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Post by bengilbert on Oct 14, 2014 12:08:07 GMT
Beware the rescheduled loans showing as current on the secondary market when they have previously defaulted, you need to examine any loan which appears to be a bargain very carefully before you hit the purchase button. I've seen that they now have a filter ('Has new loan schedule') which makes it possible to filter out rescheduled loans.
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Post by bengilbert on Oct 14, 2014 11:56:21 GMT
Latest update - 'all parties are aiming to complete the refinance this Thursday, 16 October 2014'.
Interesting to see what will happen on the SM if that £2.175 million plus a couple of months of default interest gets paid out.
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Post by bengilbert on Oct 1, 2014 15:59:57 GMT
Update posted for H****ey. The borrowers are meant to be visiting their solicitors today to sign the documents for a refinancing. If AC don't get confirmation today from the solicitors that they've been signed and returned, they (AC) will issue the demand for full repayment. If the documents are signed, it would be 'reasonable to expect' it to take 3-5 working days for the money to come through.
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Post by bengilbert on Sept 15, 2014 23:39:00 GMT
Deals like the recent ones listed on Assetz or Thincats - loans to build wind turbines, paying 9-10% - seem fairly low risk to me. If I understand it right, installation and initial proper functioning of the turbine is covered by the manufacturer, and the income generated is government guaranteed, subject to weather conditions that are fairly predictable. However, the borrowers are paying 10-12% in order to get financing for their projects. Any ideas on why banks aren't offering money at lower rates?
On property deals, I can see why banks don't compete - previous large losses in the sector, top-level restrictions on increasing the size of their property lending books, inflexible and slow systems for approving borrowers, etc. Are there any comparable reasons why they won't lend on wind turbines?
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Post by bengilbert on Sept 14, 2014 16:46:23 GMT
Next payment was due yesterday, so I assume it's just automatically been pulled for being a day late, even though the scheduled date was a Saturday.
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Post by bengilbert on Aug 29, 2014 17:42:48 GMT
Lending/borrowing is a zero sum game. There are some people who wish to defer spending (called lenders) who want to spend less than their current income, and some who want to bring forward spending (called borrowers) who want to spend more than their current income. I disagree. Some borrowing is for purposes of investment. If someone can invest the money in a productive way, there can be more for everyone, and it's no longer zero sum. I'm doing some work at the moment for a US company lending money to people so they can do programming and data science bootcamps. 90% of them get high-paying jobs after finishing the course. The returns to the student for doing the course hugely outweigh the tuition costs, but some can't afford to pay the tuition up front. By lending them money, potentially everyone can win - both borrower and lender.
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Post by bengilbert on Aug 15, 2014 12:26:15 GMT
What would happen if a deal doesn't draw down, either because the deal falls through or it doesn't fill on the platform? Would lenders still receive interest for the period their money has been committed on the platform?
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Post by bengilbert on Aug 11, 2014 20:50:41 GMT
The rates there are always on a 30-day basis, so 100 bp would mean an annual rate of about 11.7% after taking off their fee (if that's what you were seeing). I remember good invoices being bid down to 60-70 bp, but larger invoices would go at up to 150 - 170 bp, seemingly just because of liquidity - the quality didn't seem bad, as far as I could tell, but a minimum bid of 5% of the invoice meant £20,000 plus.
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Post by bengilbert on Jul 31, 2014 10:29:48 GMT
I know one of the people who are going to be analysing the data and producing the report on it - he's doing his PhD at Cambridge on crowdfunding. It's all completely genuine and they're taking it seriously. It isn't just a marketing exercise for the sites, though I'm sure it will be used to raise the general profile of the sector. I think having this sort of data will help organisations like the p2pfa when they lobby the government for support, which will be good for them if they make progress but probably good for us too.
I genuinely found the survey quick, easy and quite interesting to fill out. But feel free to discount that as biased.
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Post by bengilbert on Jul 31, 2014 9:20:16 GMT
I am repeatedly surprised that someone is buying my H*****y loan parts as I try to reduce my exposure before redemption in about a couple of weeks time. What goes through a buyer's mind to think that taking on the tail-end risk is worth it for 0.5% return (i.e., two weeks at 12% p.a.)? Whoever they are, it's appreciated I was wondering about this. It does seem a little mad to take on all the default risk in return for a fraction of the returns, and a great deal for the seller. On the other hand, another way of looking at it is that the main risk on the loan was that property prices would fall and make the security value fall below the loan amount. Almost 6 months later, that hasn't happened, and you'd imagine the security is looking good. So the sellers are giving up some high returns at the point when the risk on the loan might be at its lowest. It depends, I suppose, on how much of the risk you think is in a general fall in property prices, and how much in specific issues with the borrower, which might make the property worth a lot less than is suggested in the valuation, regardless of what has happened to prices generally.
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Post by bengilbert on Jul 28, 2014 22:52:07 GMT
Thanks bracknellboy - edited now to make it clear I was talking about Market Invoice.
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Post by bengilbert on Jul 28, 2014 22:23:03 GMT
On diversification - you do need to deposit £50,000 to get started on Market Invoice. However, you don't have to invest this all at once, or indeed at all. I suspect that, at this stage of the business, they only want investors who are willing eventually to have that sort of sum invested on the platform, but it would be quite understandable to invest a smaller amount at the beginning, as you get to know the system. I found the team there very approachable and they would probably be able to answer questions directly about what exactly they expect of investors.
Most of the bidding is done through an auto-bid system, where the only parameters you set are the maximum time until the invoice is due to be paid, the maximum exposure you want to any single seller and to any single debtor, and the maximum % of your portfolio you are willing to have in each of the 8 different price grades to which they assign the invoices. (The great majority go at equivalent annual yields of 8-16% after fees.) Some of each auction is available to bid on manually, but since auctions are almost all fixed price and generally there's high demand, this bidding tends to finish in seconds with no guarantee of getting anything. The autobid system is much more reliable, and prioritises people in order of how much of their money on the site is undeployed, ie you get invested before other people if your money is idle. Average invoice duration is about 35 days, and I think there are at least 10 invoices available per day, so you could easily get into 30-50 trades, at whatever amount per trade you're comfortable with, within a week or so. Minimum investment amount is 1% of the trade though. I'd guess 30-40% of trades are under £50,000 while 20-30% are over £100,000.
Deployment rate on the platform is about 90% at present (this statistic is shown on the site). My sense is that this was probably lower earlier in the year, but they're putting through more and more business which is allowing investors to get more of their money invested without having to wait very long.
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Post by bengilbert on Jul 28, 2014 7:53:35 GMT
A few people have asked about invoice trading. I've had a bit of experience with MarketInvoice and Platform Black, so wanted to share it.
I invested on both platforms between November last year and February this year. I stopped because I ended up with a net loss on both platforms, but I've recently started again on MI because I think I was probably just unlucky earlier. MI publish some fairly detailed statistics on returns and defaults, with low levels of losses, and it's easy to invest in all invoices and so get the average return. (I didn't do this earlier - the system didn't allow it then.) 0.89% of invoices have been 'delinquent', of which 83% has already been recovered, so that means 0.15% average default losses per invoice, with recovery ongoing on that amount. Since the average invoice duration is 35 days, I make that about 1.6% per year, vs 11.5 – 13.0% pa yield on the invoices (after fees).
Very briefly – on both platforms, you buy invoices from sellers. If the debtor (who's meant to pay the invoice) doesn't pay it, you can claim the money from the seller. So, you should only lose money if the debtor doesn't/can't pay and the seller is insolvent. The invoices are usually due to be paid in 15 – 90 days time, and you get roughly 1% per month (details depend on the invoice). Platform Black runs an auction system for the invoices, whereas almost all invoices on MI are at a fixed price.
On Platform Black, I was in trades from 4 different invoice sellers. 1 of them went wrong – the debtor found a problem with the goods supplied, only paid about 60% of the invoice, and the seller then went into administration. I generally found communications with the platform frustrating, since important questions I had didn't get answered for days, and it was sometimes impossible to reach the people who knew what was going on.
I found MI much more professional, and generally I think they're quite impressive as an organisation. I was in dozens of trades, but 2 went wrong. One was another situation of faulty goods / seller insolvent, and in the other, the debtor deducted an amount that the seller owed to them from the invoice, and the seller went into administration. MI are still working on getting further recoveries on both trades.
Overall, invoices could be a really good investment since they're high-yield, short-duration, well-secured, and it's easy to diversify (there are 10-20 trades per day on MI, and you can just set up an autobid profile which will get you into all the trades which meet your criteria). However, a couple of losses can wipe out all the small gains you make on each invoice. As I said, I tend to trust the MI statistics, which make me think that expected losses are low, even though I was unlucky first time round. I'll update in a couple of months with how things go this time.
I can explain more about how the two sites work if anyone is interested or has questions. There are some nuances worth explaining if anyone's thinking of investing, but I don't want this to get too long.
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Post by bengilbert on Jul 16, 2014 9:46:52 GMT
Just to add: Kevin from Thincats posted on their discussion forum to say that he hadn't heard anything about TC investors being caught out on this, nor could I find anything from the FT when I searched. Vero, do you have a link to the story?
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Post by bengilbert on Jul 16, 2014 0:00:44 GMT
EG residential property is not permitted; this means not just no loans to buy residential property, but also no loans at all that are SECURED on residential property, because that means if the security gets called in you may accidentally end up owning a piece of residential property. Even if it never happens, the loan is still not allowed.
Vero: do you have any more details or references on this? SSAS guidance that I've seen says that, when lending to an unconnected party, the loan must not be for the purpose of purchasing taxable property, which includes residential property. This could suggest that a loan secured on property, though not made for the purpose of purchasing it, might be acceptable. And there is a separate argument that, where the security is held by a security trustee, then even if the security has to be enforced, the lender never owns the property, it is just sold by the trustee in order to repay the loan that the lender continues to hold. If this isn't acceptable, then what about an unsecured PG, which might also require the guarantor to sell property in order to meet their obligations? And does it make any difference if the security is given by a party other than the borrower? (eg the borrower is a company, the security or PG is given by a director)
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