Peer-to-Peer or (P2P) lending is at its most competitive when financing development projects with the largest loan provided to date of £4.1 million.
Key advantages held currently by Peer-to-Peer lending are:
- Speed – with draw downs possible in 6 weeks rather than months by high street commercial lenders
- Stage payments in advance of the work required eg you get the money upfront to pay for the stage work not after the work is finished. This massively improves cash flow
- Cost with annual rates from 7% up to 9% with no costly exit fees
- Much more flexible than traditional banks to whom and on what they will lend on
- Up to 70% LTV on the Purchase price with a further 60% on costs and interest rolled up
This is a growing market with such low interest paid on traditional deposit accounts investors are chasing greater returns. Peer-to-Peer has become a more attractive investment with an estimated £3.1 billion lent globally in 2013 and over a quarter of that coming from the UK.
As of the 1st of April 2014 the Peer-to-Peer industry became regulated by the Financial Conduct Authority (FCA).
The P2P platforms allow you to package the business plan for a development project and have investors bid to lend you the money at a rate commensurate with the risk eg the better the business plan the more funds you will attract at a lower rate. It is therefore key to have a well documented, well planned, low risk project with a defined exit strategy. It is in effect a dating service for borrowers and savers with the Banking Middle Man taken out of the equation.
P2P Lenders are also expanding into refurbishment and Bridging finance for investors and developers looking to purchase or refinance residential or mixed use property quickly and refurbish them and either retain or sell them. This includes extensions/loft conversions, new kitchens/bathrooms, works requiring planning consent and change of use.
Loans for this type of smaller quicker projects are available from £75,000 to 10,000,000 for 1 to 18 months. Maximum of 70% LTV, decisions within 24 hours, interest charged from 0.73% pm with a 1.95% lenders fee.
The above information was put together with the help of Malcom Jones Principal of Brooklands commercial finance and if you need help with any type of development finance project please complete the enquiry form below and we will be very happy to look into it for you.