Three reasons why property investors are turning to alternative lenders to get funding

Fast forward a decade, P2P lending has emerged as widely popular sources of funding among brokers and advisers trying to secure the best deal for their customers. Attracted by the flexibility and easiness of borrowing through alternative finance platforms, P2P property lenders have been placed on speed dial by finance experts eager to help their customers secure funding at a time when Covid-19 has made getting funding more difficult. Last year, 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. At Blend Network, we see a similar appetite for alternative finance – our team reviews north of £100m loan requests per month. So, why are property investors turning to alternative lenders?

Greater flexibility

First, alternative finance platforms and P2P lenders offer higher flexibility and one-on-one customer relationships compared to traditional lenders. Why? Alternative lenders are young dynamic organizations filled with entrepreneur-minded doers and go-getters who, in many aspects, are trying to do the same thing as their borrowers are: build a sound business. For example, at Blend Network while operating within the FCA’s highly regulated framework, using some of the best Legal500 lawyers and award-winning quantity surveyors, our lending managers are able to speak directly with borrowers to ‘get things done’.

No ‘computer said no’

Second, alternative finance platforms and P2P lenders offer a less automated approach to traditional due diligence processes, so there is ‘computer said no’ for borrowers. This is because while the industry is highly regulated by the FCA, these firms are happy to think outside the box as long as the deal makes sense. For example, at Blend Network our lending managers are former or current property developers and investors, so instead of approaching the due diligence process from a ‘spreadsheet’ mindset, they approach it from a property entrepreneur’s mindset, and therefore can understand, assess and price the risk accordingly. In other words, lending managers are able to speak the property entrepreneur’s language.

One-on-one customer service

Third, 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. For example, at Blend Network there is no separation between origination and underwriting and all lending managers are decision-makers. Such efficiencies are key, specially in property where time is money and delays can make or break a deal.

In summary, alternative finance and P2P property lending has seen an unprecedented growth over the past decade with brokers and advisers now turning to them as their first choice of funding for their customers. The reasons are easy to understand and there is no question in my mind that we will witness this trend accelerate over the next few years.