Interview: Alan Fagan, Linked Finance

24 Feb 2018 | 03.56 pm

Interview: Alan Fagan, Linked Finance

Linked Finance lending more than doubled in 2017

24 Feb 2018 | 03.56 pm

Linked Finance brought the concept of peer-to-peer (P2P) lending into the mainstream in Ireland when it launched in 2013. The company had a transformational year in 2017, according to Alan Fagan, Head of Marketing. “Our lenders provided 517 loans to businesses across Ireland. Total funding for the year grew to €24.2m, up from €9.8m in 2016. Total funding secured via the platform is now in excess of €42m and we’ve delivered more than 1,200 loans,” he says.

According to Fagan, the only documents needed for a credit decision are the last set of financial accounts and the most recent six-month bank statements. A decision will then be made in a few hours. The average loan provided to borrowers was around €50,000 in 2017, up significantly on previous years. Fagan explains that this is down to growing SMEs requiring credit for bigger expansion plans, and to a bigger community of P2P lenders providing funds.

“P2P lending is becoming an attractive asset class for experienced and institutional investors. We’ve also recently introduced a pension account, which allows holders of certain self-administered pension products to make lending on Linked Finance part of their planning for retirement.”

Interest rates on the Linked Finance platform start from 6%, though the majority of loan requests are funded in the 8% to 10% range. Repayment terms of six, 12, 24 and 36 months are offered, the latter being the most popular. Borrowers repay their loans via single monthly direct debit payments, while the Linked Finance platform redistributes these payments to the relevant lenders.

“We don’t ask borrowers to provide assets as security. Essentially, we are providing unsecured lending to Irish SMEs,” Fagan adds. “Where we are lending to a limited company, all we ask is that the business owner sign a personal guarantee as part of the standard loan agreement.” Borrowers are charged a completion fee of up to 5% of the overall loan amount.

Many businesses coming to Linked Finance are turned down for loans, says Fagan. “A platform like ours is only sustainable as long as we can continue to deliver consistent returns to our lenders. Also, you’re not doing a business owner any favours by providing loans that they will have trouble repaying. A common reason for declining loan requests is a lack of repayment capacity evident in the bank statements provided.”

Speed, ease of access and flexibility are the key attractions of businesses for P2P loans. “Consumer-facing businesses like the ‘crowd’ element of what we do,” says Fagan. “But manufacturing companies, agriculture businesses and B2B service providers are just as enthusiastic.”

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