Draw down delay limits

@ batchoy
Yes, the draw down times can be much longer on platforms that look to structure the security properly, such as Assetz and Thin Cats. Over on Thin Cats I believe the average is about 3 weeks, but some are very quick and some are much slower. On the whole, Assetz deals are simpler but some delays are to be expected. The issue of whether to penalise borrowers for delays is constantly being discussed on the Thin Cats forum. It's a difficult one because (i) delays are not always their fault (it's often down to their bankers or solicitors), and (ii) it might put them off applying, or lead them to demand a lower headline rate. My personal view is that a provision to share the pain when delays go over 3 weeks might be appropriate. The risk of delay should always be factored into the investment decision, especially on shorter loans where a delay has a disproportionate impact on returns.

@ chris
For your part, I hope Assetz do start to put in more work earlier in the process. Equally important is that the documentation we are given for every loan tells us both how long drawdown is expected to take and the uncertainties/risks attendant to that. For example if Assetz will have a second charge and a Deed of Priority needs to be agreed with the first chargeholder, I know it's likely to take longer and be more uncertain but this should be spelled out in as much detail as you can so that potential lenders can make their own assesment. The progress report you mention will be good, but we need more information before the lending decision is made.

chris: I like your thoughts and intentions on making more information available, but there is nothing like a deadline for focusing peoples minds, hence the original question regard contractual deadlines, i.e. the borrower has 30, 60, 90 or 120 days to get everything signed off and the funds drawn down or the offer will expire. At the moment things seem to be fairly open ended  

I wonder if any "penalties" could be charged. For instance, a % per week charge could be imposed after a thirty day limit.... or better, just make it an up front charge element which would be refunded if drawdown is taken  <21 (or <30) days after the end of the auction, then the word penalty could be avoided.

To a certain extent we have to take the rough with the smooth ... the Leeds CP loan has drawndown 5 days after filling (although no doubt legals were started before then given the loan had been fully underwritten for a week or so prior).  By luck I have either avoided, or only had a token investement in the loans that have either failed to drawdown or taken ages to do so.

I do however agree that the process appears to be a bit too open ended at present, and as such encourages procrastination on the part of the borrower / borrower's legal and financial advisers.  My thoughts are a contractual completion deadline set according to the expected complexity of the legals (e.g. 30 to 90 days) with thereafter a monthly commitment fee (even if this is set at a token bank base rate + x % ) would both help concentrate minds as suggested above, and provide both Assetz & lenders a small recompence for procrastination.

As Chris has said, we are aware of the drawn out nature of some of the loans we have done.  In all cases we are aiming to have loans drawn down within 2 weeks of the end of the auction, but in many cases we are in the hands of third parties who do not share our need for expediency.  

Ensuring that each loan is as complete as possible before it goes to auction is something that we are working on constantly.  I hope through 2014 we are able to find the right balance in this regard.

We are listening to your concerns, but I must also stress not every delay is foreseeable or within the control of Assetz Capital.

Andrew