Most people know that there has been a decrease in traditional funding for property development. Since 2014, the level of funding provided by banks has halved. But development hasn’t halved. In fact, more new homes are being built recently, despite the overall trend still being downwards.
So with the banks giving out less funding than before, how is it possible that so many development projects are being financed?
Simply put, it is because developers are looking to non-traditional sources for funding, such as peer-to-peer (P2P) finance. In much the same way as ‘crowdfunding’ has enabled the development of a vast number of companies, inventions and even films.
Flexible, direct-funding finance has exploded over the last decade or so. But its application is not just limited to Pebble, Exploding Kittens, or other consumer products. This kind of lending system is adaptible for the development market, and has a lot of appeal for both investors and developers.
Some developers, including Nicole Bremner, have had huge success in crowdfunded property development. Nicole and her development companies have generated over £4m through such finance to deliver developments. Now, they use Simple Crowdfunding as a property crowdfunding marketplace.
P2P finance is often more flexible than traditional bank lending, and can also be much faster than waiting for a bank to process and approve a finance application. Their application processes are generally far more personalised, and decisions can be made within days.
Many people have pointed to the security of the P2P platforms as a major appeal as well. Because they mostly operate on a system of property debt investment, the lender’s investment is protected and will pay regular, fixed income returns.
With larger banks and their traditional processes, decisions can take weeks. Even after the decision is made, there can sometimes be a waiting period of months before funding is released. With P2P, funds can be released within a matter of weeks.
This is not to mention the support given to alternative funding options by government and industry bodies. This has meant that the banks themselves are far more collaborative with these alternative options, which streamlines and secures the process even further.
So perhaps it is no wonder that so many people are turning to P2P as their primary choice for alternative funding.