P2P lenders see opportunity in acquisition financing

The reluctance of traditional banks to lend to small and medium-sized businesses creates an opportunity for peer-to-peer lenders to fill a gap, particularly in acquisition financing.

For Nicola Horlick, chief executive of Money & Co, there is an opportunity for the firm to provide funding for management buyouts, mergers and acquisitions. However, she added that the firm needs proper security to be able to facilitate financing for such endeavours, which limits opportunities.

Read more: Money&Co eyes bank licence but P2P platform will continue

This could be a way to boost business in her opinion, as life has become more difficult for P2P lenders following the pandemic. All the strongest small- and medium-sized businesses have taken out government-backed loans under Covid-19 schemes and are not looking to borrow, she said, which means less business for P2P lenders.

Previously Charlotte Marsh, managing director of ArchOver, also said that the group has been seeing an increase in enquiries relating to management buyouts and acquisitions.

Read more: P2P business lending: Entering into a ‘new normal’

In contrast to Horlick, Ben Shaw, chief executive of HNW Lending, said he doesn’t see it as a particularly tough environment at the moment.

With most of the government-backed schemes now shut, he is still seeing demand for loans, while he added that the type of borrowers that came to HNW Lending generally were not eligible for the Covid-19 loans.

“There is plenty of opportunity for P2P lenders in this market – at least at HNW, we are quicker and more nimble than banks,” he told Peer2Peer Finance News. “We don’t say ‘no’ just because someone has a county court judgment or other chequered credit history in their past. We try to look past this to whether the funding requirement stacks up on its own merits and whether there are assets available that can support repayment of the loan if the borrower was to default.”

He also highlighted the importance of thinking outside the box and look beyond property to more exotic assets such as valuable cars, art or holiday homes.

“If you have a mentality that the loan looks good then you will try your utmost to get the loan completed – that’s what we try to do and that’s why we continue to do well and source good loans for our lenders,” he added.

Read more: Government lending schemes: Hey big spender