The CODE Investing 2018 UK Investor Report
The report* examines the growing trend in lenders supporting loans as a preferred way of financing small businesses.
The rise of FinTechs such as CODE Investing continues to revitalize the financial services customer journey. SMEs are now able to access both traditional and non-traditional lenders through symbiotic partnerships with institutions, banks, High Net Worth (HNW) and sophisticated investors.
Business finance in the AltFin arena is fast becoming a stronger proposition for many borrowers and lenders. This is not least because of FinTech companies like CODE, developing automated processes that allow us to spend more time focusing on linking the right businesses to the right lenders by matching criteria.
Our report examines how lenders choose to invest their funds, the length of time they’re happy to put their funds out for and the level of return expected. It also looks at their willingness to invest in overseas as well as homegrown opportunities.
Most private or retail investors are interested in mid-term loans and ROI of 10%
The survey found the majority of private i.e. sophisticated, HNW or general individual investors use wealth managers, brokers and independent financial managers to help manage their funds. Only a small minority of only 6% prefer to go it alone.
Of those private investors, 33% expect to invest between £10-100k, with a further 27% investing £200-500k, and 7% looking to invest £1m or more. One survey respondent replied that they “decide on a case by case basis and would look at giving the money as services instead of cash”.
In terms of ROI, most expect to see returns of between 5-10% or 10-20%, though an optimistic 8% would hope to make 100 or even 400% back on their original investment. Some lenders conceded that “much depends on structure and risk level”.
How long are investors looking to outlay funds for? Our survey found that over 50% of investors would be comfortable putting their money out for three to five years. A small minority (8%) are happy leaving funds untouched indefinitely.
Investing in Debt:
- A large majority of lenders (70%) would be comfortable loaning funds to businesses both at home in the UK and overseas with the rest devoting funds to homegrown SMEs exclusively.
- 44% are happy to take on more risk by lending to newer businesses with less track record but more growth potential.
- 56% are more cautious, preferring to invest in more established businesses.
But when reviewing borrower credentials, over 40% of lenders said they would still invest in a business even if it didn’t have any tangible security, reflecting a higher risk appetite amongst some private investors.
- Nearly 60% say they would invest in trading businesses
- Around 30% stating they would invest in real estate
- Of those who would lend to property investment, over 60% said they would also invest in property development
There’s a growing appetite amongst traditional lenders and private investors to tap into a market of SMEs and real estate businesses.
It’s a trend that’s set to continue to the mutual benefit of borrowers and lenders, as we implement more efficient systems that allow us to focus on finding the best match for SMEs and those seeking to invest in them. Not surprising as both can benefit from having a broader choice of lenders in the one marketplace.
*Conducted in conjunction with The Global Group and UK Investor Show
A growing number of institutional lender are redirecting their funds, to provide finance to UK SMEs.
CODE Investing has entered into a strategic collaboration with City of London Group to originate SME loans
CODE Investing has entered into a strategic partnership with BNP Paribas Asset Management to originate SME loans.