Dragonfly Finance will now have some loans funded by Octopus Investment’s new peer-to-peer investment vehicle, Octopus Choice.
Octopus Choice is aimed at advisers and designed to give investors a middle ground between low returns of conventional saving and the higher risks of stock market investment.
Dragonfly managing director Mark Posniak says Octopus is targetting investors with “ten pounds or more”, and adds “there are no barriers to this”.
Octopus will take 5 per cent of every loan and will lose its money first before investors take a hit.
Loans will never be more than 70 per cent of the value of the property they are secured against.
Octopus Choice seeks returns of 5 to 6 per cent, with monthly fees of 0.35 per cent.
Dragonfly has made nearly 3,500 loans of nearly £1.9bn since its launch in 2009, and says less than 0.1 per cent have gone unrecovered.
An Octopus statement says: “All qualified financial advisers have had the scope of their investment permissions automatically widened to include online lending products, but uptake has so far been limited, and many advisers remain sceptical of the opportunity they present.
“Octopus Choice represents the first meaningful move to engage the adviser community in the development of this fast-growing market, having been developed in close co-operation with a number of financial advisers.”
Posniak says Dragonfly’s track record of high deal flow and low losses will calm investors’ concerns.
Combined Financial Strategies chartered financial planner Jonothan McColgan says P2P products are only suitable for clients with high risk tolerance levels.
He says: “You’re basically lending where other lenders won’t touch it and there’s got to be a reason. That means more reward, but it also means more risk.”
An Octopus Investments spokesman says that the firm could secure loans on other assets in the future.
He says: “We’re not ruling out the potential for moving to other asset classes in the future. There are a number of asset classes that this is suitable for.”
Octopus bought Dragonfly in 2013.