An Interview with Yann Murciano, CEO of Blend Network
Blend Network launched in the summer of 2017 and has grown its loan book to over £3 million. We recently caught up with CEO, Yann Murciano to learn more about the peer to peer lending platform.
Can you provide an overview of the Blend Network?
Blend Network is a Peer-To-Peer (P2P) property lending platform where people can lend from £1,000 to loans secured against properties that return up to 15% p.a. We lend to small and medium experienced property developers across the UK and all our loans are secured against the underlying assets and often personal guarantee from the developer. Our lenders are a mix of City professionals (bankers and hedge fund managers) and retail lenders keen to get double-digit returns by co-investing along with experienced professionals.
Why did you start the Blend Network and what was your biggest challenge in launching the platform?
Before launching Blend Network, I was head of metals trading at Morgan Stanley and I spent 12 years trading commodities and FX in the City. As a trader, I am used to looking for market inefficiencies and opportunities to make it more efficient. I soon realised that the property lending market is highly inefficient in the UK, i.e. there are loads of people with money looking for a decent return on their capital and there are loads of SME property developers looking for money to build more houses for the country, but these two groups of people don’t connect. Our aim at Blend Network is simply to make the market more efficient and make lenders and borrowers connect with each other. It’s a win-win.
Frankly, given the double-digit returns we have been able to achieve, our biggest challenge has been trying to explain to the lenders that this is not too good to be true, it’s actually true! Our borrowers are cut off from traditional finance mechanisms and are willing and happy to pay a premium to get access to finance.
What type of loans are the platform's sweet spot?
We lend to SME property developers, so our sweet spot are loans between £150k to £800k. We can do larger loans but we will do it in tranches. We lend across the UK but outside London. The reason we don’t lend within the M25 is that a) we are bearish the London market and believe it has more room to come off, and b )the London market is more competitive and larger property developers can get access to finance via institutional lenders.
I notice a lot of the loans are located in Scotland and Northern Ireland. As a business you are based in London so why the focus in these regions?
London is a competitive market for property developers looking to borrow a few millions. So rather than looking for the easy deals around the corner, we prefer to deploy our team up and down the country to source good deals in less crowded markets that offer higher returns. We are looking for inefficiencies and we want to support SME property developers in places where they can’t easily access finance. In Northern Ireland, traditional lenders and high street banks pulled out during the 2008 financial crisis and have not returned yet. The market is strong but banks have no appetite to lend there. We want to do the right thing!
Lenders might like to know that as part of the Bank Referral Scheme that requires banks to refer those SMEs they refuse to finance to an alternative provider, Blend Network has given lenders access to a landmark deal in the UK. More on this will be revealed soon.
From an investors perspective why are these regions favourable? Similarly, are there any unique risks attached to these regions?
From an investor point of view, lending in these regions gives access to higher returns without necessarily meaning higher risk. In P2P lending, higher return does not necessarily mean higher risk. In this case, the higher return in the regions vs London is due to the fact that property developers in the regions have more difficulty accessing finance vs London. So our job at Blend Network is to source great deals for our lenders that sit on the sweet spot in the risk/return curve.
In terms of unique risks, we actually believe that by making small size loans in liquid markets such as the regions we are able to reduce risks. The collateral for our loans are typically 2 to 3-bedroom family homes that are easy to liquidate in case of default, so we are able to minimise loss for our lenders. Furthermore, our manual and enhanced due diligence process ensure that we have assessed all risks before agreeing to list the loan on the Blend Network platform.
What separates Blend from its competitors and why should investors sign up to the platform?
Blend Network offers a different product to other P2P lenders out there: a) Blend Network offers higher returns (the average return on our loans so far is 12.1% p.a. and we aim for returns between 8-15% p.a.), b) Blend Network gives lenders access to high-quality deals across the UK regions and places where the market is strong but there are not many lenders, and c) Blend Network offers the ‘best of the new & best of the old’. The best of the new is a fully automated lending dashboard where lenders can literally sit, click (on the loan they want to lend to) and collect (their return), while the best of the old is a manual and enhanced due diligence process and a team with a close to 100 years of experience in banking and property development among them.
How do you anticipate the platform developing over the next 3 years? What does success look like?
We don’t aspire to be the biggest P2P platform out there, but we are certainly aiming to be the best P2P platform. Perhaps this is the reason that the press has dubbed Blend Network the ‘Goldman Sachs of P2P’. Our focus over the next three years will be on continuing to source great loans for our lenders, loans that sit on the sweet spot on the risk/reward curve, as we have done so far. So far, the average interest rate on our loans is 12.1% and the average Loan-To-Value (LTV) is 56%. This is why we have been able to build a loan-book of £2.5M supported by hundreds of lenders in just 6 months. We just want to keep doing what we do best and bring good deals and good service to our lenders!