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P2P Lending Explained Ahead of Arrival Of Big New Loan Tranche
We have a big new tranche of property-backed loans that we're keeping under wraps before launch on site. Ahead of their arrival - later this month - we offer a reminder of some of the key factors to consider in appraising a loan before investing. Bear in mind that while there is no profit without risk, our lenders have achieved a return of over 8 per cent (7 per cent after our one per cent charge) with over £12 million loans facilitated.
Some Factors To Consider Before Investing
- Examine the borrowers' proposals in detail. We use our best endeavours to ensure that every representation of the borrower is true – about the market, the prospects, the company's track record, the reason for the loan, the veracity of the audited accounts, etc. But we cannot and do not warrant that this is so.
- Don't be seduced by yield. The returns can be attractive, but a high yield can mean high risk.
- Spreading your loan offers is a good idea. All Money&Co.'s borrowing companies have been through a careful credit-analysis process, but there is always a risk that a borrower might default on debt. We protect lenders' interests by taking a charge on the assets of the borrower, but please be aware that there is no profit without risk. Spreading money across several borrowers is seen by many commentators as a good way of spreading risk.
- Access to your money when you become a P2P lender is typically not as instant as withdrawing cash from an ATM or a bank. Lenders can sell their loans to other lenders in the loan market. Sometimes it may take a while to liquidate a lREAD MORE
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Jury Still Out On Funding Circle IPO
Funding Circle is the oldest and biggest player in the peer-to-peer (P2P) market. It recently announced its intention to float on the UK stock market and raise £300 million by selling shares in the company. Funding Circle has facilitated loans of more than £5 billion to over 50,000 small businesses. The initial public offering (IPO) will raises investment capital. But is it a good investment? The jury is out ahead of th4 full pricing detail, but we have serious concerns about this issue, based on the track record of IPOs in this sector in the UK and the US. The prospectus details growth plans and risk prospects for investors. He actual sale will be managed later on by a consortium on investment banks, who will look to stimulate interest from private and institutional investors (pension funds and the like). growth, what shareholders will get out of it and any risk factors that could lead to failure or underperformance. At this stage, Funding Circle has published a registration document. This outlines the risks that the business faces, as well as the opportunities for growth in the market it operates in. Funding Circle's investment banks include Merrill Lynch, Goldman Sachs and Morgan Stanley, with Numis Securities playing a broking role. If this IPO is priced reasonably, well and good. But the story of Lending Club, the big US P2P player that IPO'd in December 2014, is less than encouraging. Many of the same investment banks were involved in that IPO, and the share price seemed to many commentators – including the author of this blog – to be set too high. Good for the bankers, but not so much the company nor its investors... (our link blow)
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