Peer-to-peer lending is expected to grow substantially within the next five years. However new lenders in the market been hampered by the FCA's ability to grant licences to new ventures.
P2P finance is the future because it is very competitive and rates are often reflective of direct risks to lenders. As normal finance channels dry up, p2p (otherwise known as CrowdFunding) is a excellent way to challenge the dominance of the big instituitions.
This is something we know little about, earlier this year - one of our other brands "Genesis.co.uk" was considering moving into the peer-to-peer market for business finance. We didn't hammer out all of the details but the general idea revolved around a Dragons Den type investment platform. Give a pitch and get finance offers.
We knew that regulation has been tightened since the FCA took over, and we do welcome that tightening of regulation because where it came from previous to 2014 was zero regulation. After all, fraud and other types of scams do do damage to everyone involved in this market.
What we didn't expect was the timeframe from the point at which we would apply full permission with the FCA to the point at which we would be able to start trading.
We spoke to a well-known and very well respected law firm in London who offered to walk us through the whole application process. Doing everything by the book, with them crossing all of the T's and dotting all of the I's - we would be looking around 18 months to get licensed and at a cost of around £130,000. This is the horrendous state of regulation facing UK entrepreneurs these days. Both in the time frame and the costs involved.
A site that wanted to help other businesses get off the ground would itself have to wait 18 months - whilst paying out over £130k in legal and licence costs.
What we will probably start seeing shortly is more businesses basing themselves in other EU countries. Whilst basing themselves out there, they will still be trading in the UK. They don't need to register with the FCA because they will come under the regulatory body of the EU country to which they are based. Saving themselves 18 months and £130,000.
This is something that we consider doing but in the end we shelved the idea of Genesis.co.uk and peer-to-peer lending altogether. Yet another business idea regulated out of existence by the business friendly UK government. This is not a dig at the FCA, it's a dig at those who asked the FCA to do this.