A new P2P lending platform is crowdfunding, aiming to revolutionise friends and family borrowing

A new peer-to-peer (P2P) lending platform that integrates social networks for trust-based lending will soon launch in the UK and Ireland.

Flender is not a traditional P2P platform with an anonymous marketplace but an intermediary for businesses or individuals who want to leverage their customers or their network of friends and family.

The founders of the venture have invited the crowd to invest in their project and are offering investors 10 per cent equity for £500,000. The campaign is currently running on Seedrs.

Flender claims to be the only way for businesses and consumers to borrow and lend money through their social networks and by formalising the existing social lending market and by providing a seamless user experience it has a first-mover advantage for this concept.

Borrowers can set their own interest rates and decide the maximum amount they wish to repay over a repayment period that suits them. Flender will also let lenders choose the return they want to receive.

Commissioned research showed that the value of lending among family, friends, and connections in the UK estimated to be worth around £2.9bn p.a. and the sector is growing at 15 per cent per quarter. (The Independent survey information is provided by Flender along with its pitch.)

The campaign has so far funded over £378,000 from over 115 investors.

Business model and target market

Flender generates income by taking an interest margin between borrower and lender interest rates. For facilitating loans to businesses, Flender also charges a success fee. The interest margin per loan is dependent on the loan amount and the interest level chosen by the borrower.

The Flender margin is much higher than those of other UK P2P platforms and it says it can generate this premium because it is not marketing to users based purely on price.

The company says “Lenders are not coming to Flender simply looking for a higher return and borrowers are not always just looking for cheap money. Businesses also want to increase loyalty with their customers for instance.”

The platform has two target markets, consumers and small and medium businesses (SME).

For consumers who currently lend among friends and family, there is currently no easy way to facilitate contracts, scheduled payments or collect debt. Flender aims to formalise and simplify this and says in the USA, lenders such as CommonBond and SoFi have shown that where there is a connection between borrower and lender, default rates are close to zero per cent.

For SMEs, Flender will offer a new way to access finance. Where an established business has a loyal customer base, it can use Flender to leverage the existing relationship with its customers by inviting them to share in its success with the reassurance of a legal framework underpinning the transaction.

Use of funds

Funds from the campaign will be used to:

• Build the team with key hires, including a direct sales team and in-house software developers.
• Marketing, including online targeting across multiple channels.
• Native iOS and Android front-end completion following large user group testing and a cycle of UX improvements.

To date, Flender has been funded by its founders and Angel Investors who have together invested over £500,000. The company has attributed a pre-money valuation of £4.5m to this round and says this derived from an earlier (2016) raise of £200,000 at a £2m valuation. The platform already has launch customers signed up in the UK and Ireland in Q1 2017 and plans a full launch in Q1 2017. It forecasts revenue of approximately £20m by 2021.

It says its competitors are Zopa, Ratesetter and Funding Circle in the UK, and in Ireland, it will compete against LinkedFinance. However, it notes the differentiator as being that these platforms are anonymous marketplaces.

According to research from Liberum, by 2025, P2P lending is projected to represent between 25-50 per cent of the consumer and SME lending market.

The banking industry has never had it so bad, new platforms are emerging regularly and this new concept of social lending will further shake-up the sector. If retail investors can get a better return than that offered by their savings account then the decision to put their savings to work helping people they know is an easy one.

Flender intends to target the typical users of P2P finance platforms who are borrowing for cars, home Improvements, holidays and debt consolidation but how long before it expands into mortgages and other asset classes?