One of the most important issues for investors who use P2P platforms is what you might call the competition for collateral. This signifies a fundamental issue for lenders of all sorts – you can only secure your loan against an asset if it the asset is available as security. Most of the time, a company’s assets – its buildings, equipment, book debts and so on – have already been pledged as security to its main lender, which is almost always a bank. This explains why the vast majority of loans that are advanced to businesses by P2P platforms are unsecured, meaning that they are not backed by a legal charge over any of the business’s or the business owners’ assets.

For P2P platforms, this makes sense. If all loans had to have asset backing far fewer would be made because most of the time the assets simply aren’t available: the banks have already won the competition for collateral. But for lenders this situation presents a problem. What sort of return should you expect when there is no collateral available? That’s where secured P2P lending backed by commercial and development property comes into its own. In these transactions there is no competition for the collateral because every loan is backed by a specific property asset that has been professionally valued. Lending even against property is not risk free, but at least lenders can reassure themselves that they don’t have to stand behind anyone in the queue for security. 

Plans announced by George Osborne in his March Budget to force banks to refer businesses whose borrowing applications they reject to alternative finance providers have yet to see the light of day. The government carried out a consultation on the idea straight after the Budget but after specific measures were left out of the Queen’s Speech outlining the government’s legislative plans for its final year in office, the alterative finance movement will have to wait and see how ministers decide to proceed.

This is frustrating for many alternative finance providers, who believe that mandatory referrals from the major lenders could quickly open up a big pipeline of new business opportunities and there is no doubt that getting this process written into law would be a major boost for the alternative providers.

There’s been a rising chorus of comment about the UK property market recently. The International Monetary Fund has even been sounding the alarm over prices, with Vince Cable arguing for tighter multiples of income for residential mortgages and Mark Carney, Governor of the Bank of England, warning that rate rises may be closer than people think, in part to cool the market in London and the South-East.

At the same Mansion House dinner where Carney made his remarks, George Osborne called for more development of former industrial land and buildings to provide housing. And that’s the point that everyone involved in the property market should be focusing on – the UK needs a lot more development than it has seen in recent years.

The latest loan on the Relendex marketplace has set a speed record for a UK P2P property deal – the £250,000 transaction was fully funded in just 24 hours. The loan, which will finance the redevelopment of a property in Liverpool to create student accommodation, offered lenders a fixed rate of 8% over 12 months and a loan-to-value ratio of just 37%, making it an attractive proposition for lenders seeking secured P2P opportunities with strong asset backing.

The speed at which this deal filled shows that there is growing appetite among investors for secured property transactions and this is excellent news for developers and owners who need certainty of funding within short time frames to enable their projects to go ahead.

After a couple of years in which consumer and SME lending have dominated discussion of the Peer-to-Peer market, it is clear that interest is turning towards property as the next asset class that will be transformed by the alternative finance movement.

Numerous entrants are targeting this market now, with products ranging from short-term loans to developers that may last less than six months, up to long-term loans of three to five years. The key characteristic that they all share, however, is that they are secured against a specific tangible asset and so offer lenders greater assurance that they will be able to recover their funds should anything go amiss.

The P2P lending sector is on the brink of a big change. At the beginning of May the biggest SME lending platform, Funding Circle (which specialises in unsecured lending to businesses that on average borrow about £60,000) opens an experimental market reserved for institutional lenders.

For some time observers have been wondering about how large-scale institutional money will enter the P2P lending market and the answer, or at least one version of it, is now becoming clear. Rather than forcing individual lenders to compete against institutions to fund loans – leading to inevitable accusations that the little guys will lose out – the big money is to be given its own market in which institutions will fund whole loans rather than fractions of them.