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The Assetz Capital platform is no longer open to investment from individual investors. No new investments into peer-to-peer loans are possible and, as a result, no new funds should be deposited. The existing loan book relating to the Retail platform is now in run-off and this will, over time, deliver the return of capital to investors. Full information can be found here . Existing Retail lenders can still log in, view information regarding their account and loan holdings and operate their account in accordance with the information regarding the run-off provided on the link above. Please see this important message regarding the currency of the information on the pages on this website.

What do you get when you cross a bank with a peer-to-peer lender?

For all the positive press coverage of P2P lending, there’s a significant lack of awareness of alternative finance options among SMEs. Every trading business in the UK will have a relationship with a bank, but various reports have shone a light on the fact that most SMEs aren’t aware of P2P platforms.

Market failure

According to Government figures, roughly half of businesses are rejected the first time they apply for a loan. Of course, in some cases this is because a loan application isn’t viable, but in many cases the rejection comes simply because the business doesn’t meet criteria set by the bank in question.  This criteria is often restrictive due to the increased capital ratios the banks have to hold under international Basel II and Basel III regulations. These ratios are based on risk assumptions and the banks feel that lending to an SME is more risky than lending for a personal mortgage.  To that end, they have to either hold more risk capital when lending to an SME or restrict lending to those businesses they feel are less risky. According to BIS/BMG research, more than two thirds (37 per cent) of businesses give up after the first rejection.

In the words of a Government report, “this is a market failure, of imperfect information.”

What’s the solution?

So what can we do to remedy this market failure? A large part of our marketing activity is aimed at educating investors and borrowers about peer-to-peer lending, to show them that it is a practical, viable way of investing and borrowing.

However, more can be done, which is why collaborations between banks and alternative lenders are so important. The most straightforward way of doing this is for banks to refer businesses to other sources of finance, rather than rejecting them outright.

That way, everyone wins – banks are able to be proactive and offer solutions where they’d otherwise be unable to help, businesses get access to the finance that they need and of course, investors are able to lend directly to growing SMEs.

We’re hugely supportive of banks’ efforts to help SMEs by referring them to platforms such as ours, but of course that’s just a part of what we’re doing: ultimately, we want small businesses to be aware of alternative funding options from the start – not just when banks say “no”.

- December 9, 2014

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