Peer to Peer lender Zopa sees surge in social lending and government investment
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With the public’s confidence, trust and moral tolerance of the big banks in shreds after years of austerity brought about by their rapaciousness and the fundamental need to keep them afloat, no matter what their transgressions, it is heartening to see Zopa doing so well.
Zopa is a peer to peer lender that acts as a broker between those who wish to lend and those who need to borrow. It effectively connects individuals rather than acting as an institution, and it’s rate of expansion is beginning to accelerate. Zopa was the first social lender in the UK when was founded in 2005. Its’ business model is based on charging lenders 1% of their loans and taking a fixed ‘finders’ fee from the borrower. Lenders get a return of 4.6% on average, but rather than allowing institutions invest their money in precarious or ethically dubious schemes, it allows the lender to control where their money goes.
Having facilitated £20 million of loans in July alone, Zopa is now gearing up to start lending to small business rather than just focusing on personal loans. And it seems that the government is set to invest in the company to help support this flourishing new lending model. The government is providing £10m of funds for Zopa to lend to sole traders – such as plumbers and window cleaners – who want to borrow up to £20,000.
Giles Andrews, Zopa's chief executive, said: "Business is growing faster than ever. We have reached some kind of inflection point of awareness."
He went on to speak of the governments cash injection "It's a big deal for us. For any business to get some kind of government support after a lengthy due diligence process is a positive step, and it takes us into a pretty interesting new business area."
"We believe there's an opportunity to grow now. Conditions to compete with the banks are favourable, public perception is favourable and government perception is favourable. The market is fantastic for us."