Why Trust Will Make Peer-to-Business Lending a Success

Innovations are often met with a great deal of scepticism and rightly so. There are enough examples of when the next big thing falls flat on its face to make everyone query whether something is too good to be true. Peer-to-business lending doesn’t fall into this category though, and in this blog I’ll explain why.

Julian Wells, marketing adviser and head of introducer channel, rebuildingsociety.com

In an age where marketing is everything and we’re constantly told how amazing products or services are, it’s only natural that crowdfunding, or peer-to-business lending as we call it at rebuildingsociety.com, is being looked at closely. This is a sector that is comfortable under the microscope, however, because what sets it apart is the reality that everyone is getting a good deal, there really are no losers as it stands.

Look at the facts. If you can lend money at over five per cent these days you’ve already got a better return than you get through savings. If you’re borrowing money, for many businesses anything at all is good, but especially when you can get loans from six per cent and above, that is an excellent deal. There’s capital in the business with no equity to give away in return.

Furthermore, the lending facilitators don’t need to take huge margins, very often they are technology companies playing a volume-based strategy that allows for the vast majority of the capital to flow freely from investor to borrower. It also means there is sufficient capacity to remunerate advisers who refer businesses. Perhaps the key to the long term success of this type of funding is trust.

There will be bad debts and businesses will fail – but we’re in an environment where those behind crowdfunding in the UK have seen the terrible press banks are dealing with and know that the industry’s reputation is its most important commodity. Reputation cannot be compromised with unsuitable investments, so not every business can be listed.

However, if those that are listed pay back their loans on time, the reputation the market already has for quick deals at relatively low interest will only rise and everyone involved will continue to benefit from its low margins.

Rebuildingsociety.com will be at the Mortgage Business Expo (London) on 14 and 15 November on stand F20.

This post was originally created for www.bestadvice.net, published 11 November 2012

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