Collateral's lender reference guide (how they do business).
Nov 15, 2016 16:33:16 GMT
bugs4me, oldgrumpy, and 7 more like this
Post by Deleted on Nov 15, 2016 16:33:16 GMT
Quote: Peter collateral 15th November 2016.
(Copied to it's own thread because IMHO it represents a valuable lender resource and should be afforded prominance).
"Hi,
I think that we need to clarify the way our business model works and how we are different to other platforms.
All of our current agreements are either ‘buy back’ agreements or ‘assignment of chattels’ agreements. Both work exactly the same way in which Collateral agrees to buy the goods from the ‘borrower’ on behalf of the ‘lenders’ at a set price and gives the ‘borrower’ the option to buy back the goods within a set period of time at an agreed buy back price (the ‘loan’ amount). This is the purchase price minus a buy back fee (which equates to a monthly interest rate). The fee is deducted at drawdown to ensure the LTV doesn’t increase during the lifetime of the agreement. If the ‘borrower’ doesn’t buy back the goods within the agreement period they can pay a fee to renew the agreement or they forfeit the right to buy them back and we will sell the goods to repay the investors.
There are a number of benefits to working this way and they are all in favour of the ‘lender’ rather the ‘borrower’. For example;
• All fees (‘interest’) are deducted in full from the drawdown. The reason for this is to ensure that the interest can be paid to our lenders on a monthly basis rather than waiting for the borrower to service the loan and also that the LTV doesn’t increase for the duration of the agreement. Traditional pawn loans give the borrower the option to service the loan on an ad hoc basis and there isn’t an obligation to service the loan or make regular payments within the period of the agreement and often choose to pay back the capital and interest at the end of the loan period. As the interest accrues monthly, the LTV rises month on month.
• With traditional pawn loans, the lender has to give notifications to the borrower, such as default and notice to sell notifications. With buy backs, at the end of the agreement the goods can be sold immediately.
With regards to valuations we always look at the exit on each item we list and get a true value from individuals and companies in that particular trade - retailers/wholesalers & dealers. They give us a true valuation by way of what they will pay for the goods should they not be ‘bought back’. The reason we work this way is that we always have a confirmed exit. We often see insurance valuations that are 3 and 4 times the true value and cannot be relied on. In the case of any future loans against any asset class including property, we will provide details of the goods put up as security and will always look at what the exit is. Our IT developers are in the process of providing a ‘borrower’ ID as a prefix. This will provide info on any previous agreements with this ‘borrower’.
We currently have 9 jewellery outlets that are on our panel that have underwritten the value of the jewellery goods should the buy back option not be exercised. They have agreed to take the goods at the buy back value for any unexercised agreements. We also have 3 motor trade outlets that underwrite the value of vehicles should the buy back option not be exercised. We have outlets for all other asset classes ‘loaned’ against. We have an integrated API from HPI which allows us to do a full HPI check on vehicles which also provides us with a Glass’s guide value. We can put a charge on a vehicle (and take a charge off) in seconds. All of the underwriters are independent and have no connection with Collateral.
We use a brand new state of the art safe deposit centre in Manchester where we have their largest safe deposit box and also our own vault inside the centre to store goods in our possession. We also have a safe deposit box at the Chancery Lane silver vaults in London for southern-based clients.
We have exhibited at International Jewellery London, National Pawnbrokers Association and Finance Professional shows and attended the Lendit p2p show in London where many of our investors took the time to introduce themselves.
We have retailers, wholesalers and dealers seeking ways of ‘borrowing’ against their existing stock and them retaining the stock in order for them to repay the loan whilst ensuring adequate security on behalf of our investors. We instructed our lawyers to look at innovative ways of us working with these clients. They have provided us with the requisite legal documentation in order for us to work innovatively with clients whilst continuing to protect the platform and our investors. This is in the format of Assignment of Chattels Agreements and Sale Agency Agreements.
We don’t want to avoid the ‘borrower’ issue but we have a duty of care to both ‘borrowers’ and investors and don’t disclose who the ‘borrowers’ are as we don’t disclose who the investors are. As many of our ‘borrowers’ are well known businesses they want to remain anonymous, as they have pointed out to us that announcing who they are may have a detrimental effect on their businesses. We respect their requests to remain anonymous and prefer to work with our ‘borrowers’ and ‘lenders’ together to ensure repeat business. This isn’t to mislead anyone, quite the contrary; this is to ensure that the platform continues to grow to the benefit of us all.
One of the benefits of not naming the ‘borrower’ is that we avoid competitors circumventing us and undercutting our rates by going directly to the ‘borrower’. This eliminates that chance for repeat business. This not only cuts us out of future deals but also you - our investors. It is not good business practice to let everyone know your customers details. We have lost business previously by being circumvented.
We look at the value of each asset and the exit in the worst-case scenario on every listing and it is important that we stress that it is the asset and the ability to offload the asset (and not who the borrower is) that is important to us to continue having no defaults on the platform.
By continuing with our model, we can continue to provide the rate we offer to our investors. If forum members insist on us naming our ‘borrowers’ (and not concentrating on the assets being loaned against) it is inevitable that we will have to provide lower returns to our investors in order to compete with other lenders outside of p2p. We have been approached by funders to underwrite the funding of each loan and have resisted this so far as we have built the platform on retail investment and would like to continue this path to give all our investors equal opportunities to invest in each ‘loan’.
We have met with individual investors at each of our exhibitions and also outside of these on several occasions. We will continue building on our business relationships to bring the best deals possible to our platform and will arrange a suitable time with our larger investors at the earliest opportunity.
None of the current loans are to Collateral, I know that there were concerns about some of the earlier property loans and with hindsight maybe should have declared a conflict of interest as they were to a company related to a family member of mine. These loans were prior to the launch of the platform and we decided to put the loans on the platform to see what the investor appetite was. These have been repaid in full and all investors received their capital and interest back in full. I must reiterate that we look at the security of the asset to ensure the best outcome for our investors and the reputation of the platform.
It has come to our attention that PM’s are being sent amongst forum members and I have been contacted directly by a number of them who I have spoken to and have alleviated their concerns.
I sincerely hope that this has provided a better understanding of the business model, provides reassurance and alleviates any concerns you may have. If you have any further queries, please feel free to contact me by email – peter@collateraluk.com and provide your contact details for me to call you back."
Thanks,
Peter
(Copied to it's own thread because IMHO it represents a valuable lender resource and should be afforded prominance).
"Hi,
I think that we need to clarify the way our business model works and how we are different to other platforms.
All of our current agreements are either ‘buy back’ agreements or ‘assignment of chattels’ agreements. Both work exactly the same way in which Collateral agrees to buy the goods from the ‘borrower’ on behalf of the ‘lenders’ at a set price and gives the ‘borrower’ the option to buy back the goods within a set period of time at an agreed buy back price (the ‘loan’ amount). This is the purchase price minus a buy back fee (which equates to a monthly interest rate). The fee is deducted at drawdown to ensure the LTV doesn’t increase during the lifetime of the agreement. If the ‘borrower’ doesn’t buy back the goods within the agreement period they can pay a fee to renew the agreement or they forfeit the right to buy them back and we will sell the goods to repay the investors.
There are a number of benefits to working this way and they are all in favour of the ‘lender’ rather the ‘borrower’. For example;
• All fees (‘interest’) are deducted in full from the drawdown. The reason for this is to ensure that the interest can be paid to our lenders on a monthly basis rather than waiting for the borrower to service the loan and also that the LTV doesn’t increase for the duration of the agreement. Traditional pawn loans give the borrower the option to service the loan on an ad hoc basis and there isn’t an obligation to service the loan or make regular payments within the period of the agreement and often choose to pay back the capital and interest at the end of the loan period. As the interest accrues monthly, the LTV rises month on month.
• With traditional pawn loans, the lender has to give notifications to the borrower, such as default and notice to sell notifications. With buy backs, at the end of the agreement the goods can be sold immediately.
With regards to valuations we always look at the exit on each item we list and get a true value from individuals and companies in that particular trade - retailers/wholesalers & dealers. They give us a true valuation by way of what they will pay for the goods should they not be ‘bought back’. The reason we work this way is that we always have a confirmed exit. We often see insurance valuations that are 3 and 4 times the true value and cannot be relied on. In the case of any future loans against any asset class including property, we will provide details of the goods put up as security and will always look at what the exit is. Our IT developers are in the process of providing a ‘borrower’ ID as a prefix. This will provide info on any previous agreements with this ‘borrower’.
We currently have 9 jewellery outlets that are on our panel that have underwritten the value of the jewellery goods should the buy back option not be exercised. They have agreed to take the goods at the buy back value for any unexercised agreements. We also have 3 motor trade outlets that underwrite the value of vehicles should the buy back option not be exercised. We have outlets for all other asset classes ‘loaned’ against. We have an integrated API from HPI which allows us to do a full HPI check on vehicles which also provides us with a Glass’s guide value. We can put a charge on a vehicle (and take a charge off) in seconds. All of the underwriters are independent and have no connection with Collateral.
We use a brand new state of the art safe deposit centre in Manchester where we have their largest safe deposit box and also our own vault inside the centre to store goods in our possession. We also have a safe deposit box at the Chancery Lane silver vaults in London for southern-based clients.
We have exhibited at International Jewellery London, National Pawnbrokers Association and Finance Professional shows and attended the Lendit p2p show in London where many of our investors took the time to introduce themselves.
We have retailers, wholesalers and dealers seeking ways of ‘borrowing’ against their existing stock and them retaining the stock in order for them to repay the loan whilst ensuring adequate security on behalf of our investors. We instructed our lawyers to look at innovative ways of us working with these clients. They have provided us with the requisite legal documentation in order for us to work innovatively with clients whilst continuing to protect the platform and our investors. This is in the format of Assignment of Chattels Agreements and Sale Agency Agreements.
We don’t want to avoid the ‘borrower’ issue but we have a duty of care to both ‘borrowers’ and investors and don’t disclose who the ‘borrowers’ are as we don’t disclose who the investors are. As many of our ‘borrowers’ are well known businesses they want to remain anonymous, as they have pointed out to us that announcing who they are may have a detrimental effect on their businesses. We respect their requests to remain anonymous and prefer to work with our ‘borrowers’ and ‘lenders’ together to ensure repeat business. This isn’t to mislead anyone, quite the contrary; this is to ensure that the platform continues to grow to the benefit of us all.
One of the benefits of not naming the ‘borrower’ is that we avoid competitors circumventing us and undercutting our rates by going directly to the ‘borrower’. This eliminates that chance for repeat business. This not only cuts us out of future deals but also you - our investors. It is not good business practice to let everyone know your customers details. We have lost business previously by being circumvented.
We look at the value of each asset and the exit in the worst-case scenario on every listing and it is important that we stress that it is the asset and the ability to offload the asset (and not who the borrower is) that is important to us to continue having no defaults on the platform.
By continuing with our model, we can continue to provide the rate we offer to our investors. If forum members insist on us naming our ‘borrowers’ (and not concentrating on the assets being loaned against) it is inevitable that we will have to provide lower returns to our investors in order to compete with other lenders outside of p2p. We have been approached by funders to underwrite the funding of each loan and have resisted this so far as we have built the platform on retail investment and would like to continue this path to give all our investors equal opportunities to invest in each ‘loan’.
We have met with individual investors at each of our exhibitions and also outside of these on several occasions. We will continue building on our business relationships to bring the best deals possible to our platform and will arrange a suitable time with our larger investors at the earliest opportunity.
None of the current loans are to Collateral, I know that there were concerns about some of the earlier property loans and with hindsight maybe should have declared a conflict of interest as they were to a company related to a family member of mine. These loans were prior to the launch of the platform and we decided to put the loans on the platform to see what the investor appetite was. These have been repaid in full and all investors received their capital and interest back in full. I must reiterate that we look at the security of the asset to ensure the best outcome for our investors and the reputation of the platform.
It has come to our attention that PM’s are being sent amongst forum members and I have been contacted directly by a number of them who I have spoken to and have alleviated their concerns.
I sincerely hope that this has provided a better understanding of the business model, provides reassurance and alleviates any concerns you may have. If you have any further queries, please feel free to contact me by email – peter@collateraluk.com and provide your contact details for me to call you back."
Thanks,
Peter