Why Commercial Property Peer-to-Peer Lending?

on Apr 25, 2016
Updated: Oct 24, 2019

At Proplend, we believe that property-backed peer-to-peer lending (P2P Lending) platforms offer smart and secure investment opportunities for individual investors. However, as an investor, it might seem “easier” to invest in a consumer p2p lending platform, or better yet a residential p2p lending platform because they are more commonly understood, mostly because many of us own residential property and/or have personally gone through a borrowing process.

Placing the words “commercial property” in front of p2p lending is not something you should fret about. In fact, greater capital protection from the property and longer tenancies make Commercial Property P2P Lending one of the most secure forms of p2p lending, plus it offers favourable returns of 5-12% pa*.

Three Key Facts

What will your investment be secured by? An income producing commercial property.

How will you be paid monthly interest? From the Rental Income produced by the property.

How will your investment be repaid at the end of the term of the loan?  A property can be sold or refinanced.

What is Commercial Real Estate?

“The term commercial real estate refers to buildings or land intended to generate a profit, either from capital gain or rental income.

Examples of commercial real estate include office and recreational parks, office blocks, and industrial estates.

Why not invest directly into Commercial Real Estate?


The cost of buying a commercial property tends to be high, especially if comparing it to the cost of a residential property. For most personal investors, collective investment schemes represent the only way to gain exposure to commercial property. Plus, the responsibility and costs associated with managing the property are high and time consuming.


The uniqueness of most commercial properties makes it difficult for investors to get an accurate valuation without access to professional advice. By contrast, it’s relatively easy for residential investors to compare the prices of houses or flats in a given area, based on comparable market activity easily accessed on the internet. Professional, technical advice is crucial for anyone considering direct investment in commercial property. This is why Proplend’s team is made up of seasoned professionals who understand the market and the risks involved.

What kind of Borrowers require financing?

A typical Proplend Borrower owns a Commercial Property, in England or Wales, which is valued at £500,000 to £5,000,000. Borrowers request finance through Proplend because the sub £5,000,000 commercial loan sector is massively under-banked and due to added regulation there has been a severe decline in the number banks offering re-financing for this niche segment.

Example Borrower Evaluation: Loan-to-Value and Interest Cover

A potential Borrower contacts Proplend about a loan request to re-finance an Industrial Estate, which has 5 tenants and produces £75,000 in annual income per year. The request is to borrow £650,000 at an interest rate of 8.5%. Our first step is to instruct a valuation by a professional, RICS valuer who determines that the current market value for the Industrial Estate is £1,000,000.

With the valuation complete we then consider the Loan-to-Value (LTV), the loan amount compared to the value. Proplend’s maximum LTV is 75%. The Loan amount of £650,000 divided by the Market Value of £1,000,000 equals 65% LTV. This request, therefore, meets our LTV requirement, so we can move forward with the process.

Next we consider the Interest Cover (IC), which is the ratio used to determine how easily a company can pay interest on outstanding debt. Although we do not have a ‘set’ Interest Cover requirement, we generally require at least 1.25 times cover. The annual rental income of £75,000 divided by annual interest expense of £55,250 equals 1.36. This meets our IC requirement so we would proceed with loan request.

As a potential investor in a loan, the LTV and the IC are two of the most important factors to consider, and are always stated in the Loan Request documents available on the platform. The full approval process is complex, which is why Proplend has a team of experienced professionals that vet each deal. Each loan on the platform has a Loan Request document which explains the deal in detail, and assesses the borrower, tenants, valuation, business plan, and many other aspects of the proposed loan. If you are unsure, it is important to read this document and understand the intricacies of the loan request. A member of the Proplend team is also always available to answer any questions you may have.

Why become a P2P Commercial Property Lender?


  • With bank rates showing no sign of increasing, investors need to consider other options to earn higher returns.
  • The loans on the Proplend platform currently average 7.06% pa (gross).


  • All loans are supported by a 1st legal charge over an income producing commercial property.  This means that in the event there is a default, the property can be sold and the profits used to repay investors. Unlike equity crowdfunding, where investors become shareholders in a particular property, Proplend lenders invest in loans secured against property.
  • The maximum LTV at Proplend is 75%, which means that a property would have to decline in value by more than 25% before any Tranche C investment is at risk. And with Tranche C being our higher risk investment, investors in Tranche A (0-50% LTV) would have to see the property value fall by at the very least 50%.

Rental Income

  • The income from rent covers the interest payments and the lease lengths are generally longer than the loan term. Understanding the interest expense is a very important calculation when considering an investment. At Proplend, we normally require an interest rate cover of 1.25 times, which means that the annual rental income must exceed the annual interest expense by 125%.


  • Proplend offers our lenders the opportunity to invest in different Loan Tranches, allowing them to choose their risk and return level. Lenders can invest in different types of loans, each offering different property types, geographic locations, loan terms and interest rate returns.

There is approximately £200 billion of outstanding CRE debt in the UK. 25% of which is in the sub £5m sector and requires refinancing within the next 2-5 years. Proplend specialises in this niche marketplace and our mission is to open up what used to be an institutional only asset class to a wider range of investors, allowing them direct access to secure and attractive returns. We are continuously applying the latest technologies, adopting them alongside traditional lending models to ensure our offering is as efficient, transparent and inclusive as possible.

To learn more about Commercial Property Peer-to-Peer Lending visit Proplend’s GUIDES page and download a copy of our white paper.

*After fees, but before bad debts and taxes


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