Home > Uncategorized > The “new lenders”. Hubris?

The “new lenders”. Hubris?

hubrisAt a recent Turnaround Management Association Event there was a speaker from an “alternative crowd funding” lender who was very dismissive of the current providers of asset based finance and gave a distinct impression that his form of lending would soon dominate the whole market. I wasn’t there so I will refrain from naming names but I was aware that the comments did ruffle a few feathers.

But did he have a point? Readers of this blog will be well aware of my views of the established market and certain dated and rather shoddy attitudes that remain prevalent. Certainly, on that basis I have welcomed the new additions to the market and they have at the very least, freshened up the available options.

All this makes the role of the broker more valuable.

My view is that no one form of asset/invoice lending will prevail. Claims to the contrary are misplaced simply because with upwards of 50 lenders active in the market, there will be a constant scramble for market share and specialisation

One size cannot fit all. Those requiring flexibility will have to pay a little more because regularity has its own cost benefits to a lender. Risk will also always be a driver of cost and the views of what determines risk will constantly vary across the market

Funding circles and those reliant on investors are naturally going to have to show a return. That return will also be geared towards risk and as in any market, an increase in the real or perceived risk will increase the demand on the return.

It goes without saying that a low cost deal for a borrower is not going to be a lucrative facility in the short term for an crowd funder or established bank. However a longer term view might be taken over a contract. To give an obvious example, would you rent your house out for one month at the same rate as per month for a three year tenancy

Our friend’s message to the TMA was clearly that their offering was going to so attractive to borrowers that they would not be able to compete. Maybe so but this is his message for the investors

Crowdlending through x gives Investors the chance to realise significantly better returns than those offered by banks and many other alternative investments

Lets see if they can square that circle

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