These are all too familiar questions posed and discussed around many a peer-to-peer (P2P) board table in recent weeks.
How a P2P platform addresses these questions will largely depend on the general profile of its borrower base and the financial position of the platform itself (that is, its ability to withstand the impact of Coronavirus (COVID-19) at least in the short to medium-term).
We consider that most of the P2P platforms out there are likely to fall into three broad areas:
Operational hibernation
Your platform has been critically affected by COVID-19 and you have been unable to obtain Coronavirus Business Interruption Loan Scheme (CBILS) accreditation (or similar). You may be experiencing challenges which have prompted you, as a board, to assess the strategic options available to your business.
It may be that your platform was fundamentally sound pre COVID-19, yet highly geared towards property lending. With many development projects mothballed, investors have little choice but to accept an unknown and potentially prolonged period of hibernation, for as long as lockdown ensues. In this scenario, the existing liquidity of the platform may be key to its survival.
Exploring exit options
If your platform, was fundamentally sound, with a viable business model pre COVID-19, now may be the time for you to opportunistically explore the prospects of an early exit.
Conversely, if there were concerns regarding the viability of your platform pre COVID-19, the current climate may have exacerbated those signs of distress. In these circumstances, if your platform is unable to access government-backed initiatives such as CBILS, you may be considering exit options (share sale or a managed wind-down). Where a share sale is considered this is obviously not without its challenges given the current economic environment, and prospective sellers will likely have to accept a lower valuation than previously contemplated. However, some platform owners may see value in realising remaining equity value earlier than their original exit horizon pre COVID-19.
Business as usual
Conversely, your platform may be weathering the impact of the crisis. You may have achieved CBILS accreditation and have successfully adapted your operations to continue to operate within the current environment. For your platforms, the strategic focus will likely have turned to providing funding to new customers where appropriate, but primarily supporting existing customers. In this regard, robust management of the portfolio of new and existing customers will be paramount to future success.
Whatever your current circumstance, within Quantuma LLP, we have the expertise and sector-specific experience to help you to react, respond and prepare for the challenges ahead. For those platforms experiencing an element of distress in the current economic climate, we can help you to assess the strategic options available to your business. We can play an active part in stakeholder management, as well as providing robust advice to directors individually.
Platforms that have successfully adapted to the current crisis and are operating in a close to ‘business-as-usual’ manner, we’d recommend taking additional steps to closely manage your portfolio of clients throughout the lifecycle of their funding. We offer a broad range of business advisory services (including corporate finance for acquisitive clients within your portfolio) through to restructuring advice for those clients at risk of default.
This article first featured in P2PFN
