{"id":7180,"date":"2021-12-08T10:10:00","date_gmt":"2021-12-08T10:10:00","guid":{"rendered":"https:\/\/iqeq.com\/?p=7180"},"modified":"2023-05-09T09:10:45","modified_gmt":"2023-05-09T09:10:45","slug":"rise-non-bank-lenders","status":"publish","type":"post","link":"https:\/\/iqeq.com\/insights\/rise-non-bank-lenders\/","title":{"rendered":"The rise of non-bank lenders"},"content":{"rendered":"
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The impact of COVID-19 on world economies might be the hot topic of the day, but most conversation on that front is still speculative. Economies evolve over the course of decades\u2014and the dust from the 2008 financial crisis is still settling over 13 years later.<\/strong><\/p>\n

A prime example is the rise of non-bank lenders, which have stepped in to fill a void left by banks in providing credit to select retail segments: high-risk mortgages, consumer finance, car loans, and even SME loans. In the United States,\u00a068% of all mortgages<\/a>\u00a0in 2020 came from non-banks\u2014an increase of a whopping 10% year over year. Over half the U.S. mortgage market has been comprised of non-bank lenders since 2016.<\/p>\n

Regulation and capital requirements like\u00a0Basel 4<\/a>, imposed as a direct result of the financial crisis, have caused traditional commercial banks to rein in their appetite for doling out credit. Many independent lenders gained accreditation as part of the\u00a0Coronavirus Business Interruption Loan Scheme (CBILS)<\/a>\u00a0or similar schemes worldwide, and have played a substantial role in supporting SMEs throughout the pandemic.<\/p>\n

According to the\u00a0Finance & Leasing Association (FLA)<\/a>, approximately 36% of the \u00a315.9bn loaned to SMEs in the UK in 2020 came from non-bank providers. And as traditional bank loans\u00a0dry up in the U.S.<\/a>, non-bank lenders have stepped in to fill the void. What this means to consumers is a great deal more choice in the market\u2014and in some cases, the possibility of funds that may not otherwise have been available.<\/p>\n

Put differently, independent non-bank lenders are playing an increasingly important role in the global economy by providing funding where banks are less keen.<\/strong><\/p>\n

In this post, we\u2019ll explore the kinds of loans non-banks are taking on, how they\u2019re funded, and what the future looks like for modern lending methods.<\/p>\n

Non-bank lenders are taking on higher-risk loans<\/h2>\n

Lending areas viewed as higher risk include:<\/p>\n