform providing similar information that you would do to the likes of a bank such as audited accounts and cash flow forecast.
This information would be made available to prospective lenders who could be private or commercial investors who are looking to obtain a greater return on their investment than they would typically expect to get on a savings account.
There are various types of peer-to-peer lending schemes available but, as an example, let’s assume that the borrower requires a commercial loan of £50,000 repayable over 5 years at a variable interest rate. The borrower sets an interest rate that they are prepared to pay lenders and each potential investor can then bid to provide a certain sum of money at a specific rate. For instance, there could be say 50 lenders each prepared to invest £1,000. Some lenders may be particularly attracted to the lending proposition and in order to outbid other potential investors may be willing to invest at a lower rate of interest than what the borrower had been prepared to pay. This could, for instance, be the case should there be so many lenders that the total amount collectively offered exceeds the amount required. That is obviously good news from the borrower’s point of view as this would result in the average rate they pay being lower than what they had originally been prepared to pay. If there was not enough interest in the proposition resulting in not enough money being offered by lenders to reach the amount of the loan required then the transaction may not progress any further. Security would usually be required by the investor to protect their investment.
We hope that the above has been of benefit and should you wish to discuss a commercial mortgage proposition why not get in touch with us and we can arrange for a specialist to speak with you.