The peer-to-peer (P2P) lending model is all about connecting. It involves people with money lending it to their peers via an intermediary, the peer-to-peer company, usually for a competitive rate of return.

For borrowers the rates are also competitive because P2P  networks dispense with the traditional and expensive banking infrastructure and administration. 

It comes as no surprise, therefore, that this model of lending has grown exponentially in the UK over recent years. In fact, cumulative lending at the end of the first quarter in 2014 hit £1.2 billion compared to £591 million at the end of the first quarter of 2013.

This data, produced by the Peer-to-Peer Finance Association (P2PFA) also shows strong growth in both business and consumer lending with over 5,100 business borrowers, 8,2000 consumer borrowers supported by more than 94,000 lenders. The P2PFA’s chair Christine Farnish commented, ’ Peer-to-Peer lending is becoming mainstream and a credible alternative to banks for consumer and business finance.’ 

P2P lending became regulated by the Financial Conduct Authority from 1April 2014 in a move designed to inform and protect consumers, while ensuring continued access to these innovative sources of funding. 

Folk2Folk have seen the popularity and success of P2P lending first-hand. They are introducers, with an added personal touch. The business, based in the South West, was launched over a year ago having been set up by the owners of long established solicitors, Parnalls of Launceston. With Parnalls having been active in private mortgages since the 1930’s the roots of Folk2Folk are in local lending and borrowing, predominately in Devon and Cornwall, although its success has enabled the business to broaden its offering across the remainder of the South West.

More on Peer-to-Peer lending in the UK:

• Government regulation to be brought in for P2P lending
• Alternative lending market forecast to hit £1.6 billion by 2014
• What you need to know about online funding options

As well as a website, Folk2Folk have a high street presence, unique in the Sector, and this has meant lenders and borrowers have the choice of an online or direct proposition. The role of the company has been to put those with funds in touch with those looking for funds from a minimum of £25,000 and no maximum, with interest only loan terms ranging from three months to five years. Lenders have the comfort of knowing that all borrowing is secured on property, while borrowers know they will get a quick decision, usually within 7 to 10 days from application to release of funds.

The combination of these benefits have proved popular across the business community and Folk2Folk have introduced over £25 million of loans in a little over a year. This has resulted in the funding of a wide range of ventures across the South West. Lenders are receiving a competitive return on their investment and at the same time supporting the local economy, able to see the funds being put to good use.

Returning to the traditional approach of a local, community based lending scheme but ensuring it operates securely – and quickly – to be a maximum benefit to its clients has been a highly successful move for Folk2Folk’s backers.

Folk2Folk is chaired by Tim sawyer, managing director of StartUp Loans which is a government-funded scheme to provide loans to entrepreneurs. He said, `Folk2Folk is a fantastic alternative lending channel, which is becoming increasingly important as businesses struggle to secure finance from the banks today following the fall-out from the economic crisis. Our peer to business model is a return to the traditional way of money being borrowed, but it is most definitely the future.’