Peer to Business Lending
Alternative Finance Sector Report - November 2014
26
PEER TO BUSINESS LENDING
ALTERNATIVE FINANCE SECTOR REPORT
PUBLISHED
November 14
AUTHOR
Luke Jackson
Samantha Goins
Lenders will rarely pay any fee at the start of the loan. They can usually sign up to the platform for free and lend as long as they meet
the minimum lending requirements. Platforms take their initial fees from borrowers to cover the initial due diligence, listing on the
platform and administration surrounding the loan. This will be taken as a percentage of the loan value of between 2-5% before any
costs of sale that the platform incurs.
On an ongoing basis the platform receives their revenue as a percentage of returns or a percentage of loan balances. This usually
equates to about 1% of the loan balance, but will vary by platform. A number of platforms advertise that there is no annual fee to
lenders, although this is likely to have been factored into the interest rate and instead of being payable by the lender as a deduction
to the publicised interest rate, it is paid as an annual fee by the borrower. Most platforms are very open about their fees as this is a
unique selling point of P2P over bank lending or mainstream investment products. The annual fee will be used by the platform to
cover ongoing administration and running costs of the platform.
LENDER
BORROWER
PLATFORMS
UPFRONT FEE 2-5%
PRINCIPAL
PRINCIPAL
PLATFORMS
ANNUAL FEE 0-1%
PRINCIPAL
+
INTEREST
PRINCIPAL
+
INTEREST
LENDER
BORROWER
DURING THE LOAN
AT START OF LOAN
