P2P money blog wins an award

July 19th, 2017

The P2P money website blog has been awarded one of the Top 100 P2P Lending Blogs on the web.

Anuj Agarwal, founder of Feedspot, wrote "I personally give you a high-five and want to thank you for your contribution to this world. This is the most comprehensive list of Top 100 P2P Lending Blogs on the internet and I’m honored to have you as part of this!"

Ian Gurney, founder of P2P money, stated "This is a great achievement to be recognised as one of the Top 100 P2P Lending Blogs given our focus on the UK market".

Fallout from RateSetter wholesale lending

July 19th, 2017
RateSetter

 RateSetter has emailed all of their lenders concerning three borrowers.  We have redacted some of this information for confidentiality.

On 2 May 2017, we announced on our blog that we had changed our relationship with two of our borrowers.  We are writing to you today with more information about this and to let you know why RateSetter has intervened over and above the usual course of business with three of its borrowers.

Why is RateSetter providing this information?

We believe it is important for all our lenders to be comfortable with their investment and aware of the risks of investing with RateSetter on an ongoing basis. If you feel this information changes your investment, we are giving you the option to review your investment with us and sell out without incurring any fees. This offer is available to you for the next month.

RateSetter has intervened directly with three borrowers as follows.

  • V****** T****** Group Limited, a motor finance holding company: this company went into administration because it had taken on too much debt.  RateSetter bought the two operating subsidiaries in order to best protect our lenders’ interests.  They are Vehicle Credit Limited (which makes loans to consumers to buy cars) and Vehicle Stocking Limited (which makes loans to motor dealerships to buy cars).  We intend to expand our motor finance lending capabilities by integrating the two businesses into RateSetter product lines, with lenders matched directly to the end borrowers.  The businesses are repaying their existing wholesale loans of £24m (VCL) and £12m (VSL) as their end borrowers repay in line with the loan schedules.  The loans are secured on the underlying loan portfolios of these two businesses which total £31m.  These portfolios are expected to generate sufficient interest throughout their lifetime to repay these wholesale loans in full.
  • A**** Limited, an advertising company:  In 2015, V****** T****** Group used £12m of wholesale lending from RateSetter to lend to A**** Limited.  A**** was poorly managed and got into financial difficulty.  As lending this amount to a single business was outside RateSetter’s credit policy and was an exceptional case, we believed it was right for RateSetter as a company to intervene and absorb any losses from this loan, as opposed to the Provision Fund doing so.  RateSetter is doing this by standing behind A****’s monthly loan repayments until the money is fully repaid.  The amount outstanding is now £8.5m. A**** is now fully owned by RateSetter.
  • G***** B**** Limited, a consumer guarantor loan specialist:  RateSetter obtained a minority equity share of this business, with the intention of changing the wholesale lending arrangement into one where RateSetter investors would lend directly to G***** B**** borrowers.  However, after further examination, we concluded that we would not continue with this strategy.  RateSetter will remain a supportive but passive shareholder in the business.  G***** B**** is repaying its existing loans of £32m as its end borrowers repay in line with the loan schedules.

These three interventions all stem from RateSetter’s wholesale lending which we discontinued in December 2016 and we do not intend to intervene like this again.  The expected default rate on RateSetter’s outstanding lending is unaffected and stands at 2.9 per cent, and currently we estimate that the Provision Fund is large enough to cover all Expected Future Losses.

The option to review your investment with a free sell-out

We are giving everyone, not just the lenders who are matched to these specific borrowers, the opportunity to review their investment, as all investors are exposed to the performance of the loan book as a whole.  The Provision Fund effectively spreads each lender’s risk across the whole loan book, you are exposed to the performance of the book as a whole - not that loan specifically.

If you would like to sell out of your investment with RateSetter without incurring a fee, please email us.  This offer will last for one month, from 18th July to 17th August 2017.  We would like to point out that sell-outs are always subject to there being other funds in the market to replace funds withdrawing from loan contracts.

RateSetter did have to because if they didn't the Provision Fund would have been able to cover this, but this would leave it so depleated that it would be unable to cover other expected defaults.  The reaction on the P2P Independent Forum was of some concern, with some lenders expressing their wish to exit the market, but given the current oversupply, this could simply restore some of the balance between lenders and borrowers.

Crowd2Fund launch secured property lending

June 20th, 2017
Crowd2Fund

Peer-to-peer lending platform Crowd2Fund have announced that they are launching secured property lending which is available to sit inside their Innovative Finance ISA.

Here is their full press release:

Crowd2Fund have launched a new property loan product, secured against commercial or residential property, which qualifies for inclusion within the platform’s IFISA.

The new loan vehicle is targeted at businesses which own property, or directors who are willing to offer their property as security. Loans are between £100K and £1 million and loans will typically last for a duration of three to five years and carry an estimated APR between 6%-8% before fees and bad debts.

The only associated fees for investors are the Repayment Fee, set at 1% of the value of repayments, which is collected from each repayment.

Benefits To Investors

Diversification

The Crowd2Fund property loan is the latest addition to the range of debt products already offered by the platform. These include standard loans, revenue loans, bonds and venture debt.

The introduction of the property loan allows investors to further diversify and personalise their portfolios, according to their risk appetite and individual goals. Investors can invest as little as £100 into property loans.

The property loan enhances diversification opportunities by being a comparatively lower risk vehicle that will accompany the higher risk products available, such as Venture Debt.

Even though interest rates are lower with property secured investments, funds should be spread across different products and companies to help mitigate the risk of defaults.

All businesses go through a thorough due diligence procedure. Nevertheless, all campaigns on the platform carry their own, unique risk. There have been zero defaults on the platform to date.

Investors may choose to spread their investments across both secured property loans and high growth sector businesses, which carry a higher interest rate, but in which an investor might have a personal interest.

Furthermore, property loans are included within the IFISA, which has an allowance of £20,000 in the 2017/8 tax year, thus enjoying the added benefit of sheltering interest repayments from tax.

Secured Against A Property

All businesses which run a property loan campaign are required to let Crowd2Fund take a charge over their tangible assets. The value of the secured property must cover 100% of the total loan value.

This means that if the business defaults on their loan, the property will be taken and sold to repay investors.

Property loans are lower risk in comparison to unsecured loans. However, it should be noted that there is a risk that the property may not retain its original valuation and that it may take time to sell it.

Simple And Transparent Structure

We want the concept of property loans to be simple for businesses and investors to understand.

We understand that investors may prefer to allocate their funds to a loan which is secured against bricks and mortar. The reason for this is that it is easy to understand the value of property as there is an active market in which to sell, not to mention that property belongs to an established and trusted asset class.

As with a loan, businesses repay investors interest and capital on a monthly basis. This amortises over time; this means that investors are repaid the same amount of money each month, but the interest will decrease as the principle repayment increases. For example, should a repayment be £10, £5 will be interest, £5 will be principal. A second repayment will still be £10, but the interest will reduce to, say, £4.50, and the principal will increase to £5.50, and so on with each repayment. You can understand more about amortisation here:

https://www.crowd2fund.com/amortisation

Investors are welcome to manage and track their property investments through their personal dashboard on Crowd2Fund.

Access Your Capital By Selling To Others On The Exchange

Property loans can be bought and sold on the Exchange. Selling your property loan means investors are able to access their capital by selling it to others.

This makes investors’ investments more liquid, whilst giving investors the opportunity to sell at marginal profits.

Additionally, utilising the Exchange will give investors further opportunity to diversify their portfolios by purchasing additional loans.

Chris Hancock, Crowd2Fund CEO, explains: “The launch of our property loan gives investors access to an asset class which has performed steadily over time and is easy to understand. These asset-backed loans are likely to be popular with P2P crowdfunding investors new to the market due to the perception of them being less risky than standard loans, which do not have security taken out on them.”

The first property backed loan on the platform is set to be a £300,000 campaign for Mark Marengo, a Savile Row tailor focused on exporting sharp-cut tailoring internationally.

Wellesley & Co suspend P2P lending

May 26th, 2017
Wellesley & Co.

Wellesley & Co have announced that they are suspending peer-to-peer lending on the platform. The reason for this is likely due to pressure from the FCA to change their business model.

Below is a copy of the email sent to lenders:

As we progress towards full authorisation by the Financial Conduct Authority (FCA), we are making some changes to our product range over the coming months. We want to make sure that you are aware of the changes and whether these will affect you.

From 31st May 2017, Wellesley & Co will not be accepting any additional investment into the existing Peer-to-Peer Lending products and we will be launching a new Peer-to-Peer lending product in Q3 which will offer different features for customers. The new Peer-to-Peer lending product will no longer provide a fixed rate of interest with a fixed term period. This period will allow us to continue to work behind the scenes on developing the new product and bring it to market. The new Peer-to-Peer lending product will no longer provide a fixed rate of interest with a fixed term period.

How does this affect existing Peer-to-Peer investments?

As a Wellesley & Co customer, any existing Peer-to-Peer lending investment will remain under its current terms until its contractual maturity. This means that it does not affect your existing investments and you do not have to take any action on your account.

It is important to note the features of the new products as they will be different to your existing Peer-to-Peer lending investment.

Over the coming months, we will be developing our systems and portal in order to continue providing access to investments from Wellesley Group companies that offer you, the opportunity to invest your funds for attractive returns.

Zopa ISA and Zopa Core

May 26th, 2017
Zopa

Zopa have annouced that their Innovative Finance ISA is to be launched on 15th June, pending final approval from HMRC, with priority given to existing customers.  The target return for the ISA is predicted to be up to 6.1% AER.

At the same time Zopa will be launching a new product called "Zopa Core" which will replace Zopa Access and Zopa Classic.  Unlike the products it is replacing Zopa Core will no longer be covered by the safeguard fund which was launched 3 years ago.  Zopa Access and Zopa Classic will be retired for existing customers on 1st December.  The target return for Zopa Core is 3.9% AER after expected bad debts and fees.

Here is the full statement on the Zopa blog:

Following on from our FCA authorisation, I wanted to write to explain what happens next and some important changes we’re making to our service.

Introducing our IFISA

Pending final approval from HMRC, we’re excited to announce our flexible Innovative Finance ISA (IFISA) – with target returns of up to 6.1% – will be available from 15th June.

As we expect investing volumes to be high, we’re giving existing investors priority access ahead of new customers, where existing investors are those customers who have already signed up as an investor today.

Introducing Zopa Core

In addition to our IFISA, on 15th June we’re excited to let you know we will also launch our newest peer-to-peer investment product: Zopa Core. Core will lend in risk markets A*-C and will, by December 2017, replace Access and Classic. As with Classic and Plus, there will be a 1% fee when selling loans.

Core will offer initial target returns of 3.9%, and will not be covered by the Safeguard fund. Classic and Access will not be available for investors currently on the waiting list or future investors, however current investors with loans in Access or Classic can continue to lend through these products until 1st December, 2017 when they will be retired.

From launch, investors will be able to send Access and / or Classic repayments into Core, and add new funds. Core, like Plus, will have a minimum investment of £1,000 to diversify your risk: this will be waived for existing customers moving their repayments across, but it’s important to remember that those customers with a waived minimum will have more than 1% exposure to each borrower and will have a higher chance of losing money.

What happens next

Retiring Access and Classic

We are retiring Access and Classic from 1st December 2017, which means we will no longer be originating loans with Safeguard coverage after this date. All existing Safeguarded loans will continue to receive coverage (subject to there being sufficient funds in the trust) until December 1st, 2022, by which time all Safeguarded loans will have matured.

We initially introduced Safeguard in 2013 to deal with a tax anomaly that unfairly penalised peer-to-peer lenders. The fund was designed to ensure that investors only paid taxes on the net income they received from Zopa borrowers: and not bad debt. In 2015 the tax laws were updated enabling investors to claim for relief on losses from bad debt. As a result, the primary reason for Safeguard was removed.

Last year, based on customer demand, we introduced Zopa Plus, our current product without Safeguard coverage. Plus has proven incredibly popular, and since March 2017 we have been operating a waiting list for new investors due to the very high levels of demand. Retiring Safeguard will allow us to provide greater target returns than Access or Classic (2.9% and 3.7% respectively, versus 3.9% in Core and 6.1% in Plus).

Remember: when you invest your money, your capital is at risk and is not protected by the Financial Services Compensation Scheme (FSCS). Our risk statement has all the details.

If you have any questions, please get in touch with our award-winning Investor Services team.