michaelc
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Post by michaelc on Apr 18, 2017 21:46:06 GMT
I'm sure this post goes to show my naivety/stupidity but I only now have noticed FS (according to their calculator in the borrow-money section) lends at up to 64.4%. Above 50K it goes down to 30%. That is a very long way from the 12% we get. I don't know why, but I assumed the site would get around 18% or so - I think I read some posts that seem to hint at that.
Anyway, the margin is much bigger than I assumed and does seem disproportionate to the risk (or lack thereof) that FS is taking.
Is this kind of monster profit margin normal in the p2p sector and is it just for providing a platform with fcs accreditation? That feels like something a software developer (like me) and an accountant could knock up. I don't see why that would need 18%+ of investors money to do. Maybe I've completely misunderstood something and got the wrong end of the stick. I certainly hope so!
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locutus
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Post by locutus on Apr 18, 2017 22:04:56 GMT
You're way, way off the mark. Download FS's accounts from Companies House. They are profitable but make nowhere near the margin that you seem to think. And as for it being something you "could knock up", I couldn't really comment but I think you're massively underestimating the amount of hard work, investment and experience required to make a platform like this successful.
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Apr 18, 2017 22:20:28 GMT
Knocking up the platform is probably the easy part, spending 2 years ensuring the FCA doesnt knock it flat on its a*** is the difficult bit and even then you would have to get some borrowers & some lenders or youll fall flat on your face. And then us lot will probably give you a kicking while your down.  (See the list of didnt quite make its on P2Pmoney, or the struugles of peer funding more recently) |
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ozboy
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Post by ozboy on Apr 18, 2017 22:21:29 GMT
You're way, way off the mark. Download FS's accounts from Companies House. They are profitable but make nowhere near the margin that you seem to think. And as for it being something you "could knock up", I couldn't really comment but I think you're massively underestimating the amount of hard work, investment and experience required to make a platform like this successful. Indeed locutus, indeed.
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ozboy
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Post by ozboy on Apr 18, 2017 22:23:15 GMT
Knocking up the platform is probably the easy part, spending 2 years ensuring the FCA doesnt knock it flat on its arse is the difficult bit and even then you would have to get some borrowers & some lenders or youll fall flat on your face. And then us lot will probably give you a kicking while your down. (See the list of didnt quite make its on P2Pmoney, or the struugles of peer funding more recently) Did you just say arse, ilmoro? I'm shocked. I'm going for a lie down.
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Liz
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Post by Liz on Apr 18, 2017 22:26:04 GMT
That "A" word is on a list in the forum rules that gets you an automatic ban |
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Apr 18, 2017 22:51:57 GMT
That "A" word is on a list in the forum rules that gets you an automatic ban Colloquial name of a football team - to get knocked flat on one's a*** - means to fail repeatedly and constantly under-achieve 
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ozboy
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Post by ozboy on Apr 18, 2017 22:53:47 GMT
That "A" word is on a list in the forum rules that gets you an automatic ban Mods must be tired/gone for cocoa Liz, the naughty word is still unabridged as at 23:53 00:06 on 19/4/17! 20:38 on 19/4/17 00:14 on 21/4/17 
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sb
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Post by sb on Apr 19, 2017 7:16:59 GMT
I'm sure this post goes to show my naivety/stupidity but I only now have noticed FS (according to their calculator in the borrow-money section) lends at up to 64.4%. Above 50K it goes down to 30%. That is a very long way from the 12% we get. I don't know why, but I assumed the site would get around 18% or so - I think I read some posts that seem to hint at that. Anyway, the margin is much bigger than I assumed and does seem disproportionate to the risk (or lack thereof) that FS is taking. Is this kind of monster profit margin normal in the p2p sector and is it just for providing a platform with fcs accreditation? That feels like something a software developer (like me) and an accountant could knock up. I don't see why that would need 18%+ of investors money to do. Maybe I've completely misunderstood something and got the wrong end of the stick. I certainly hope so! Based on the accounts for Jun 2016 their turnover was 2.1 mln, assuming loan book 20-30mln that is 7%-10%. They made 0.5 mln profit after 0.85mln cost of sales (probably some fees) and 0.75 admin expenses. With the current loan book size 50mln they should make a nice 1mln of profit.
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michaelc
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Post by michaelc on Apr 19, 2017 13:02:49 GMT
Many thanks for the serious replies - quite interesting. I'm clearly not an accountant. What I mean by "margin" was the gross difference in the rate they lend to borrowers and the rate we receive as lenders. That before any of their salaries costs.
Regarding the intertest charged to borrowers, there still seems to me to be a disconnect to the amounts mentioned here (e.g. 18% up to mid-twenties which is what I also assumed it was until yesterday) and the amount that is clearly shown on their website as starting from 30% ! Go to their website, pretend to be a borrower, and there is a calculator that never goes below 30%! That is a long way in my view from "18% up to mid twenties".
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Post by davee39 on Apr 19, 2017 17:40:22 GMT
The pawnbroking loans carry far more risk than is generally understood by yield hungry asset enthusiasts.
There is no legal obligation for these loans to be repaid, and at the rates charged the borrowers must be pretty desperate. After one or two renewals the borrower may well be forced to relinquish the asset, having paid more than it's value in interest. At this point the asset is sold and repayment depends on the quality of the valuation and the current state of the market with the risk falling 100% on the lenders.
I assume that performing 12% loans provide sufficient reward to compensate for losses, otherwise there would not be such a scramble for new loans.
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ben
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Post by ben on Apr 19, 2017 18:04:53 GMT
The pawnbroking loans carry far more risk than is generally understood by yield hungry asset enthusiasts. There is no legal obligation for these loans to be repaid, and at the rates charged the borrowers must be pretty desperate. After one or two renewals the borrower may well be forced to relinquish the asset, having paid more than it's value in interest. At this point the asset is sold and repayment depends on the quality of the valuation and the current state of the market with the risk falling 100% on the lenders. I assume that performing 12% loans provide sufficient reward to compensate for losses, otherwise there would not be such a scramble for new loans. I find the pawn broking loans less risky for us lenders, as you state the borrower does not have to redem but providing the orginal valuation is good and it the item appeals to the mass market chances are you will get your capital back at least. Unbolted is a prime example they have a fair few defualts which is to be expected but at the moment every single one I have been in has recovered enought to pay capital, interest and unbolted fee. With some of the borrowers on sites like FS and other similar ones with property you will soon find you with a difficult borrower all your capital going on legal fees, I think rebs currently has one or two examples and Lendy is about to find out with a certain over valued office block.
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peteuk
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Post by peteuk on Apr 19, 2017 19:26:27 GMT
Ref rishton loan originally 182 days now sitting on 418 at these rates of interest there is now nothing left in the loan, the invester is going to be the one that loses out fs get first pick of whats left this really iritates me as i have been in contact with fc on a weekly basis demanding that they default the loan as they have a duty of care not only to the borrower but also to the lender. If anyone is interested look at this loans update page and you will not want to invest anymore money with fs, it seems at the moment they will sell any loan for turnover and worry about it later have contacted FCA about a month ago about my cocerns if anyone else is unhappy about the way they treat the investers can they please do the same many voices may change there attitude
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ozboy
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Post by ozboy on Apr 19, 2017 19:34:11 GMT
Ref rishton loan originally 182 days now sitting on 418 at these rates of interest there is now nothing left in the loan, the invester is going to be the one that loses out fs get first pick of whats left this really iritates me as i have been in contact with fc on a weekly basis demanding that they default the loan as they have a duty of care not only to the borrower but also to the lender. If anyone is interested look at this loans update page and you will not want to invest anymore money with fs, it seems at the moment they will sell any loan for turnover and worry about it later have contacted FCA about a month ago about my cocerns if anyone else is unhappy about the way they treat the investers can they please do the same many voices may change there attitude I agree. Pending knowing the full facts and background to a Loan, we, the Investors, should have the power, by a vote, to Default at, say, six months maximum. I mean, it's our money!
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mikes1531
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Post by mikes1531 on Apr 20, 2017 2:25:27 GMT
The FS calculator on their website is specific to their "P2P pawnbroking" loans. These have huge rates and the effective spread between borrower and lender is massive. The problem is that you really need to think about the margin in cash terms rather a yield. These tend to be for very small loans (say £25-100k) and are quite bespoke. Plus there isn't a huge volume of these loans. I expect that for FS to make any material amount of money they do need to charge a very wide spread. Another factor to consider with the pawn loans is that FS have to take physical possession of the security and store it safely, and that has the potential of being expensive relative to the amount of interest to be earned during the 6-month term of the loan. And if a loan isn't redeemed, which isn't a rare occurrence for pawn loans, FS have to spend time trying to sell the security. Property loans might not have that storage expense, but I expect that the legal fees associated with drawing up the loan contract and taking the security are significant.
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