Flender co-founders, Oli Kavanagh, Jeremy Davies and Kristjan Koik.
Billy Wood

Member Article

Meet the P2P lender that wants to take the awkwardness out of lending money to your mates

Peer-to-peer (P2P) lending comes in all shapes and sizes nowadays, with the increasingly ubiquitous model applied to everything from mortgages to invoice financing to short-term consumer lending and everything in between.

The model has crept towards mainstream acceptance in recent years, shrugging off fears about regulation and oversight to become a viable option for businesses looking to finance their latest ventures, backed in turn by a welter of FCA approvals.

Now, a FinTech startup is hoping to bring a similar P2P financing revolution to one of the last untapped lending markets - informal, social lending between family and friends.

Flender has been in development for the last two years and is built around harnessing the power of social networks, both online and offline, to help individuals and businesses raise capital.

Founded by entrepreneurial tech trio Oli Cavanagh, Jeremy Davies and Kristjan Koik, the app is now poised for its official launch in the UK and Ireland later this month, and has this week hit its £500k crowdfunding target on Seedrs.

“We surveyed the size of the friends lending market across the UK and when you translate that into value, we almost fell off our chairs.”

While a key part of its business plan is providing a platform for businesses to raise funding from customers, suppliers and others in their social circle, it’s most eye-raising and, arguably, most innovative feature, is its facilitation of lending between friends and family members.

According to research that Flender carried out last year, this informal lending market between friends and family could total as much as £2.9bn (for reference, the UK and Ireland’s business and consumer lending market stands at around £2.5bn), a massive market that Cavanagh believes has remained ‘untapped’ until now.

Speaking to Bdaily following the closure of Flender’s crowdfund, Cavanagh revealed that the startup was stunned to discover just how big this market was.

He said: “We were really shocked to discover how big that was. We surveyed the size of the friends lending market across the UK and when you translate that into value, we almost fell off our chairs.”

One of the app’s key draws is formalising this social lending market, so that it’s ‘no different to borrowing from a bank’, and gives individuals the scope to charge interest if they wish.

“Because you do end up asking for your money back. It’s very awkward and it actually ruins friendships and families.”

Using the example of someone trying to fund an MBA, Cavanagh explained that while people could theoretically do a whip around of friends and family, asking to borrow £500 to £1000 from 10 to 15 people, no one does due to the inherent complications and awkwardness associated with such lending.

“On one hand, no one does that because it’s so difficult,” he says. “It’s unreliable and the amount of percentage of loans that are never fully repaid is ridiculous.

“No bank would ever survive. The second thing is that it’s very very awkward. Because you do end up asking for your money back. It’s very awkward and it actually ruins friendships and families.”

Flender’s solution is to provide an entirely formalised approach which allows users to tap up people in their contacts list and Facebook friends list and enter into direct, legally binding digital contracts while providing better returns than high street banks.

“We’re actually removing the negative side of it, the awkward side of it, the potential negative fall outs.”

But won’t embroiling interest rates and financial contracts into friendships be even more awkward than current informal arrangements?

Cavanagh disagrees and argues that by making it both more formal and so easy to do, Flender’s solution is actually a lot less awkward than lending £500 to a mate, which is then never paid back.

“It’s going to maintain friendships more than anything,” he argued. “[Informal lending] is already going on to the value of £2.9bn a year, and that’s creating problems because it’s not formalised.

“We’re actually removing the negative side of it, the awkward side of it, the potential negative fall outs.”

However, the £2.9bn friends and family market only forms half of its ambitions. The startup also has its sights trained on the mainstream alternative finance market as well, bringing its total potential market to £6bn across the UK and Ireland.

Cavanagh says that Flender has already signed around £2m-worth of business lending agreements ready to go live for the platform’s launch, and once fully operational will give businesses the opportunity to raise cash from customers and other interested parties directly.

As with the social lending model, lenders enter into direct, digital contracts with the business and can set their own rates, including the option to lend at 0% interest, something which Cavanagh says no has facilitated before.

He explained: “With 15 people lending at different rates, it’s very very good for our business because we’re working on a blended interest rate, it widens the net of people who are able to participate.

“Because there are people lending at 0,1,2% it means other people at maybe 8, 9, 10% are able to participate in the same loan.”

With regulatory approval in two markets, a multi-currency platform and a successful half-million pound crowdfund under its belt, Flender certainly looks in good shape ahead of its official launch.

Whether it means your granny is going to start charging more punitive interest rates than the most predatory bank remains to be seen.

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