Linked Finance aims to increase peer-to-peer lending
Linked Finance has raised €2 million in equity as part of plans to expand its business. The company facilitates peer-to-peer - or crowd - lending, which allows individuals to put forward money that is, in turn, offered in lending to businesses. Since launching in 2013, Linked Finance has lent €34.5m to Irish SMEs, more than a third of which has already been repaid, and agreed its 1,000th loan in September. The latest funding round was led by Linked Finance's original venture capital backers, Frontline Ventures, while it also brought in funding from some of the individuals who are actively lending on its platform.
Linked Finance's CEO Niall Dorrian said the money it recently raised will help it to expand that business further. "Linked Finance has been growing rapidly over the last number of years since it started in 2013 but 2017 has been a transformational year where it's growing at over 200%," he said. "So it's very much about having the funds to take it to the next level. Peer-to-peer lending is a rapidly important source of funding for SMEs within Ireland and we want to ramp that up in terms of the awareness on our brand and the sales and marketing functions of the business."
Irish SMEs have traditionally turned to banks when seeking finance, with non-bank lending here only gaining any significant foothold in the market in recent years. Mr Dorrian hopes to change that, though he says it may take time to explain the advantages to some firms. "It has been an education process," he said. "It is a rapidly growing area throughout the world, particularly in the UK and US, Europe is playing catch-up a wee bit. What is unique about peer to peer lending is the speed of funding, the flexibility and the transparency which contrasts with traditional forms of finance, which would take much longer. SMEs need to respond and react quickly to opportunities and new contracts and that's where we step in."
Of course Linked Finance doesn't just need to convince firms to take out loans - it also needs to get individuals to put forward money of their own in order to make that lending possible. However Mr Dorrian says that they have so far done well in that regard - with anything from €50 to thousands of euro being offered, thanks to some clear incentives for lenders. "People are frustrated with the low interest rate and they're looking for opportunities to make their money work a bit harder," he said. "We've 16,000 registered lenders who are deploying money and what we advise people is that you're building up a portfolio, it's a diversification of that portfolio over many, many SMEs, you don't put all of your eggs in one basket. That has actually been the easier part of the sell."
But crowd-based lending remains a relatively new idea across Europe and as a result many countries are still playing catch-up in the area. That means that there continues to be no regulation in relation to the industry in Ireland - though Linked Finance has sought out a framework to ensure its business is meeting standards. "We proactively went and applied for regulation with the FCA in the UK, which would have the most advanced regulation," Mr Dorrian said. "That was very much about benchmarking our work practices and processes against the best in the world and we successfully completed that process. We are, however, engaged with Finance around regulation Ireland and we would expect that to take a similar shape to the UK, which puts us well ahead of the curve in terms of that regulation coming in."
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