P2P platforms branded “banks in disguise”

Grandin reckoned forward funding deals casts doubt on whether the P2P platform can find a funder in the first place and gives funders too much power.

Lend2Landlord founder Lee Grandin has accused peer-to-peer platforms of being “banks in disguise” for lending money before the peer funders are in place.

Grandin reckoned forward funding deals – where lenders put their own money on the line before getting funders on board – casts doubt on whether the P2P platform can find a funder in the first place and gives funders too much power.

He said: “For property backed peer-to-peer lenders to grow at scale and remain competitive they need to reduce the need to forward fund or they will become uncompetitive.

“Using your own balance sheet money is costly and to me this defeats the whole objective of the peer-to-peer concept.

“Quite frankly you are no more than a bank in disguise.

“Peer-to-peer lenders believe that by forward-funding they reassure the peer funder.

“It’s like saying ‘look I would invest in this and we are prepared to put our own money in to show you how good it is’ but my belief is contrary to this.

“To me it raises doubts as to the ability of the P2P platform to find a funder and I would question why these funding opportunities aren’t being snapped up.”

He added: “Furthermore, the P2P platform runs the risk of slowing its process slower and slower as funders can take longer and longer to make a decision on whether to lend.

“If the P2P platform stays true to its original aim and looks for solutions to connect funder and borrower as quickly as possible then this will make the P2P platform highly competitive against a bank. “

Grandin, who launchedLend2landlord last month, is also owner and managing director of large portfolio-focused buy-to-let brokerage Landlord Mortgages.

He described Lend2landlord as a peer-to-peer ‘master broker’ which aims to do away with the necessity of forward funding by stoking up competition on different P2P platforms.

Within one second of a landlord or developer making a property available for funding it showcases the property and borrower profile on third party P2P platforms.

Grandin said: “It may become very important from a regulatory point of view that there is a distinct connection between funder and borrower and any forward funding could distort that connection.”

He added: “If the funder procrastinates over its lending decision, then it is likely the opportunity is gone to another P2P originated funder.

“Thus the funder then becomes educated and learns that it must act decisively when the next opportunity arises.”