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Hail the new breed of lenders giving the banks a run for their money
Alternative lending is having its moment in the sun, but can these young upstarts really shake up the banks?
by Michelle McGagh on Aug 15, 2012 at 13:49
Trying to borrow money at the moment may seem like a fruitless task for many who are stuck between stingy banks that want DNA samples before even thinking of lending to you and shouldering extortionate charges levied by payday lenders.
With these two unappealing propositions to choose from, isn't it time for consumers and businesses to look for alternative ways to borrow money?
With scandals engulfing our banks since the financial crisis including multi-million pound fines (I’m looking at you Barclays) and reports of widespread mis-selling over a decade (hello, RBS, Lloyds, HSBC and Barclays again), it’s no surprise that the backlash has begun.
The friendliest face of a different sort of banking has to be Dave Fishwick, a minibus millionaire from Burnley who set up his own bank in 180 days with the aim of lending to his local community and offering decent rates for savers.
Fishwick also donated the profits from his ‘Bank on Dave’ operation to local charities after covering costs. He wanted to bring ‘hard work and common sense’ to the banking industry, which is sorely lacking.
But he isn’t the only one with ideas on providing alternatives to the big high-street lenders.
Many people have heard of Zopa, which was set up in 2005 to match-make those people who have money to lend and want to make a bit of profit, with those who need to borrow. To date, £224,235,120 has been loaned through the company.
Funding Circle is the equivalent of Zopa for businesses. Having been open since 2010, it has so far loaned £44,552,060.
The amount of money that has been borrowed shows the appetite for alternative lending is huge, while operations of this type are gaining credibility.
The latest contender to enter the fray is BanktotheFuture.com which claims to be the ‘world’s first social network financial institution’. Confused yet? This lending website matches investors and start-up businesses but instead of relying on credit scores it evaluates potential customers on their social media ‘capital’ – basically online presence, number of friends and followers, plus good reviews equals a good credit score.
Before you shrug the idea off, keep in mind that it's got Sir Richard Branson's blessing and has made it into the top 50 of his global Virgin Unite Screw Business As Usual competition.
As unorthodox as this seems, it is marrying together online lending with the 21st century maxim that you’re not anyone until you’re someone online.
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