Rebuildingsociety marketplace changes

October 24th, 2016 are offering borrowers a 5% discount in return for additional security. 

We've been working hard to bring you good quality borrowing applications for you to consider. Currently businesses that are eligible to borrow through, must have at least two years history, an average turnover of £50,000 a quarter and offer at least a personal guarantee as security. The average final rate paid by borrowers on our loan book is over 20% APR*, this rate is paid usually regardless of the security offered in support of the loan.

We've listened and as lenders you want better security and borrowers tell us they want lower rates.  So we're excited to launch 'loan discounts for security' e.g. A loan with a 1st charge over a property with a great LTV will receive a discount of up to 5% on their starting auction rate.

This incentivises borrowers to  put up any security they may have and hopefully gives lenders a better choice of loans.

 These marketplace changes are explained in detail on the blog.

The borrower can offer a wide variety of security to support their loan. We’ve assigned a nominal value to the different types of security, making some security ‘more valuable’ than others. For example a 1st charge on a property will be deemed a more valuable form of security than a company debenture, and as such they will be rewarded with a lower starting interest rate.

The more security added, the more the starting rate will be reduced* as the security added works in a cumulative way linked to the loan to value ratio.

The starting maximum rate will never be modified lower than 5% of the standard maximum rates, which are currently as follows:

  • A+ = Max rate 11%
  • A= Max rate 14%
  • B= Max rate 17%
  • C= Max rate 20%

Therefore a C rated loan will never have a maximum starting rate of less than 15%.

The security we can accept from a borrower is ranked in priority below.

  • 1st Charge Commercial Property
  • 1st Charge Non Residential Property
  • 2nd Charge Commercial Property
  • 2nd Charge Non Residential Property
  • 1st Charge Residential Property
  • Fixed Asset Debenture
  • 2nd Charge Residential Property
  • All Assets Fixed and Floating Debenture
  • Corporate Guarantee
  • Personal Guarantee Insurance

Therefore, depending on the LTV on the security, a 1st legal charge taken on a commercial property in support of a loan will be ranked higher than a loan with an All Assets Debenture and may be achieve a lower maximum loan rate. Similarly, based on the above a loan secured on a 1st charge non residential property with an exceptional LTV will not achieve a better rate than a loan secured on a 1st commercial charge that also has an exceptional LTV, unless the former is accompanied by additional security.

Zopa reduce rates again

October 24th, 2016

We reported back in September that following the Bank of England reduction in the base rate that Zopa would be dropping their rates by 0.2%.  Zopa have subsequently announed that they are reducing lending rates again by 0.2%.

Here is the full email sent to lenders:

Since September, we've seen the borrowing market become significantly more competitive, with at least 6 mainstream prime lenders further lowering their headline rates.

Zopa has always believed in a prudent approach to risk. It's against our principles to lower our criteria to attract riskier borrowers.

As a result, we've taken the decision to reduce our lending rates next week. From October 28th, we'll be targeting the following rates for lender portfolios:

  • 3.1% in Access
  • 3.9% in Classic
  • 6.3% in Plus

If you want to amend your lending settings, it's easy to do so at any time via My Zopa.

If you have any questions or concerns, please get in touch.

Crowdstacker Innovative Finance ISA

October 21st, 2016

Crowdstacker is one of the few peer-to-peer companies which has received full FCA authorisation, and as such is able to offer an Innovative Finance ISA.  They have published some data which suggests that 90% of customers opening an IF ISA are new to the platform.

Here is the full press release:

THE new Innovative Finance ISA (IFISA) is attracting large numbers of new investors to Peer to Peer investing, and potentially opening up access to billions of pounds of financing for UK SMEs, it is revealed today.

The data is taken from a six-month summary of investment information issued by one of the few Peer to Peer (P2P) platforms authorised to offer an IFISA, since it was introduced in April 2016.

It shows that for every ten IFISA investments made, nine come from investors who have not invested with the platform before.  The average amount invested using the IFISA is £7,700.  And just under one in five (18%) have chosen to realise the full tax benefits for their P2P investments by using their full annual allowance of £15,240 in the IFISA. 

“2015-16 Government data shows that £80 billion was invested via other types of ISA, typically in cash accounts or stocks and shares.  But the popularity of the IFISA suggests that within a few years a sizeable portion of this could be providing a direct boost to the UK economy by being invested straight into growing UK SMEs,” comments Karteek Patel, CEO of Crowdstacker, the platform which has provided the IFISA data.

The data also reveals some other interesting patterns:

  • The IFISA appeals to all age groups ranging from investors in their 20s through to those in retirement
  • Investment levels using the IFISA have remained steady in each month since launch
  • Interestingly nearly one in ten (7%) people have taken the opportunity to move money from other types of ISA investment.

To date only a handful of platforms have the full FCA authorisation and HMRC license required to offer the IFISA.  But according to the regular Nesta report the alternative finance industry already creates £3.2 billion investment annually. 

“IFISA money was, for example, a big contributor to one of our current raises, for BurningNight; an exciting, innovative and already very successful business which operates bars in City centres in the North and West of Britain,” explains Karteek.   “All the money we raise for businesses comes from everyday investors and roughly half was invested by people using our Innovative Finance ISA, helping us hit £1 million within just a couple of weeks of launch.

“But as other platforms are able to offer the IFISA and awareness about it grows further, we expect to see the success of this investment wrapper grow even more.  It could be a great investment for consumers who have a variety of choice about how their money is invested depending on the investment structure used by each platform.”

Crowdstacker’s IFISA is structured in a similar way to a stocks and shares ISA.  Investors can deposit some or all of their £15,240 annual ISA allowance and then choose specific businesses featured on the platform to lend to.  As with a stocks and shares ISA, these investments can be reviewed in depth with a thorough explanation of each business, its financial track record, and market opportunities to sustain and grow financial health.

“The Crowdstacker proposition is about helping investors make informed choices. We aim to do this by taking a bespoke approach to due diligence, meaning we can use tried and tested methods of interrogating a business’s financial health, which includes standard credit-checking right up to management interviews and forensic reviews of accounts,” continues Karteek.

“Loans are then structured in a way that aims to offer a good level of security to lenders, for example first charge over easily accessible assets valued at multiple times more than the actual loan.  And offering an interest rate which is sustainable for the business in its current sector climate, and attractive to investors who are looking for higher returns than those offered by other types of investment,” concludes Karteek.

Risk warning

Lending to businesses can be rewarding, but it involves a number of risks. If you lend through Crowdstacker, please be aware that you may lose all of what you lend and that there is currently no active secondary market for the underlying loan to be transferred if you need access to the capital. You should not lend more than you are prepared to lose. For more information consult our full risk warning Money lent is not insured or covered by the Financial Services Compensation Scheme. 

Crowdstacker Ltd. is authorised and regulated by the Financial Conduct Authority (frn. 648742).

Please note all data used in this release has been sourced from Crowdstacker’s analysis of investment in its own IFISA.

Should P2P platforms cross-sell?

October 13th, 2016

During LendIt Europe Cormac Leech, Principle at Victory Park Capital Advisors, suggested that peer-to-peer lending companies should take advantage of cross selling which is an untapped source of revenue.

Once banks have acquired customers they will typically try to cross sell loans, credit cards, insurance and other financial products throughout their relationship. Cormac suggested that peer-to-peer platforms could go further and cross sell holidays and tech goods and share some of the revenue with the platform's customers.

On some levels this makes financial sense, but when I heard this I had to shake my head.  There may be some merit in cross selling other financial products on a P2P platform, but I would argue that unless this helps grow the brand and deepen the customer relationship it may at best detract from the platform's primary aim - which is to match lenders and borrowers - and at worst lose customers.  Would you buy a holiday from your insurance company?  If not, how would you feel about your insurance company offering to sell you a holiday?

Some customers have migrated to peer-to-peer platforms to get away from some of the traditional spamming practices that some companies operate.  If peer-to-peer companies were to adopt some of these cross selling practices then some customers may simply go elsewhere.

LendingWorks become first fully authorised major platform

October 13th, 2016
Lending Works

Lending Works has become the first major peer-t0-peer lending platform and P2P Finance Association member to obtain full authorisation from the Financial Conduct Authority.  LendingWorks have also announced that their ISA will be launched in January, confirming the estimate provided by Nick Harding at LendIt Europe.

Here is the email sent to LendingWorks members:

We're fully authorised by the FCA

We are thrilled to announce that we've today received official confirmation from the Financial Conduct Authority (FCA) of our full authorisation as a financial services provider. This is a momentous occasion for Lending Works, and also means we are the first of the peer-to-peer lending platforms operating under interim permission to receive this approval.

It marks the end of a thorough, 12-month review in which our processes, systems, policies, financials and levels of compliance and risk management have undergone intense scrutiny from the UK's primary financial services regulator, and this green light from the FCA represents the ultimate stamp of approval. We hope that this news will further underscore your confidence in us, and all that we stand for.

Our ISA is coming soon

With this FCA approval in hand, it now paves the way for us to apply to become an ISA Manager with HM Revenue & Customs. Once this formality is complete, we'll be eligible to deliver the Lending Works Individual Savings Account (ISA), a product we plan to launch in January. We are waiting until January to launch our ISA for a number of reasons, namely: the expected waiting period for obtaining ISA Manager approval, the fact that we have other major releases planned for the next couple of months, avoiding launching before or during the Christmas break, and to align the launch with the January-to-April 'ISA season'.

New branding, website and user dashboard

In a few weeks' time, we will launch new branding that we hope is befitting of our position as an innovative financial services technology firm. In addition, we will launch an easy to navigate, simple-yet-informative new website and intuitive new user dashboard. We will introduce you to the new brand, website, logo and lender dashboard closer to the time of launch, but we are confident it will further enhance your customer experience.


Finally, we have also got several new major partnerships going live soon too. These partnerships will bring more and more high-quality borrowers to our platform, which in turn will benefit you, our lenders.

But for now, we hope you will share in our delight at having made this significant step up with the FCA - a launchpad we believe will drive us towards even bigger and better things.

If you have any questions regarding the above, or any other matters, please do not hesitate to get in touch with us. 

All the best,

Nick Harding
Co-founder & Chief Executive Officer

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