We spoke to Stuart Law, owner and founder of Assetz Capital, about the P2P market and how the FIFSA is the next big thing.
What does Assetz Capital do?
Assetz Capital is the UK's second largest peer-to-peer business and property lender. Since our inception in 2014, Assetz Capital has been instrumental in providing fairer and more accessible business lending to small and medium sized businesses and property developers throughout the UK. During this time, we have lent more than £350 million to credit-worthy businesses, whilst also providing returns to our thousands of investors, approaching £30 million in loan interest, such as from our investment accounts that earn gross rates of return between 3.75% to 7% per annum, before allowances for tax or for any losses not recovered from the loan security or covered by a provision fund.
We provide SMEs with flexible and relatively quick access to funding for their projects, helping future business and employment growth with competitive rates. rates.
Rather than being just a website with automated credit assessments, Assetz Capital is run by finance, banking, credit and lending professionals with huge career experience, alongside a nationwide network of relationship managers who visit potential borrowers and help structure the loans. Unusual for peer-to-peer lenders, tangible security is taken in all cases to both reduce the risk of capital losses for investors and lower the cost of borrowing for businesses. Traditional credit assessment techniques are employed rather than solely computer-based borrower assessments but high-tech in-house software is also used to manage investors’ capital and smooth and speedy loan processing.
What investment trends do you predict for the next 12 months?
Without doubt, the new IFISA (Innovative Finance ISA) will be the hottest trend for 2018. Now that all the major P2P platforms have received FCA accreditation, IFISAs will be hitting the market, with ours coming out in Q4 2017. IFISAs will allow people to use some (or all) of their annual ISA investment allowance to lend funds through P2P platforms. This will offer investors tax-free interest income, with potential returns much higher than many of the cash ISAs that traditional banks and building societies currently offer due to it being an investment (with capital at risk) rather than a savings account.
With around £½ trillion of investment already in ISAs, we believe that the IFISA has the potential to elevate the peer-to-peer industry to a level where it offers serious levels of additional funding like the banks.
What indicators should current and potential P2P investors pay attention to?
There are two important indicators that P2P lenders need to look at before making any investment. The first is the rate of return net of any losses, and with a variety of P2P platforms out there, the rates can vary significantly. The gross rate of interest an investor makes will be affected by loan defaults and losses and these take time to show themselves. Well-established platforms that have transparency on their data and third party analysis carried out on loan performance may be the best places to dip a toe in the water. Typically the higher the gross interest rate offered the more risk there may be in the lending but it can take time for these losses to be recognised and crystallised, so longevity is important.
The second is the economic environment in the widest of senses. Whether it is concern over the results of whatever Brexit turns out to mean through to Bank of England warnings over consumer debt, there is plenty to keep investors and businesses awake at night. We are probably entering a period where a more conservative approach is required and the Assetz Capital policy of always taking security, principally property security, for all lending is perhaps a place where investors may feel safer and that hopefully means a continuation of funding for sound businesses with security to offer.
The P2P market has grown in recent years – do you foresee this growth continuing? Why/why not?
Assetz Capital has seen growth of around than 100 percent year on year since 2014, and we believe that our business and the P2P market in general will continue to grow as it continues to offer significant benefits to both investors and lenders; in our case, businesses looking for investment for growth. The banks are under ever increasing regulatory pressure and any start to a weaker economic cycle will see banks having to become even more cautious in lending again when in fact there are many credit-worthy borrowers still seeking funding. This is how the P2P industry was born and each economic cycle is expected to strengthen, not weaken, the industry.
If you could see one headline about P2P, what would it be?
"P2P investment found to deliver positive total returns every year of the [next] recession and instrumental in supporting businesses through those times."