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Alternative lenders – on the forefront of change

September 11, 2015 | Jonathan Pryer

The loans market has seen an eruption of alternative lenders in the last few years, disrupting the traditional ways of lending. This has been particularly beneficial for smaller businesses, which often find it difficult to get a bank loan.

However, this emerging market isn’t without controversy. Just this week, peer-to-peer lenders in particular have come under close scrutiny from a number of industry experts,who are accusing them of hiding some of the costs associated with investing via their platforms. These experts are calling for the industry to develop a standardised formula for expressing costs and charges as a way to improve transparency.

It’s perhaps no surprise that P2P lenders are still finding their feet when it comes to communicating charges; after all, the alternative lending market is an extremely fast-growing and dynamic industry.   The latest example of this is corporate loans, which allow ordinary investors to back loans to large corporate borrowers with only a small amount of cash to lay down. It has similar characteristics in common with P2P lending and corporate bonds, but loans are larger and investors have exposure to only a handful of companies.

Will corporate loans be the next disrupter in the alternative lending market? It’s too early to say but looking at the likes of WiseAlpha, which is leading the way in this sector, I wouldn’t discount it.


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