For P2P lenders, possibly the biggest boost of confidence they are receiving is that borrowers and investors are coming to them to get better rates than those available at banks and other securities. While initially proving themselves as a source for lending to individuals and small businesses that were unable to get approval of loans from banks, borrowers are now switching to P2P lending platforms instead of banks, and not the other way around.
Two items have changed. First, the industry has matured, and the idea of a non-bank alternative for loans isn’t as strange as it used to be. Secondly, rates available on P2P lending platforms are becoming more attractive than terms available from banks. The demand to borrow on P2P lending platforms has resulted in a rising group of institutional funds deciding to invest in the market due to attractive rates available compared to other fixed income securities.
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Illustrating the latest demand among investors to lend money on P2P platforms, Chicago-based Victory Park Capital has filed to raise £200 million on the London Stock Exchange’s AIM to create a new investment vehicle to invest in P2P platforms. The investment vehicle, VPC Specialty Lending Investments, will be targeting a yield of over 8% for shareholders.
Victory Capital’s interest in P2P lending comes as they have been allocating funds to invest in the sector this year. Earlier in the year, it was reported that the firm was investing funds in Lending Circle and Assetz Capital. The UK market itself has been one of the fastest to adopt P2P lending, as recent research published by the UK’s financial regulator, the FCA, reveals that lending transactions grew 170% to nearly $2 billion in 2014.