Here are the trends we expect to see in the specialist lending market next year
By Yann Murciano -
Having emerged just over ten years ago on the aftermath of the global financial crisis, specialist lending has come a long way and is playing a significant role in the mainstream financial ecosystem.
Yann Murciano, CEO at P2P lending platform Blend Network, looks at the three trends we are expected to see in the specialist lending market next year.
Attempting to predict any trends is always hard enough, let alone at the end of a year that saw a black-swan event hit the world in a manner very few, if anyone at all, would have predicted.
However, I believe what’s helpful is thinking about the trends we are likely to see – or we would like to see –by allowing us to steer our business in the right direction for the year to come.
So, as we come to the end of a challenging year that also presented many great opportunities to grow our businesses, I would like to pause and take a few minutes to reflect on the three trends we are expected to see in the alternative lending market in the year that starts now.
First, we expect to see a closer collaboration between traditional lenders and alternative lenders under the HMRC’s Bank Referral Scheme (BRS).
Launched in 2017 with the aim of promoting increased collaboration between traditional banks and alternative finance providers, the BRS was designed to help businesses who have been unsuccessful with the major banks find finance through alternative lenders.
However, the BRS has achieved mixed results so far. Between November 2016 and June 2019 (the last date for which data is available), nearly 30,000 small businesses rejected for finance from one of the big banks were referred under the scheme.
However, only 1,700 businesses went on to secure funding to get their start-up going. The Covid19 pandemic provided an opportunity for alternative lenders to show their worth and given the success of alternative lenders in channeling funding to small businesses and SMEs this year, we believe that the collaboration between them and traditional lenders is likely to strengthen over the next few years, starting with next year.
Second, we expect to see an increasing number of institutional lenders allocate funding lines to alternative lenders and peer-to-peer (P2P) property lending platforms to deploy funds through alternative lending platforms.
This is a trend we already started to see in the months that followed the initial lockdown, which was also seen across the industry.
Back in May, an article in Bloomberg described how ultra-rich families with cash on hand had started to pile into private debt and use peer-to-peer (P2P) property lending platform to source their deals.
According to what we have seen at Blend Network, this trend consisting of more institutional lenders, accelerated through the year even as the volatility in the equity markets witnessed at the start of the year reverted back to more normal levels in H2.
Third, we expect the alternative lending market to continue to grow strongly in 2021. This is a trend also suggested by the Global Alternative Finance Benchmarking Report published by the Cambridge Centre for Alternative Finance in April 2020.
This report shows that the UK market remains the main contributor to the European alternative finance volume.
In summary, alternative finance and P2P property lending has seen an unprecedented growth over the past decade with finance broker or financial advisor 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.
Yann Murciano is CEO at development finance and bridging lender Blend Network.