Flender* is a peer-to-peer business loans and property lending website that has provided us enough information to be listed in 4thWay's peer-to-peer lending comparison service. This takes place after our experts' usual exhaustive questioning and data gathering.
One of the experts has written a brief summary of their key findings and an own opinion in this Flender Review:
4thWay's Quick Expert Flender Review
“Own crowd” concept with great potential
Established in 2017, lenders using Flender have lent over one million euros to Irish business borrowers and Flender is in the process of expanding to include property. The loans are in euros, so UK-based lenders who normally use pounds face currency risk if the pound falls in value.
Flender requires that borrowers first borrow at least 25% from their “own crowd”, meaning friends, family, suppliers and other contacts, before other lenders can take part. The own crowd might charge low interest or no interest, making it easier for the borrowers to afford the overall loan.
Flender has a team with relevant banking skills, qualifications and senior-level experience in both business and property lending.
Flender has described to us in detail the processes it has in place for approving loans and recovering bad debts, and these are just as we would expect. In some areas Flender exceeds expectations. We like that business borrowers have to be able to afford to pay 1.5 times the monthly loan repayments and that the average is more like three times. This is highly appropriate for these kinds of loans.
Flender does not or has not conducted the sorts of risk modelling that is usually carried out on small business loans to steer its entire decision-making process, although this is always very difficult to do when a lending business has just started. This is because there is no existing loan data to base the models on. Flender tells us that to compensate it is being conservative to begin with while it builds up a history of loans.
When Flender lenders are funding just part of a development, Flender intends to approvewith a maximum loan of 75% of the starting property price, which is an attractive safety net. If the loan is to cover the entire development from start to finish, the maximum will be 75% of the expected sale price of the completed development, which is pretty standard.
Flender also intends that the property borrowers typically have spare existing income that covers interest payments two times over. Such attention to affordability is far from a given in P2P, and we expect it should significantly reduce the risk of losses on individual loans.
Flender approves approximately one-fifth of business loan applicants. This is not high in broad risk terms, but it is higher than we'd expect for a brand new P2P lending site doing these kinds of loans. Smaller, newer P2P sites can be much more selective of their borrowers since there is less money available to lend, so we like to see them being able to take advantage of that.
However, if Flender pulls off its ambitious 2018/19 plans for attracting a large number of borrowers and lenders very quickly, this approval rate could quickly become acceptable and in line with similar-sized lending operations.
One-sixth of all applicants have so far gone on to raise enough money from their contacts, so that they are allowed to get the rest from ordinary lenders on the Flender website.
It will be very interesting to find out how much having an “own crowd” reduces the risks for all lenders, although it will take some time to see the results.
No loans have gone bad and lenders have lost no money, but it is very early days. We won’t know for a while if the interest rates for lenders – typically 10% – will turn out to be sufficient for the risks involved. However, based on the information we have those interest rates look suitable.
Flender* has been very transparent with us. In addition, we would like to start receiving access to their detailed loan data over the coming months.
Flender has received €650,000 (£570,000) from angel investors and entrepreneurs who seem to us to be credible, as well as from Enterprise Ireland, which, by one measure, is the third-largest early-stage funding organisation in the world, ahead of Google Ventures. Flender is seeking around €2 million (£1.7 million) in total from investors to help it grow into a profitable business.
You choose the loans you want to lend in for yourselves, except if you lend at least €100,000, in which case you have your money automatically lent out. You will need to spread your money across other P2P lending sites to lower your risks and to ensure you are lending in enough loans.
Read more Quick Expert Reviews in our comparison tables.
Independent opinion: the opinions expressed are those of the author and not held by 4thWay. 4thWay is not regulated by the ESMA or the FCA, and does not provide personalised advice. The material is for general information and education purposes only and not intended to incite you to lend.
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