A fintech start-up became one of the UK’s quickest early-stage tech companies to reach a £1 billion valuation last month with Revolut going, in its words, “from a few coders with a crazy ambition to disrupt financial services forever” to unicorn status within three years.
Nik Storonsky, Revolut’s founder and CEO, says the company’s mission has been to do “everything completely opposite to traditional banks”. LendingCrowd has a big shift to go before we can start to think about being one of Scotland’s next unicorns – but our strapline “Think Outside The Bank” is making a real impression with investors and borrowers alike.
Since launching in 2014, our own mission has been to do things differently to the banks because we could see that SMEs needed an alternative route to funding. SMEs power Scotland’s economy, but many of our most promising companies face difficulties in accessing funds to allow them to grow, build their teams and products and enter new markets.
Competitive rates and rapid loan turnaround times mean more borrowers are turning to specialist peer-to-peer (P2P) business lenders who enable individual investors to lend directly in SMEs via innovative online platforms.
Research from the British Business Bank in February showed net bank lending remained relatively flat in 2017, equity-based crowdfunding fell further, while P2P business lending volumes rose by 51 per cent to almost £1.8bn.
As part of our drive to build market position, we recently launched our debut television advert, designed to bring the opportunities available through P2P lending to a wider audience.
LendingCrowd has just had its best month with more than £3 million retail investor funds inflow and almost the same amount of lending.
In the first four months of 2018, we equaled last year’s total lending to Scottish companies. Investor funds on the platform have grown rapidly, in large part due to last year’s launch of our Innovative Finance ISA (IFISA) – one of the first on the market. We now offer three IFISAs.
In Q1, we completed a £2m external fundraising round to support increased sales and marketing activities as we look to enter scale mode this year. Looking ahead and given the strong pipeline of both investor and SME demand, we will likely seek additional Series A funding over the next 12 months and are actively speaking to the venture capital community about our next phase of growth.
The P2P sector as a whole is maturing and moving more into the mainstream as platforms evolve and diversify their business models, as the Bank of England highlighted in its latest financial stability report. The industry is now regulated by the Financial Conduct Authority and we became the first P2P lender focused on the SME market to achieve full authorisation from the City watchdog in 2016.
Full FCA authorisation came hot on the heels of Scottish Enterprise’s announcement that it would provide LendingCrowd with £2.75m to lend to Scottish SMEs across our platform. Since then we have completed loan deals with companies like Summerhall Distillery, producer of award-winning spirits brand Pickering’s Gin, restaurant chain Tony Macaroni, property lettings agency Umega Lettings and many more.
LendingCrowd is targeting £10m of loans to Scottish SMEs in 2018. We aim to fuse the best of technology with prudent banking tradition, illustrated by our credit team who have a century of combined credit analysis experience and enable established small business to access flexible and affordable financing.
The introduction of the IFISA, along with robust and transparent credit data on borrowers, means more investors are opening their eyes to P2P. As well as offering healthy returns, this new way of lending generates real benefits for SMEs and the economy.
Stuart Lunn is CEO and co-founder of LendingCrowd