While some platforms are withdrawing from the P2P retail market, voluntarily or otherwise, Proplend remembers that peer-to-peer lending has always been about extending creditworthy direct lending opportunities to individual investors. We remain committed to offering attractive rates of risk-adjusted returns and first charge property-backed security to new and existing UK retail investors and ISA subscribers – in 2020 and beyond.
Since launching in 2014 and first offering our innovative ISA in 2017, Proplend’s commercial property-backed loans have provided inflation-beating investment returns to a wide range of individual investors. From experienced property professionals, to open-minded alternative finance investors, to those who’ve always preferred cash saving but couldn’t stomach the value of their hard-earned money persistently losing value in real terms.
However, they have ALL had one thing in common. An understanding that they were investing with capital at risk, in loans where their debt position placed them ahead of the commercial property owner they were lending to – should in a default scenario, the first charge security need to be enforced.
They also each understood that it was only by pooling their resources with other like-minded individuals, using a financial technology platform, that they could access opportunities that had traditionally been the sole domain of financial institutions. And with Proplend facilitating direct lending arrangements, why shouldn’t the individuals that invest ALL the capital be passed on ALL the interest from Borrowers.
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As facilitators, we charge fees to the Lenders and Borrowers that we help connect. But those platforms charging one rate to Borrowers and paying lower rates to Lenders have forgotten one of the main justifications for circumventing the banking system. And the FCA, with their 9 December regulations are seeking to encourage greater clarity and investor awareness in this area.
It’s not just an issue of transparency, but of making informed decisions too. The interest rate on offer should indicate the level of risk to potential investors. Proplend offers a range of risk-adjusted returns, with loans individually priced on various Borrower risk parameters and underwriting circumstances. We can even offer different risk-return profiles within the same loan thanks to our loan-to-value (LTV) based ‘tranching’ system.
We understand that even amongst our retail investor community there are differing attitudes to risk. Facilitating bridging and mortgage lending at a range of LTVs (up to 75%), provides a corresponding range of opportunities for differing risk-reward appetites. But even the more risk averse Proplenders can participate in higher LTV loans thanks to our ‘Tranche A’ investments.
Limiting investors’ exposure to 50% LTV, even where the overall loan LTV is higher, Tranche A loan parts are first in line to be paid and benefit from a minimum 50% value buffer in the event of the Borrower defaulting and the first charge being enforced. Proplend Tranche A investments are also the top-rated peer-to-peer lending opportunities available according to P2P experts 4thWay – and Tranche A are the only investments we allow our Auto-Lend facility to allocate to.
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Platforms and existing retail Lenders alike, may have found the new Appropriateness and marketing regulations a little inconvenient and ‘broad-brush’, but Proplend welcomes the opportunity to confirm the knowledge and awareness of existing investors. We also welcome the burden of raised standards, transparency and disclosure imposed on the industry going forward. 2020 should be a year of increased confidence in the asset class and in the platforms like Proplend, that remain.
The Financial Conduct Authority wants to; “… ensure that only consumers capable of understanding the risks and of bearing the consequences invest in P2P agreements” – partly by setting out qualifying criteria for ‘High Net Worth’ and ‘Sophisticated’ categories of investors who can continue to invest in P2P (unadvised), without restriction. Any individual falling outside of these descriptions, will only initially be able to invest up to 10% of their net investable assets as a ‘Restricted’ investor, but will be able to re-categorise as Sophisticated after investing in a couple of loans and demonstrating an understanding of the P2P product.
Like any investment (with capital at risk), peer-to-peer lending clearly isn’t for everyone, and with a minimum investment of £1,000, we accept that Proplend won’t be for all P2P Lenders. Our long-established combination of direct lending contracts and a backup service provider (now an FCA requirement for all platforms), should give most new and existing P2P investors comfort to consider Proplend as one of their peer-to-peer or ISA providers. Peer-to-peer is not covered by the Financial Services Compensation Scheme, but remember FSCS only covers losses in the event of a Stocks and Shares provider winding up for example – not your investment or savings losing value.
We’d be delighted to accommodate ALL, well-informed individual investors looking to give risk-adjusted, property-backed investing a try, particularly ALL experienced investors looking for another home for their P2P funds, where their existing provider has withdrawn from the retail market.
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We’re not yet six years into a much longer journey and we’ve got many more Lenders and inflation-beating returns to facilitate. Proplend’s Classic invest, Innovative Finance ISA and Pension account customers have funded around £90m and 100 loans to date, ALL of which have had the option of a maximum 50% LTV (Tranche A) investment.
As well as ‘returning’ over £45m to Lenders in the form of interest and capital, almost £25m of loan capital has been realised by sellers on our refreshingly liquid secondary market – which also enables sellers to recoup interest accrued since the loan’s last monthly payment date. We can’t guarantee one of your peers will want to take on your holding, but with this market providing additional investment and diversification opportunities, it’s no surprise that the ALL-time average waiting time is just 10 to 11 hours (… yes hours).
We’re working hard behind the scenes ahead of the spring ISA season and we invite ALL retail investors, new and Sophisticated, to consider the appropriateness of our loans and proposition for your needs. With 300 individuals combining to fund our most recent loan in under 10 minutes, Proplend remains open to retail investors in every way.
Related to this post …
Platform loan and return statistics
More about how flexible ISAs work
More about our Tranche A only automated investment facility – Auto-Lend
Auto-Invest in maximum 50% LTV investments via our tax-free ISA
Read 4thWay’s independent Proplend review
Blog feature: Why it pays to be flexible this ISA season
Blog feature: 8 ways Proplenders are using Auto-Lend
