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Post by Ton ⓉⓞⓃ on Jan 2, 2015 17:04:01 GMT
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spockie
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Post by spockie on Jan 2, 2015 17:32:24 GMT
"Returns for a specific invoice discount product are estimated to be 5-7 per cent a year, with a contingency fund to cover losses." If this is true, then count me out. 8-10% with a contingency fund or 10%+ without is my bottom line. Let's hope the articles quoting 10% are correct and the FT one isn't. I shan't be investing at 5-7% whereas I would have been interested at 10%. Perhaps stuartassetzcapital could clarify?
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hendragon
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Post by hendragon on Jan 2, 2015 17:40:19 GMT
returns of 5-7% pa would not be sufficient for me to invest either. You would be better off with ratesetter unless there was very good, and free, liquidity. I am sad to say the declining returns and new website have led to me halve my investment with AC. If this indicates further downward pressure on returns I can forsee having little or no investment left with AC.
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ton27
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Post by ton27 on Jan 2, 2015 18:01:53 GMT
Generally this sort of business generates a better than 10% return so I will not be investing unless it is 10% plus. 5-7% is just not competitive.
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merlin
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Post by merlin on Jan 2, 2015 18:11:55 GMT
5-7% wont interest me sufficiently enough to entice me back to AC while I can get better than 12% elsewhere. I also know I am not alone in my thinking as I continue to rub up against many other contributors to this site who have moved elsewhere.
My guess is that this offering is possibly aimed at the Building Society investor who is beginning to look for a better rate of return than .5% gross. I also guess that these rates reflect the additional costs to AC of buying into a franchise agreement with a very much bigger player. However I could be wrong?
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bg
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Post by bg on Jan 2, 2015 18:37:28 GMT
It's short term funding though.
The comparable rate on Ratesetter is 2.8% (1 month loan), Zopa has 3.9% for 3 year loans while loans with only a few months left on FC go for around 4% (unsecured). This is not going to be a long term hold for many people on this forum but I can see a situation where a nice term loan is 'upcoming' on the platform with drawdown forecast in 4-6 weeks and you park your cash in this for a few weeks while you wait for the term loan to become available (which is how I will use it).
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mikes1531
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Post by mikes1531 on Jan 2, 2015 22:04:46 GMT
5-7% doesn't look very attractive to me either, even with a provision fund. Even the top end of that range is no better than the GEIA.
The MarketInvoice person referred to said their investors receive about 12% return. They also suggested a default rate of 1.9%. It wasn't clear whether the 12% was before or after subtracting the defaults, but even if it's before that still leaves 10% for their investors. If all AC are going to offer to their investors is 5-7%, then that leaves a rather large 'spread' to be divided between AC and IFG, so I can see how this would be very attractive to them.
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Vero
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Post by Vero on Jan 3, 2015 0:14:04 GMT
I expect these are not targeted at "us", rather at a new, more "retail" market, such as building society/ISA punters, who just want to park their money.
With so many earning sub-inflation level returns, 5%-7% with a PF ought to be enough to tempt some (especially with talk of a p2p ISA wrapper on the horizon). I'm sure it's a good business move - we are all only here to turn a profit.
As merlin pointed out, our preferred risk-to-yield returns are still available out there (so far...).
PS. Speaking of which, merlin - is that your dog over at ReBS?
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pikestaff
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Post by pikestaff on Jan 3, 2015 8:36:20 GMT
At 5-7%, it's doesn't look that competitive with MarketInvoice or PlatformBlack on a first look. It's possible to achieve net (ex fees) yields of around 11-12% on MarketInvoice. That's before the 2% default rate but recoveries are very good, so the real loss rate is <0.3%, leaving a return in the 10.7-11.7% territory. However, you can't achieve deployment rates on your capital of 100%; more like 70-90%, so the real return is probably more like 8-10%... If the real return of 8-10% on MarketInvoice is net of fees then 5-7% does look a bit mean even allowing for the cost of running the provision fund. It suggests either a rich profit margin (good luck to AC) or high costs. I wonder how much they will be paying IFG? I could well be tempted at the upper end but not at 5%. I agree with Vero's comments.
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merlin
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Post by merlin on Jan 3, 2015 10:13:01 GMT
At 5-7%, it's doesn't look that competitive with MarketInvoice or PlatformBlack on a first look. It's possible to achieve net (ex fees) yields of around 11-12% on MarketInvoice. That's before the 2% default rate but recoveries are very good, so the real loss rate is <0.3%, leaving a return in the 10.7-11.7% territory. However, you can't achieve deployment rates on your capital of 100%; more like 70-90%, so the real return is probably more like 8-10%... If the real return of 8-10% on MarketInvoice is net of fees then 5-7% does look a bit mean even allowing for the cost of running the provision fund. It suggests either a rich profit margin (good luck to AC) or high costs. I wonder how much they will be paying IFG? I could well be tempted at the upper end but not at 5%. I agree with Vero's comments. Hi Vero didn't know I had a dog? Got quite a lot of sheep though. Sheep and dogs together are often bad news so I will have to keep a good lookout and keep my rifle handy!
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ramblin rose
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Post by ramblin rose on Jan 3, 2015 11:24:05 GMT
At 5-7%, it's doesn't look that competitive with MarketInvoice or PlatformBlack on a first look. It's possible to achieve net (ex fees) yields of around 11-12% on MarketInvoice. That's before the 2% default rate but recoveries are very good, so the real loss rate is <0.3%, leaving a return in the 10.7-11.7% territory. However, you can't achieve deployment rates on your capital of 100%; more like 70-90%, so the real return is probably more like 8-10%. Also there can be a significant issue with taxation as gross (pre fee) yields are 14%-15%. If AC can offer 7% with 100% deployment and no taxation risks (i.e fees are paid by borrower) then it might be of marginal interest to me. At 5% it doesn't work. From my standpoint, I don't see the need for the provision fund since while default rates may well be in the 1-5% territory, recoveries should be very high leading to a low loss rate. I much prefer an unprotected product at a higher yield. What we shouldn't forget, also, is that if you can't invest £50K+, then you can't get the MarketInvoice real return of 8%-10% at all. If you are at the £100, £1K or even £10K investment level you can't get any return from it. AC will be providing a mechanism whereby we could, if we wanted, diversify into this market with much more 'retail' sized investments. As above, probably not for me, but if it's an area you wish to diversify into it wouldn't be that bad an offering at the upper end of the estimate (lower end definitely too low though).
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bigfoot12
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Post by bigfoot12 on Jan 3, 2015 12:10:28 GMT
At 5-7%, it's doesn't look that competitive with MarketInvoice or PlatformBlack on a first look. In the past few years I have lent money on RS at 2-3% and I can see myself doing so again in the near future. Sometimes loans repay/investments mature and I put the money somewhere for a few months until bills need to be paid or I work out what to do with it. 5-7% on a platform I am already signed up for, with no minimum would suit me well. If the provision fund repaid as soon as the default happened (as RS's provision fund does) than I would use it even at 5%. And I would consider it a useful addition for liquidity. Having said that, averaged across a year the amount invested would be low (at 5-7%).
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Post by Ton ⓉⓞⓃ on Jan 3, 2015 13:34:47 GMT
At 5-7%, it's doesn't look that competitive with MarketInvoice or PlatformBlack on a first look. It's possible to achieve net (ex fees) yields of around 11-12% on MarketInvoice. That's before the 2% default rate but recoveries are very good, so the real loss rate is <0.3%, leaving a return in the 10.7-11.7% territory. However, you can't achieve deployment rates on your capital of 100%; more like 70-90%, so the real return is probably more like 8-10%. Also there can be a significant issue with taxation as gross (pre fee) yields are 14%-15%. If AC can offer 7% with 100% deployment and no taxation risks (i.e fees are paid by borrower) then it might be of marginal interest to me. At 5% it doesn't work. From my standpoint, I don't see the need for the provision fund since while default rates may well be in the 1-5% territory, recoveries should be very high leading to a low loss rate. I much prefer an unprotected product at a higher yield. That seems to say that MarketInvoice might be inefficient, perhaps in time they can streamline their operation to allow 10% and more to lenders. With the fees that we've seen that are required to break Invoice Discounting Agreements and their costs I'm surprised to see such low yields. With the Plumber Loan #146 & #99 their Invoice Discounting cost 123k (in 2013) and then 30k (and more?) to break the agreement.
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mikes1531
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Post by mikes1531 on Jan 3, 2015 21:24:37 GMT
That seems to say that MarketInvoice might be inefficient, perhaps in time they can streamline their operation to allow 10% and more to lenders. While MI might be inefficient, couldn't the 'spread' between the gross rates charged to the companies using the invoice discounting service and the rates being paid to the MI investors simply be the result of MI charging hefty fees? If they can raise all the finance they need while charging big fees, there's little or no incentive for them to reduce the spread.
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bugs4me
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Post by bugs4me on Jan 3, 2015 22:38:30 GMT
Not for me at 5-7% either. May as well just go with the GEIA at a projected 7% and even that doesn't attract me mainly as with the number of WT units available on the SM I cannot see a defined exit route to 'compensate' for the lower than expected (in my mind) return.
Looks like we're going to be in wait and see mode to see if/when and how AC launch this product.
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