Game of Loans: Can lenders keep innovating?
I was recently asked by a journalist whether I think that lenders in this sector can carry on innovating. In other words, have we reached our capacity in terms of product offerings, loan structures and outright dynamism? The answer is, of course, very much a no.
Innovation really is core to the success of a lender. Being able to stay ahead of the game is crucial; a glimpse into the current market reaffirms this as we can see how every lender is trying to offer something slightly different, packaged in a slightly different way. Somehow, we are also still seeing new lenders enter the market, trying to offer a unique proposition. For me, an interesting example of this is amongst P2P (peer-to-peer) lenders where a lot of their business is based on their technology and how innovative they can be when interacting with their potential investors. I recently flew on a short haul flight where, from my house to my destination, I saw P2P adverts on the train, on the street and on the plane out. It's great to see there’s no escaping innovative lenders.
This leads me to development finance which, on the surface hasn't changed too much over the past few decades (except for some of the players in the market). However, the scope for innovation is still huge. When lending development funds, a lot of lenders will release funds based on the developers' invoices and the physical cash put into the site. In theory this works, however, developers often have unexpected soft costs which may not necessarily go directly into the site, as well as labour and other unforeseen spending which could all come off their bottom line. Ultimately, the role of the development lender is to make the developer as liquid as possible. This is why we, at Regentsmead, prefer to use our surveyor as our eyes and ears on the ground to confirm exactly what funds we can release to the borrower. (This is innovation working in a very subtle, but better way of doing things).
In terms of attracting new clients the possibilities for innovation are endless. At Regentsmead, we often brainstorming meetings about how we can further interact with our clients, and potential clients for that matter. Our recent live chat and online application form is something you might associate with 'fintech' rather than development finance, but we have managed to make it work very well. New partnerships, ideas and different ways of working just go to show that innovation never stops.