UK

Folk2Folk Introduces P2P Mortgages for Cornwall and Devon Properties

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Folk2Folk launches a p2p lending services for interest-only loans that are secured by first mortgages. A borrower may not use the home he lives in as security, the services aims at residential buy to let, holiday homes, commercial or industrial premises, farms and agricultural land. The loan amount can be 60% or less than the value of the security.

To start lending a minimum investment of 25,000 GBP is required. Quoted interest rates for last week range from 6 to 9%. Borrowers pay a 2% fee. Fixed term loans as well as variable length loans are possible. The concept of a p2p mortgage may sound complex, but Folk2Folk says they aim to complete the lending in 8 to 10 calender days from the time the borrower applied.

There is a very detailed set of rules describing all eventualities.

Lenders Can Use New Sellout Function to Exit Loans Early at Ratesetter

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Ratesetter yesterday introduced a new sellout function that allows lenders to exit their contracts early.

How does it work?
Lenders request the amount they wish to have returned to their Ratesetter Holding Account. Ratesetter works out whether this is possible and calculates the cost of doing so. The Lender confirms their wish to go ahead and then Ratesetter processes all the necessary assignments. The Borrower will remain entirely unaffected by this.

What are the costs involved in exiting early?
Ratesetter charges a fee made up of three elements:
•    The exiting Lender’s interest is reduced to the level they would have received based on the length of time they have ended up lending for. This is based on the Market Rate and products available on the day they originally lent. So, for example, if the lender had lent into the 5 Year Income market nine months ago and choose to exit now, the lender would only receive the interest the lender would have got from lending in the Monthly Access market for that period of time; if the lender had lent 13 months ago the lender would only receive what the lender would have got from lending in the 1 Year Bond market; if the lender had lent 37 months ago, the lender would only receive what the lender would have got from lending in the 3 Year Income market. With regard to an early exit from the Monthly Access market, the cost is that the lender forgoes all the interest for that month. The purpose of this charge is to ensure there is no incentive to lend for five years if the intention is only to lend for two years;
•    A fixed charge for administering the exit which is 0.25% of the oustanding contract amount (currently waived for existing Lenders for a period of one month)
•    An “Assignment Fee” to ensure that if the interest rate in the relevant Ratesetter market has gone up the exiting Lender can still exit. This will calculate and deduct from the exiting Lender the amount required to be added to the interest rate to ensure the incoming Lender gets what they expect.  In circumstances where interest rates are the same or lower there will be no Assignment Fee.

Can the lender choose which individual contracts I sell?
No, the contracts will be automatically selected, starting with the most recent contracts.

Where does the incoming Lender come from?
From the same market as the exiting Lender.

Are there any circumstance when the lender would be unable to exit early?
It is Ratesetter’s  intention that the lender will be able to exit all contracts at any time. However, it may not always be possible to do so:
•    If there are insufficient funds in the relevant market. This will be determined by a “buffer” of available funds (of which the amount in each market will be periodically reviewed) designed to keep the smooth running of the Ratesetter markets.
•    If an individual contract is less than £10, the current minimum reinvesment size.

Offering a secondary market (regardless in which form) is becoming a basic functionality that lenders expect as a core feature from a p2p lending service. The 3 major British services Zopa, Ratesetter, Fundingcircle as well as American Lending Club and Prosper now offer the ability to sell loans. In other countries regulation makes the setup of a secondary market difficult.

Fundingknight Launches Auctions

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British p2c lending Fundingknight, a service facilitating p2p loans to British companies, yesterday launched auction bidding. Basic requirements for companies to be eligible to submit a loan application are:

  • The business must have at least two years trading history
  • They must be limited companies registered at companies house
  • And finally, they must be UK based businesses with a UK bank account

Fundingknight then uses the following criteria to decide if the application will be listed on the marketplace

  • Is the business well managed?
  • Is the company realistic about risk?
  • Will the business generate enough cash to repay the lenders?

Fundingknight launched in September 2012. There is no data publicly available on the loan volume to date.

Interview with Sophie Coles of Squirrl.com

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On Wednesday the new p2p lending marketplace Squirrl.com launched. For an introduction on the concept read the article ‘Squirrl Launch – Secured Loans to Suppliers‘. Now Sophie Coles, Squirrl’s Director of Business Development answers my questions.

What is Squirrl about?

Squirrl.com provides an online finance platform for well established commercial organisations (Suppliers) that have a business model where assets are provided to their customers and paid for over a period of time through Pay for Use Agreements.  Examples are the motor industry, industrial machinery, office equipment etc….  If this type of organisation has no other financial arrangements it must pay for the assets at the start of the contract, and only receive its money back over the life of the agreement.  Few commercial organisations can suffer the impact of this negative cash flow, yet customer demand for this service model is growing.  Investors using the Squirrl.com platform can lend money to this type of Supplier in return for higher interest rates than they would get from the high street banks and have their loans secured.

How did you get the idea for Squirrl?

Since the banking crisis of 2007/2008 the flow of money available to commercial organisations to finance Pay For Use Agreements has almost dried up yet there is a huge demand from all sectors for such contracts. Traditional funders have become increasingly inward looking and preservation of their balance sheets their primary concern. There had to be another way to fund these contracts that are often underwritten by high quality customers and supported by highly reputable Suppliers. If someone was prepared to lend to another person on an unsecured basis as demonstrated by the P2P marketplace then surely that same person would lend to a good quality business secured against the cash flow of the Pay For Use Agreements. That was the trigger moment that occurred in 2011 and for the last year the site has been under development.

What are the three main advantages for lenders?

  1. Squirrl savers can achieve higher interest rates than saving through high street banks typically between 5-15%.
  2. Loans are made to established commercial organisations and then secured against the cash flow from a pool of a minimum of at least 20 Pay For Use Agreements. There is always a substantial buffer built into the security so that on average there is £2 of cash flow available to repay £1 of loan.
  3. A 13 point risk mitigation programme is designed to reduce risk to the investor as much as possible.

What interest rates do you expect to see on the marketplace?

Typically the interest rate savers receive will reflect the level of risk associated with the investment opportunity.  Initially Squirrl.com will only accept the lowest risk organisations so interest rates will vary between 5-7%, which is still a great return compared to what the high street banks are currently offering.

Which marketing measures do you plan to attract lenders?

Initially we are planning a very soft launch for Squirrl.com and will not be over promoting the concept.  Savers do not have to pay any fees to join and start bidding apart from a one off £5 fee to cover the costs of user identification to comply with Squirrl.com security and Money Laundering Regulations.  We want to stick closely to the community feel of social saving so we want to make the user experience as good as possible and Squirrl.com will continue to evolve through user feedback.  After the initial launch we will start to seek other suppliers who could benefit from gaining finance using Squirrl.com, but we will only work with reputable companies who have high quality, structured Pay for Use Agreements in place.  We can also act on a consultancy basis to help companies develop their structure to meet our criteria.  Ultimately we want Squirrl.com to represent high quality, low risk, high return saving for the community so finding suitable suppliers to fit the bill will be crucial in maintaining this quality and reassurance to our squirrl savers. Continue reading →