Government funds all used up??

blender - I do need to be careful on this, in part because I'm off piste and also because this is commercially sensitive. I'm also the company geek rather than MD or FD etc. so take what I say with a pinch of salt.

I would be surprised if there were any qualifying P2P platform that hadn't applied for the government fund, and whilst we think we can certainly put it to good use it's not essential to our business plan.  The endorsement is nice but the whole market is still very much in the early adopter phase and won't hit mass market in any meaningful way until much later this year at the very earliest and likely many more years.  So again it's nice but it's not critical.  As has been mentioned previously by Andy we are working on alternatives regardless and the government cash would just be one facet of any strategy for growth.  There are bigger changes coming to the industry over the next couple of years that I personally think will have far more effect on shaping the competitive landscape between the major platforms.

Competition wise I would like to think that we're now just about big enough, with a run rate of £5-6m lending per month and turning a profit, and with a different enough offering from FC and the other platforms for it not to be an issue.  Most P2P platforms effectively act as small banks - they look at the Experian or Equifax credit scores (or sourced from another party), add a few criteria of their own, and then put borrowers into "risk" buckets and list them on the site.  If they lend to businesses the banks turned down then in general it's only because they are willing to set lower criteria than the banks not because they have a better understanding of underwriting to the banks, or they are trying to compete with the banks on pricing by taking a smaller margin and asking their lenders to shoulder more risk.  When you see platforms showing off about the technological marvels used to automatically power their underwriting processes then alarm bells should be ringing as any algorithm is only as good as the data put into it and most will ignore the human judgement aspect of understanding a business.  Computers just aren't that smart yet.  The only exception would be those playing the volume game like Wonga but that is a very very different business model and proposition.

We have a different approach to underwriting where credit scores and company accounts are just two aspects that we look at.  We use a very experienced team to assess the risks, weigh them against the security and rewards offered, and look at the underlying ability to repay rather than past credit information that is often out of date.  We then price to risk rather than pricing to liquidity.  As such we have a very different lending profile to most of our competition which means for the most part we really aren't competing with them for the same loans.  If you want a small business loan and have a good credit rating then you'd be a fool to use us instead of FC, but then again you're likely to get a good deal from your bank.  FC's selling point would probably be speed of process and possibly offering a better rate.  However if you don't fit that profile FC won't even be an option.

There is a wider question about the state of the rest of the industry and whether the current small players and new entrants will be able to compete in the future - I suspect that many will not be able to survive unless their backers have deep enough pockets. From a philosophical point of view I would much rather there be a healthy ecosystem of many players servicing different markets and providing competition to drive the whole industry forward. No one platform is going to revolutionise business (or personal) lending in this country, and no one platform will get everything right, but collectively we just might drag the banking system into the 21st Century.  The government do need to be careful about skewing the market too much should they wish for this variety and range of offerings to thrive and flourish, rather than effectively endorse a handful of models, but looking at my own little corner of P2P it's not keeping me up at night.