As the birthplace of P2P lending, the UK has been the fertile soil for the development of fintech. In recent years, many outstanding enterprises have emerged. We travelled to London in June 2017 to visit several representative fintech companies, and here we share one of a several special reports on their innovative business models.
LendInvest's predecessor, Montello Bridging Finance, specialized in short-term mortgages and was established in London in 2008. From 2012, LendInvest’s founders, Christian Faes and Ian Thomas, began to pay close attention to the online lending market, and in May 2013, LendInvest's online investment platform was officially launched. LendInvest is not a P2P platform in the traditional sense. The company registered with the Financial Conduct Authority (FCA) as a fund management company, and its products on the online platform are in essence fund products.
LendInvest has grown rapidly since it started operations. By April 2017, the total turnover of LendInvest had reached £999 million British Pounds and the number of individual and firm borrowers reached 2,000, with an average loan limit of £ 957,000.
LendInvest Business Model
LendInvest focuses on short-term bridge loans, all of which take the first legal charge of the property as collateral. LendInvest offers two types of products for borrowers, bridge loans and development loans for property developers.
LendInvest’s Bridge loans include bridge loans for one to 12 months, bridge loans for three years and auction loans for one to 12 months, with loan limits between £75,000 and £750 million British Pounds and Loan-to-Value Ratio limits up to 75%. LendInvest’s also offers four categories of development loans for property developers, including refurbishment loans and development loans with different loan limits. Development loans have the highest loan limit between £250,000 and £ 10 million. By April 2017, the loan balance of bridge loans and development loans accounted for 78% and 22% of LendInvest’s loans respectively. The company also has about 2,000 borrowers which are mainly enterprises.
Individual investors can register on LendInvest's platform and choose a platform for investment. LendInvest was also able to draw on its in-depth understanding of the property market to develop a Buy-to-Let (BTL) Index which is based on indicators like asset returns, rental income, and house price indices. Investors can also share part of the revenue by investing in BTL loans on LendInvest's platform.
LendInvest is gradually expanding its funding sources. Funds contributed by individual investors currently account for one-third of LendInvest's funds, while the other two-thirds of the funds come from LendInvest Capital and institutional funds. In April 2016, Macquarie, an Australian investment bank, signed an agreement with LendInvest to invest £40 million in short-term mortgage assets on LendInvest's platform. According to reports, four other banks have also invested in LendInvest's platform.
Q&A
Below is our interview with Christian Faes, Co-founder and CEO of LendInvest:
Q: Would you please briefly introduce LendInvest?
A: LendInvest's predecessor was founded in 2008, after the economic crisis, and mainly provided short-term mortgage loans. In 2010, a fund company was set up and was mainly responsible for offline investment advisory sales. In 2013, the company followed the fintech trend and established an online platform--LendInvest, which mainly provides short-term bridge loan products for those who wish to self-invest.
The company has gradually moved online, developed automated processes and given more attention to user experience. The average loan approval time is about 14 days, which is much shorter than the banks' approval time.
In terms of geographical focus, LendInvest will continue to focus on the UK mortgage market which is very large. We also find that the costs of access to regulation in the US and China and adaptation of property mortgage process and policies are very high, but the costs in Australia and other regions are relatively low. We will further develop the UK market for now.
We believe that the property mortgage market will not be monopolized. We welcome competition and hope to become the largest mortgage lender outside the banks.
Q: Who are the major investors of the company?
A: There are three main sets of investors, individual investors on the online platform, investors of the offline fund company and institutional investors. The number of individual investors on the online platform accounted for about one-third, and the remaining accounted for two-thirds. The cost of using institutional funds is relatively low, while the duration can be longer. But at the same time, institutions' requirements for the company's risk control are stricter.
Q: What's the process of the company's risk control?
A: Our risk control mainly combines third-party institutions with our own system, especially in terms of anti-fraud. The company has gradually achieved the automation of loan approval to improve the user experience. For example, the specific information of mortgage assets can be queried automatically. The submission documents vary with specific projects.
Q: Do you believe that the short-term bridge loan market is too small, and the demands will be reduced after the gradual recovery of the economy?
A: People's awareness of bridge loans is changing. Due to the increasing difficulty in mortgage applications, bridge loans have actually become more common with still great demand. Of course, we are also broadening our product types.
Q: What's the future plan of the company?
A: We will diversify the types of long-term loans and not only focus on short-term bridge loans. The company will also seek IPO financing to get more development funds.
