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Last time out we talked about one brand of peer-to-peer lending and today we follow this up by talking to a guest who has worked on the inside of the creation of not one but three start-ups in the peer-to-peer lending & crowdfunding space, or 'marketplace investing' as it is now becoming known.
Formally of Funding Circle but now working for a brokerage advising on how best to navigate the wide and varied array of up to 200 peer-to-peer and crowdfunding lenders for your next 'project funding campaign'.
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Resources mentioned
Resources shared by Craig Snider:
For background checks on potential peer-to-peer platforms: Trust Pilot
The Alexa Listing tells you about the depth of users of a given platform (this is a link to the Chrome browser extension).
In terms of regulation and compliance check out the FCA & the Peer-to-Peer Finance Association as well.
Craig is happy to give his time to walk through the different options and providers that operate in the peer-to-peer and crowdfunding space, his contact details:
- Email: craig@totumfinance.com
- Tel: 0845 519 6043
- Web: totumfinance.com
Link to the Podcast feedback survey
Today’s must do’s
Start to research peer-to-peer lending as an option for your property projects
Contact Craig to makes sense of all the different peer-to-peer & crowdfuning platforms out there, quoting The Property Voice obviously.
Subscribe to and review the show in iTunes…and while you are at it please help us to spread the word by telling all your friends too!
Send in your property stories, questions or moans to podcast@thepropertyvoice.net and we will try and feature YOU on the show too!
Property Investor Toolkit – here is the book link on amazon.co.uk & amazon.com in case you would like to get yourself a copy to accompany this series
Get talking!
Join in the discussion, either here in the comments section below, or by emailing us at podcast@thepropertyvoice.net
Start a conversation on Twitter with us @PropertyVoiceUK or on our Facebook page
Transcription of the show
Hello and welcome to another episode of The Property Voice podcast. My name is Richard Brown and it’s a pleasure to have you join me on the show again today.
I have been truly fascinated not only by the many alternative financing methods we are uncovering but also by the wide array of excellent guests that have helped me to create this third series. I am genuinely looking forward to sharing many of the interviews that I have already recorded over the coming weeks and we have another very interesting guest and topic today for you.
Last time out we talked with Ben Shaw about is brand of peer-to-peer lending and today we follow this up by talking to a guest who has worked on the inside of the creation of not one but three start-ups in the peer-to-peer lending space.
Formally of Funding Circle but now working for a brokerage advising on how best to navigate the wide and varied array of peer-to-peer and crowdfunding lenders, let’s hear my chat with Craig Snider now.
Richard: Hi again everybody, Richard again. I’m joined right now by Craig Snider, from Totum Finance. Craig, Hi, how are you?
Craig: Hi, good afternoon, I’m well, thanks.
Richard: Great. Thanks for joining me. It’s always valuable I think, for not only me, but our listeners, when people, such as yourself, with the background that you have got, join us share their knowledge. And I know also, it’s a weekend so, appreciate that, for giving up your time at the weekend to join us. So, welcome to The Property Voice podcast. Why don’t you give us a bit of an outline—we are in the middle of a series on financing. And today we are going to talk about, I know there is a couple of umbrella terms, we are probably going to get into that, but Peer to Peer/Crowdfunding, that’s where we are talking today. Why don’t you give us a little bit of background about you, and an insight into your specialist knowledge in this particular area?
Craig: Absolutely. Thanks Richard. I spent a few years with the big banks, RBS and with a couple of the other great big finance companies that exist around the world. And at one point decided I needed to branch out, diversify my experience and also have a bit more fun, than was happening in the bad old days of finance around 2008-2010, when I left. I moved towards the fintech sphere by taking a job with The Funding Circle. So, I spent just under 2 years, with The Funding Circle, helping to build their Corporate Finance offering. So, at the time they were only doing funding for trading businesses. They didn’t have anybody with any Corporate experience and it was an area that they were very keen to get involved with, to help them increase their loan amounts, the money that they could get out the door and their overall portfolio because they were a new type of borrower. We put together our product and launched it probably about 6 months later. And it was doing very well, and it continues to do very well for them. Since then, a couple of years after I started with The Funding Circle, it got to business as usual area, which was fun, but again, very similar to my work with RBS and companies before that. So, one we got out of the business as usual point of the product lifecycle, it was time for me to move on and help another company get started. So, I moved to a Peer to Peer lender that I got a years’ worth of consultancy work with, a company called Crowd2Fund, which also funds property as well as trading businesses. Then I spent a year working with a company the GK Group, so that encompasses GK Capital which is Peer to Peer firm, that you might hear about a bit more in the next 6 months. It’s one that’s just launching now as well as GK Credit and GK Pay and a couple of other things that they have. That sort of brings me to today, where I have recently joined Totum Finance, with a good colleague from RBS, Piragash, who I think you are having on here soon, but we are now looking at different ways for investors to gain finance for property development. So, we are a funding brokerage, we help business access finance.
Richard: So, that’s exactly what we are looking for, someone who has actually been on the inside if you like, of the industry. You have been involved in some of the start-up organisation, obviously Funding Circle, I’m sure a lot of people will have heard about, and Crowd 2Fund and GK Group. So, we talked a little bit earlier, and I want to get into this right at the beginning, Peer to Peer/Crowdfunding, what’s it all about, what’s the difference, where does it fit in, more to the point, this is obviously a property orientated podcast. Where does it fit in, as far as property investors and developers are concerned, from a financing point of view?
Craig: Absolutely. So, Peer to Peer finance, probably the biggest in finance, the big uproar that its creating and the reason it’s so busy and it’s such a big disruption to the industry is that its de-centralising finance. And, rather than going to the all-powerful mega-bank that sits in the high street and asking for funding, there is just a lot more access to funding, there is different people running funding platforms. So many different models out there now, rather than your typical, individual goes and puts money into a savings account and tucks it away for 10 years and the bank borrows it in the meantime to lend it on the high street, it sits back and takes in the difference. We now have Peer to Peer lending, which is making things a bit more democratic, its individual, instead of putting their money into a savings account, can now choose to log into a website, do their own due diligence, to some extent, depends which platform you use, how much due diligence you have to do yourself. And then choose which business or which projects you would like to put the money in to. Because there are so many different models out there. You touched on some of the different terminology, there’s Peer to Peer finance, there is Crowdfunding, and now if you want to be right on the cutting edge, the word that’s being thrown around a lot these days is Marketplace Investing. It’s another spin on a similar concept, and each of these different models, pretend to, sometimes it will be all the due diligence model from the platform, you literally just go on, put your money into an account, take the interest out, all the way to the other end of the spectrum where you have an investor who logs into the platform, does all the due diligence, they research the person behind the business or the projects in the case of property files, then you search the actual home, you might even be able to go and visit the home and take a look at the bricks and mortar yourself and decide where you want to place your funding. And of course, this has implications to the borrower as well. The borrower may need to make themselves available, for due diligence, to get on the phone and answer questions, to certainly do a bit of marketing themselves. In some cases, these platforms will literally just be a platform, that allows you to run your own funding campaign, market yourself. Go to friends and family and say, will you lend money to me, if so, put it into the project in this website etc. so, it does create a lot of opportunity, for borrowers, in the sense that there is so many different models out there, all using a slightly different spin on old school finance. It’s no longer, just go to your bank, fill out a form, wait 3 months and hopefully get the funding, there is a lot more different models being used today.
Richard: Yeah, that’s kind of where I was going with it really. I guess, the biggest one, using the old terminology, that’s become more known, as far as property is concerned is Crowdfunding. I guess, my particular interest would be, as a property investor or property developer, to be able to go to let’s say the Crowd, a collection of Peers, that’s why it probably falls under the heading of Peer to Peer, but I go to the crowd, there is a collection of people who could potentially, collectively fund my project. Now, whether it’s a Buy to Let investment, a development of some description, effectively I could go to a platform and draw down money, would that be fair? There is a market place that exists where I could tap into another source of funds as opposed to mainstream banks?
Craig: Absolutely. There’s many of them, I’ve heard. Depending who I’ve asked, there is anywhere from 50 to 100, possibly 200, Peer to Peer platforms out there in the UK today. Personally, and this won’t be the definitive market accepted answer, but I personally view Crowdfunding as the term for slightly more philanthropic directed platforms. So, it could be we designed this amazing backpack, it just needs to get made, you don’t have the money, you are really chucking in a couple of pounds, and we will get it made. And we are thinking with a discount on the backpack. Something like that. Or maybe someone needs some support because of a health issue, let’s all kick in £5, and hopefully get this person the help they need. It won’t be everybody’s view, but I see that as more crowdfunding today. Personally, I view Peer to Peer finance as slightly more higher headed commercial view. Somebody, who is looking to put money, make an investment, get a return, a win/win proposition at both sides. For the borrower and the investor. As I say, it’s not everybody’s’ type of view, but that’s kind of how I like to differentiate the two.
Richard: Ok, shall we use Peer to Peer as the generic term for the rest of our conversation?
Craig: Sure, yeah. It probably fits better for us.
Richard: Ok, excellent. So, in terms of Peer to Peer Financing, as far as property is concerned, in general terms, how does it work, what’s involved and how do people go about it?
Craig: Sure. On the front, it probably looks very similar to your typical banking relationship. You will have, you might go through a broker, like myself, you might go directly to the platform, and tell them a little bit about what you would like the money for, who you are, what your back ground is and your experience. And they will take all sorts of information from you, they will run a credit check, and they will hopefully approve it for you. That is the point where it changes slightly. Most Peer to Peer platforms won’t just write you a cheque, what they will then do is list it on their platform; so, they will advertise your business, your proposition. How much they will release, depends on their platform, the business model and to some extent, your consent. And investors, will then get an opportunity to decide whether or not they like what it is you are doing, whether or not they would like to contribute to it, without any return. That process can take a week, 2 weeks, 6 weeks, it really depends on the platform and the amount of investors that they have. What they will do is, that’s the point where they are going out seeking funds for you. They are trying to knock together a little of the money that you are looking to borrow. Once that’s complete, once its funded, if it funds, then they will progress back to your traditional lending relationship, where they might have to do their evaluations, or they will transfer the money to you and you will carry on as it where any other bank.
Richard: Ok, I guess, you said if it funds, is that a key part of the process? Because I have seen with Kickstarter and those funding platforms for example that if you set a funding limit and you don’t reach it, then you don’t get any of the money. Is that typically how it works with Peer to Peer or could it be that you have got 80% of your funds, so we could advance you 80% of you target, would that be acceptable? Do they have differences in how they work that way?
Craig: Yeah, absolutely. I would say, particularly when you are looking to borrow for property development, you will almost always find that you need to reach your target. If you need to buy a property for £200000 and you need £50000 to develop it, giving you £150000 isn’t going to do much for you, in fact, it’s only going to increase the risk, in many cases. So, most platforms, as I say especially with property development, won’t allow you to take part of the money. It will be a hard target. It’s not always the case, especially with trading businesses, if you are looking for £50000 for stock, there are some that work on the Kickstarter model, who will give you, as long you reach a hurdle sometimes, they give part of the money. But, because you are a Property Developer, and that can be a major risk. If you are going to a bigger lender, like Funding Circle, they have a fantastic track record of funding. Last I checked, absolutely everything they have ever listed. In they have different ways of doing that of course. There are many smaller platforms where, it can be the exception that something gets fully funded after its listed. You might find projects, are not being funded, left, right and centre. That can be a waste of your time and a risk for you as well as a borrower.
Richard: Yeah. I got that. In terms of opportunity, you talked about this being, de-centralised finance, it’s an emerging technology, fintech, as you say, its disruptive, its growing. But in terms of for property investors and property developers, would you say it is a big opportunity? Whether it is now or whether it might be in the future?
Craig: Yeah, certainly. I think it’s quite a big opportunity, it possibly could have less of an impact on property development, as a niche area of Peer to Peer lending. But, it will certainly have an impact. And I think we are already seeing it. Just recently, The Funding Circle announced that they were the third biggest lender to small businesses in the UK, this year. So, they were behind RBS and one of your listeners will have to correct me if I’m wrong but I think it was Lloyds, that was the other one that was beating them. That can only have an impact on the banks as well. When you have a competitor that’s that dominant, that quickly. So, there will be other platforms that are offering funding, like The Funding Circle, has dove into the property space, there are a couple of others, Landbay is one that are doing property lending. Not all of them are getting into property ending. However, whether they are or they aren’t, just having more sources of funding will, not only change terms, more money available on the wider market. But will also force banks to be more competitive. So, Funding Circle as an example, tend to turn loans around within 2-3 weeks, something like that. They can get from application to cash in your bank account within that time. And that’s forcing the banks to be faster. The days taking 3-6 months to get a loan out of a bank, are just not acceptable anymore. Considering there is more choice, banks need to toe the line, and need to recognise that there is more competition and they need to do better than they have done. And that will have an impact, putting borrowing directly from Peer to Peer, or if you are borrowing from a bank, Peer to Peer is looking over their shoulder.
Richard: So, you are going to have more options, there are going to be more of these players, as you say, coming into the marketplace, and getting bigger and that’s going to create more competition. So I can see competition will probably drive better service, such as turnaround times, as you mentioned. I guess price will be squeezed with some of the more established players, there is going to be more options for people to go to as well. What the general—they are probably quite key benefits, but what other benefits might you see, coming out from Peer to Peer financing as far as investors are concerned?
Craig: As far as investors, looking to borrow from Peer to Peer firms, I think that’s going to be the majority benefits, you are going to see the banks sort of smarting up their process, move more quickly and with a bigger view to satisfy the customer. That’s probably going to be the biggest impact. As I say, there are more companies to lend to, there are other models as well. You might find some platforms will take a share in the equity, you might find some platforms will be willing to call together equity investors for you. So, I suppose we are looking at it primarily—up to this point we have been discussing debt, but that’s not to say equity doesn’t also appear in the Peer to Peer space. So, there will be other ways to access equity, and smaller equity investors, as well as debt. With all the different models that come along with it.
Richard: Yeah so, I guess there is speed, there is variety in the service level and that sort of thing comes in. You have got the equity play as well as the debt play. It’s not just borrowing money, it’s also investors putting money into your project. So, there are a couple of reasons I gather, from what you have just said. One of the question I did want to ask you though; I did a write up about some of the Peer to Peer lenders a while ago, and I have used previously, a phrase of banks in disguise and you talked to me about credit checks and this sort of thing. But are they following bank based processes in the main, I mean apart from speed, and the platform they are going, but have they got a credit committee type of process, do they do a formal credit application in the same way that banks do, or are they starting to look at things in different way, and maybe separate themselves in that kind of way?
Craig: Yeah, that’s true. There is some variance in there, in terms of procedures and some the bigger more established ones are probably banks in disguise, it’s a fair phrase to use. Funding Circle have on their board, ex Wachovia directors for example, I’m sure there is other people who differ from banks to now work for platform and the other employees like myself. I was approached from a bank to go and work for them. Naturally that’s going to filter in some bank processes, into Peer to Peer process. And some of those are going to be best practice. They are going to be better. However, there are platforms who are doing more interesting things, one of them for example, the name has just slipped my mind, I will come back to the name; but what they do is something diligence by crowd. So, what they will do is list a deal on the website, and they will give you the information that you need to your diligence, that’s what they will say, that they will list sufficient information, and leave it to the crowd to do the background checks, do the searching. You are taking that as a vote of confidence. So, it’s an interesting model, I guess you could call that a massive crowd credit committee, is one way to look at it. It can be a bit intimidating, as a borrower. Instead of having to justify your project to 5 or 6 people in a room, you have got a crowd that you can’t see online, potentially doing all sorts of digging. As I say, that can be quite intimidating. No other platform will expect to release that sort of information, but that’s Thincats is the name of that platform.
Richard: Oh yeah. I guess the conclusion is that even if you have got debt or equity, it is still a financial proposition, there should be due diligence that takes place. It would be reckless, wouldn’t it, just to throw money at people without making a few checks. So, there is obviously going to be some bank or venture capital type of processes, which go into it. Perhaps, a bit unfair of me, to expect none of that to exist. But, mind you, what did you call it, the diligence by crowd, might be a bit scary! Thousands of people pawing over your credit file, I don’t know.
Craig: They probably won’t go so far, there is a privacy issue there of course and I don’t know if they would go so far as to, well they wouldn’t go so far as to release your private credit information on your mortgage or credit card for example, but they might release the details of your project, what you expect the GDV to come out, and you might have people in the crowd who speak up and say, why £50000 I that neighbourhood, no way. And others you say that’s pretty fair, so you will find your project discussed to no end in forum somewhere. It can be interesting, and it can, in some cases that can even help to kick the project into shape, if the crowd comes up and says I will put in £50, but I have a feeling that you might get more equity out if you did it in this structure. Or you might get more a profit out of it if you did it this way. So, that could be an advantage as well.
Richard: Very interesting. I’m going to go look that up later. In general terms, how would a property investor, so we are talking from that perspective, property investor, property project, how would they get themselves ready to pitch their project, with a Peer to Peer provider? And does it differ from other types of lending proposition?
Craig: Definitely. So, when you engage with a platform, they will tell you what their process is, and of course, it will vary from platform to platform. There is a theme that’s emerging there. But, some will do more work than others to get you pitch ready. So what they may do is, they may send you is send you examples of other pitches, and then expect you to put together a PowerPoint presentation. They may expect you to put together pictures and diagrams etc. or they may take you by the hand, they may ask you for what I have mentioned and they may put it all together on your behalf. So, what you will need is the full details of your project, what you have planned, your background, your information, what you would expect from a bank, what you are buying the property for, how much you are going to sell it for, and what you are going to do with it, what your GDV is also, every month, profit potential etc. So, having got that information to hand, don’t expect to go there and cuddling in together. As the conversation emerges, have information to hand and they will take it from you and they will help you kick that into shape as a presentation for potential investors.
Richard: Ok, as you say, the key phrase is, it varies from platform to platform.
Craig: Of course, yeah. More so than the banks I think.
Richard: Yeah, banks usually have a generic application form, which is fairly consistent form provider to provider. But this one, depends on the model of the platform I guess. That can shape that. I guess, the unwritten thing here is, perhaps having some guidance could be useful. Where to go to.
Craig: Yeah, most platforms will have examples of successful campaigns and unsuccessful ones. Probably a good word to remember is well actually is the term campaign. So, as for the bank, you might be going in the door, giving your information, completing an application form, get the money. The flipside with Peer to Peer is that it will be a campaign. Whether you are driving that campaign or the platform is, there will always, always be an element of publicity that somebody does, to bring in the funding.
Richard: That actually, is a really good distinction, that you just made there. I hadn’t really thought of that way, but you are right. It’s kind of a marketing campaign, to raise funds. It’s a good way of putting it actually.
Craig: Certainly, with some campaigns, some platforms over others. You look at platforms like Kickstarter, they are very much—I mean it’s even in the name, it’s very much a publicity thing. I do think of some them as a form of financial entertainment. It’s almost like you are putting money, just to have a go, a bit like playing casino. Whereas others are more grounded, more level-headed companies like Funding Circle for example, are less financial entertainment and more hard headed investment.
Richard: I got you. Have you got any general tips and pointers, for people looking at Peer to Peer and Crowdfunding? For example, does it suit particular projects or particular situations?
Craig: Yes, definitely. There will be projects that are easier to, that are more appropriate for these sorts of platforms. A lot of it, as we touched on, will come down to how much information can be in the public domain. There is a privacy issue in some case, and that will also speak to which plat form you want to go to. That will be a question worth asking when you go to the platform. How much information are we going to have to release? And if you are a private person, it’s a very private investment that you are making, then perhaps Peer to Peer isn’t for you. If you are willing to put at least the basics into the public sphere, then it suits better. I suppose the other one could be timelines, if it’s a long-terms project, perhaps it’s not suitable for Peer to Peers. If it is quite a complex project, where it requires complex solutions with the funding, then Peer to Peer, you will probably find its more up to it in Peer to Peer rather than the banks. They tend to be straight down the line and expect that to maybe suit Peer to Peer very well. When it comes to engaging a Peer to Peer platform, which platform you choose is going to be critical. The last thing you want to do is just google Peer to Peer and whichever one comes up first, spend the next 6 months teamed up with them. Some are going to, as we touched on, expect quite a lot from you, some will expect less, that may be reflected in the beans. But I always say, one of the main thing to be conscious of, is the success rate of funding for the platform that you choose to deal with. You can generally figure this out by spending some time on the website. You can see how many different deals they have, how long those are listed on the website. If you go back to the same website, every day for a month and the same loan is listed on that platform, you have to expect that yours will probably be on there for a month as well. That might be ok for you. You might expect funding quicker. But if you are looking for money inside of a week or two, you don’t want to use a small lending platform with the same deals on it for 6 weeks. You won’t get your funding in a week. That’s something to be conscious of. Make sure there is liquidity on there. Do some research. See if they have the funds behind that they offer.
Richard: Ok, some good pointers there. I guess the ones who are very successful are going to shout about it, you will probably find them easily in other words. The ones who are not so successful, they are probably not shouting about it too much, or they are shouting it in a very clever way let’s say. So do a bit of digging. I was just thinking to myself, it’s such a broad array of different possibilities, we are trying to get to the practicalities a lot, in this series, and of those is what is the right funding solution for the right project. What sorts of projects, I am thinking in my head Buy to Let project, a Bridging and short-term finance project, a refurbishment project, a conversion project, a development project; that’s just 5 that we have thrown out there, would any and all of those be suitable for some sort of Peer to Peer or Crowdfunding solution, or do you think some of them lend themselves, better than others to consider that route?
Craig: That’s a good point actually. I think that the development projects are going to be ideal for Peer to Peer. You have got a situation where someone has a great plan, a great scheme, the skills behind them, a track record and they can do this. What’s holding them back is they need to unlock some money for 6 months, a year, year and a half potentially to get this project completed with big rewards on the back. That is perfect for Crowdfunding, Peer to Peer lending. That’s something hat going to be easy to convince the Crowd or a group of people to part with their money for, with the hopes that they can earn a nice return in 6-12 months. What may not be suited and no doubt there are platforms that do it, but possibly not as attractive, is the Buy to Let deals, which fairly vanilla, fairly straight down the line, a bit less risk, but require, probably longer term commitment and longer return, over the same period. So, Peer to Peer tends to be a shorter timeline return. You will no doubt find a Buy to Let product out there through Peer to Peer but probably, less attractive than somebody doing refurbs, developments those types of things are going to be in the right space for Peer to Peer.
Richard: Yeah, if you have got relatively short timescales, up to 18 months being short, 2 years perhaps at a push, but relatively short timescales and a degree of complexity, you are perhaps adding value, to the property in some way, shape or form, they would probably be your cues to say well, let’s look at Crowdfunding or Peer to Peer as an option.
Craig: Yeah, certainly I think that’s a good way to wrap it.
Richard: We actually had a preliminary conversation before we came on and started recording. I don’t know if you remember, I started talking to you about resources and that sort of thing. I just wondered if you have got any resources that maybe our listeners could find helpful that you use, that you could direct them to?
Craig: Absolutely yeah. I think my priority just comes around to doing background checks, and doing reputational checks on these platforms. So, a big one, and it doesn’t just apply to Peer to Peer, so it won’t be particularly new to a lot of people, Trust Pilot, is a great website for getting a bit of background about a property, before you do business with them. If you go to Trust Pilot, these being Peer to Peer, being used by definition, websites, then it’s bound to have a Trust Pilot page and that will have lists of what they use, there will be borrowers and investors and you want to see both sides happy really. If you seeing investors aren’t happy, then they aren’t going to have many investors for long, and clearly if you are a borrower, you want to see borrowers happy with their experience with that platform as well. Probably more so than any other industry, you are going to want to see depth of records, as well. If you have got 5 or 6 people on Trust Pilot, reviewing it, I wouldn’t consider 5-6 people a crowd unless you are in a small London flat, it’s not going to be the type of crowd you need to fund a big property deal. You are going to want to see dozens if not hundreds of reviews on Trust Pilot, that it has a big user base. There is also, I believe it’s called the Alexandria Listing, which will—forgive me you will have to google, but the Alexandria Listing I believe, is something that gives you the depth of users on a website as well. It tells you what the traffic figures are for a website. You want to see pretty substantial traffic going to Peer to Peer website, to know that it’s going to have a crowd of people. And then on a more regulatory view, the Peer to Peer Finance Association, which lists a very short list of, I think there is about 6 or 8 Peer to Peer finance platforms, that…although it’s not industry regulator, it is an industry trade body and the industry as a whole is very interested in making sure things are doing responsibly, and this their way of making sure that happens. So, the Peer to Peer Finance Association holds platforms to account, they require that business is operated in a certain way to make sure things are done. And the FCA is improving their offering in the Peer to Peer finance space, they are ratching up the regulation. It’s not as highly regulated as the bank of course, or even most lenders, but it’s certainly heading that way. The regulation is getting tighter and tighter every day. This doesn’t prevent from all accounts. You know the biggest Peer to Peer lenders are cheating this as well because, you all it takes is one swindle and your credibility is gone in the industry. So, you can also checkout any government websites, the FCA etc. to make sure that they have a clear background and that they are a regulated firm. Usually it will be at the bottom of the website, if they are directly regulated or to an appointed representative from somebody else. That gives you an idea of how credible they are.
Richard: Yeah, the regulation piece is emerging still, as indeed the industry is, I think that’s the other thing that might put people off a little bit. The Peer to Peer Finance Association, we weren’t sure, but roughly between 6 and 8 members, but you, earlier said something of the order of 50-200 different types of Peer to Peer lender out there, it’s obviously a very small minority of the wider industry. I know that you mentioned Thin Cats and Funding Circle and I believe both of those are members of the Peer to Peer Finance Association. So, it’s the thin end of a wedge, I guess where I’m going, regulation and industry compliance is still growing and emerging, was the big takeaway there. So, thanks for the resources, Trust Pilot is a good one, that’s interesting because what was going through my head was a Crowd funder is getting reviewed by the crowd. Using crowds to another level. I’m going to ask you in a second about how to get a hold of you and what do you do effectively Craig. But, is there anything that you feel that we should bring out whilst we are talking, before we do that before we draw a close?
Craig: What we have just touched on is the regulation, that’s probably not the right time to bring it out at this point, into the wider discussion, because it’s probably a whole show unto itself, is the regulatory piece in Peer to Peer, but I what I would say is, to anyone considering using Peer to Peer finance; the framework for Peer to Peer finance has gotten a lot stronger. It started out with the FCA giving the industry enough rope to hang itself. It hasn’t happened. It’s been self-regulated to this point, and it is becoming more and more regulated. It’s becoming much more difficult as a platform and its certainly becoming much more difficult for things to go wrong. The industry is very concerned about its own reputation, and they have done a good job of self-regulating. It is going to get tighter and the fact that there is so many platforms out there. So, few of them are members of the Peer to Peer Finance Association, is not reflected of the quality. It’s not to say that there are only 8 of them worth engaging with either 200 or 4%, it’s more a matter of those are the most established ones. Those are the ones that have been around the longest. Those are the one that operate in a way that is defined by that association as officially Peer to Peer. So, there will be others who do more interesting things that just don’t fit perfectly into their space. There may be some that just haven’t proven themselves as of yet, but there will be more—I’m sorry just those 6-8, that have something to offer. Especially if your particular deal is slightly quirky. You might find that you need to engage with a platform that’s newer or a bit more cutting edge or not yet, a member of that mainstream body.
Richard: Very good. I think that’s really helpful to know that. It is a new area, it’s still emerging, still growing. I’m sure it’s going to improve and tighten up over time. But your point about if it’s a bit more quirky then to look at somebody who is still getting themselves sorted out, could be quite useful. So, to draw a bit of a conclusion, where do you fit in and how could you help people make sense of all this, because I am kind of thinking to myself 50-200 players, not all of them necessarily regulated, not all of them necessarily member of the industry body, horses for course, some do secured lending, some don’t do secured lending, some offer equity finance, and other don’t. I guess, I’m cueing you up Craig, where do you fit in and how could you potentially help?
Craig: Absolutely. Well, as a broker, it’s my job to know, which lenders have which expectations, and they might not even be lenders, they might be equity providers and the best thing I can do is speak to a borrower, a property developer, and talk to them about what their project entails. Where they are comfortable, what they are comfortable with, whether its privacy issues, regulatory issues, etc. We will take a view of just how quirky the deal is and we will partner them up with the right platform. We have a good idea at Totum Finance of which Peer to Peer firms are credible, which ones have the funding behind them and which ones will make empty promises. I hate to say it, but there are some that won’t be able to bring about a deal. And we know which ones can and which ones can’t. We are happy to speak to the developer and talk to them, make sure they are partnered up with the right firm. So, rather than holding a project back. They firm that they eventually engage with are pushing it forward.
Richard: Very good. And so how can people get a hold of you Craig?
Craig: My email address is craig@totumfinance.com that’s T-o-t-u-m. We also have our website, totumfinance.com. you can use either one, I’d be happy to speak to anybody who has a deal that they maybe need a little bit of help funding. And hopefully we can put something together for them.
Richard: That sound great. And I think probably will, if nothing else just to try and understand, make sense of this and see it as an option. that they have available. But perhaps a bit if overwhelming to think up 200 different players, all operating out there. So, I guess, you can do the legwork and you obviously been on the inside track, a couple of times now, I’m sure you are well positioned to help people. I just want to thank you so much for coming on and sharing what you have about this emerging—you called it Marketplace Investing, didn’t you?
Craig: Yeah, another phrase that springs to mind.
Richard: Peer to Peer, Crowdfunding, Marketplace Investing, so making sense of it all, effectively its getting money from crowds or individuals in a less than mainstream way and avoiding some of the formal institutional banks and this sort of thing. So, appreciate it. Especially at the weekend. We will get the show out, the show notes will be there and all the links that you shared, I will dig them out and do the Google Searches. Make sure they are in there and of course, your contact details will be in there as well. So, as I say thanks for coming on…
Craig: Thanks for having me on…
Richard: You are welcome, we will talk again soon.
Craig: Absolutely, thanks Richard.
Richard: Take care, bye-bye.
Property Chatter
Interview with Subject Matter Expert: Craig Snider from Totum Finance.
Resources mentioned:
For background checks on potential peer-to-peer platforms: Trust Pilot
The Alexa Listing tells you about the depth of users of a given platform (this is a link to the Chrome browser extension).
In terms of regulation and compliance check out the FCA & the Peer-to-Peer Finance Association as well.
Craig is happy to give his time to walk through the different options and providers that operate in the peer-to-peer and crowdfunding space.
Craig Snider’s contact details:
- Email: craig@totumfinance.com
- Tel: 0845 519 6043
- Web: totumfinance.com
Finally, a quick wrap up from me.
There were lots of good points that came out of this discussion with Craig I think. Note least of which the fact that there are such a wide variety of different providers and platforms that fall under the peer-to-peer, crowdfunding or marketplace investing umbrella.
We have the unsecured lender types like Zopa,
the business lenders such as Crowd Cube,
the secured lender types that will fund your property project such as Funding Circle,
and then a few specialist providers that offer investors the opportunity to fund the company’s own projects, such as Crowd With Us.
I am sure I have missed a few out, so maybe give Craig a call and he can help you work out the best options to consider on your next property project. The brokerage that he works for is Totum Finance they are not selling courses or anything like that. They get paid on results, so that is essentially the special offer that they have available to you dear listener – their time and expertise. Make sure you mention The Property Voice when you do connect with them though won’t you!
That’s me for this week then. By all means do email me personally if you want to talk about anything from today’s show or more general in property investing to podcast@thepropertyvoice.net, the show notes will be over at the website www.thepropertyvoice.net
Now all that remains is to say thank you very much for listening once again this week and until next time on The Property Voice Podcast…it’s ciao-ciao.
[…] Last time out we talked about one brand of peer-to-peer lending and today we follow this up by talking to a guest who has worked on the inside of the creation of not one but three start-ups in the peer-to-peer lending & crowdfunding space, or ‘marketplace investing’ as it is now becoming known. Formally … […]