Private lending expected to rise after coronavirus lockdown

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The industry of private lending is expected to surge following the coronavirus pandemic, Business Leader is told.

Private lending from personal and specialist lenders has been limited or non-existent during the coronavirus, as lenders have been cautious to give out money during these unpredictable times.

Lenders have not been equipped to make decisions over income, affordability and repayment terms, especially when many were advised by the FCA to offer payment holidays to existing customers.

However, this has not reduced the demand for personal or business loans, which has been significant for those unable to earn a living during the lockdown or for businesses looking for help with their cash flow.

In addition, mortgage providers and banks have highlighted their plans for a more restrictive lending criteria following the coronavirus lockdown – and this could give way to private and alternative non-bank lenders.

Finance analyst Daniel Tannenbaum commented: “Private lenders have been very cautious over the last few weeks, since there has been so much uncertainty over customer income and affordability. Will people be furloughed? Will their business still survive in 3 months? These are things that have restricted any sort of lending and Amigo were the first to say that all lending was on hold during covid-19.”

“However, as we slowly emerge out of the coronavirus pandemic, the demand of loans and finance is still very much there – and now lenders will have funds that they are ready to give out and also make up for, since they will have funding targets that they will need to meet.”

“The types of lending we will see are from non-banks and more attractive fintech companies and lenders, likely to be offering unsecured loans such as guarantor or peer to peer loans – and for businesses, we should see more specialist finance such as bridging and invoice finance.”

“We may also see companies exiting the market, since they were unable to reach funding targets or have seen larger default rates as a result of the coronavirus pandemic. Particularly in the high-cost short term loan space, there are far less players in the market, and other types of lenders such as peer to peer or personal are expected to pick up the slack.”

In addition to private lending, many companies have sought alternatives for legal and accounting software. As part of a cost cutting measure, those looking to save money from large accountancy firms are starting to handle this in-house, using the likes of Sage, Xero and QuickBooks.

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