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Post by lendingcrowd on Sept 24, 2015 14:45:22 GMT
The Real Value of Floating Charge / Debentures I have started investing with LC but am concerned about the reliance on Floating charges for Assets . In a liquidation floating charges are well down the list and given that most assets have very low values when sold off its a concern. Directors guarantees also have limited value as there is no control over disposal of underlying assets backing it. (Same opinion for FC loans apart from property). Do Lending Crowd value the assets as under liquidation conditions ? 1. FIXED CHARGE HOLDERS As far as liquidators are concerned, their primary concern is to satisfy the outstanding debt owed to creditors with a security interest over ‘charged’ property. There is however a problem of what is to happen when more than one creditor has security in the same asset. The Companies Act 2006 stipulates that the security that is registered first will have priority. There are important distinctions between different types of securities. In terms of liquidation, and which creditors will be paid first, a fixed charge holder i.e. a holder of a security in a particular asset of a business will ‘rank’ ahead of a holder of a floating charge i.e. a charge that has yet to ‘attach’ to business assets. There is an exception to this rule, and that is where a floating charge was created that explicitly prevents the creation of any later fixed charges and the holder(s) of a fixed charge had notice of its creation – there is normally a clause within the documentation for the ‘floating charge’ that makes such a condition very clear. 2. LIQUIDATION COSTS The next concern for the liquidator, after having satisfied the fixed charge holders will be to account for the cost of liquidating the company. These costs are normally accounted for from the assets of the company that would be used to pay general creditors – those that do not hold security over company assets. 3. PREFERENTIAL CREDITORS When a liquidator has satisfied the costs of pursuing the liquidation, they will then turn to deal with the so called ‘preferential debts’. The debts that this refers to, have been changed after some reforms in this area of the law. The current preferential debts that will need to be discharged are; • Employee wages to the maximum sum of £800, earned in the four months prior to the resolution to ‘wind up’ the company; and • Money lent to the company e.g. from a bank to pay employee wages. 4. CREDITORS WITH FLOATING CHARGES A liquidator will then turn to deal with those creditors that hold floating charges over company assets. This is an area of the law that has undergone a great deal of reform. The law requires that a liquidator set aside a portion of the company’s assets, called the ‘Prescribed Part’ to pay for ‘unsecured’ debt. Floating charge holders will be paid from company assets, in so far as they can be, from monies that do not make up the ‘Prescribed Part’. Hi grahamgTo answer your questions: When we assess a loan application we look at first and second exits. The first exit is the cash generated within the company to ensure that loan repayments are met. The second exit is what can be realised to assist with repayment should there be a default position, this can be the assets within the business or personal assets held by a guarantor. In the case of Floating Charges/Debentures what we do is assess the assets that are in the business, and how easy are they to realise. At the same time we consider if there is already a charge and if so where we would rank and if there would be anything left for us should it be enforced. In respect of personal guarantees we have a duty in line with the Financial Conduct Authority guidelines to ensure that a guarantor has the means to provide a guarantee, and we therefore complete a statement of assets and liabilities. Our credit assessment is based on the 100 years of experience in the Credit Team and to always remember that we are not security lenders and that cash is king. Kind regards, LendingCrowd
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bjorn
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Post by bjorn on Sept 24, 2015 15:52:14 GMT
When we assess a loan application we look at first and second exits. The first exit is the cash generated within the company to ensure that loan repayments are met. The second exit is what can be realised to assist with repayment should there be a default position, this can be the assets within the business or personal assets held by a guarantor. In the case of Floating Charges/Debentures what we do is assess the assets that are in the business, and how easy are they to realise. At the same time we consider if there is already a charge and if so where we would rank and if there would be anything left for us should it be enforced. In respect of personal guarantees we have a duty in line with the Financial Conduct Authority guidelines to ensure that a guarantor has the means to provide a guarantee, and we therefore complete a statement of assets and liabilities. Our credit assessment is based on the 100 years of experience in the Credit Team and to always remember that we are not security lenders and that cash is king. This is interesting because it would suggest that the borrowers LC are targeting are quite different to those of the asset-backed platforms where borrowers are presumably often cash-strapped (almost by definition - particularly at pawnbroker end of the spectrum). The asset backed platforms might have reasonable LTVs on assets as security but my bet is by lending to cash-strapped borrowers they also have to deal with defaults and/or snow-balling debts more often too. I had spotted that some of the companies on LC had strong cash positions, which is definitely confidence-inspiring.
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grahamg
Member of DD Central
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Post by grahamg on Sept 24, 2015 18:01:13 GMT
When we assess a loan application we look at first and second exits. The first exit is the cash generated within the company to ensure that loan repayments are met. The second exit is what can be realised to assist with repayment should there be a default position, this can be the assets within the business or personal assets held by a guarantor. In the case of Floating Charges/Debentures what we do is assess the assets that are in the business, and how easy are they to realise. At the same time we consider if there is already a charge and if so where we would rank and if there would be anything left for us should it be enforced. In respect of personal guarantees we have a duty in line with the Financial Conduct Authority guidelines to ensure that a guarantor has the means to provide a guarantee, and we therefore complete a statement of assets and liabilities. Our credit assessment is based on the 100 years of experience in the Credit Team and to always remember that we are not security lenders and that cash is king. Kind regards, LendingCrowd Excellent, Inspires a lot of confidence
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arbster
Member of DD Central
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Post by arbster on Sept 24, 2015 18:28:40 GMT
Our credit assessment is based on the 100 years of experience in the Credit Team and to always remember that we are not security lenders and that cash is king. This is very encouraging unless that's one REALLY old guy...
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registerme
Member of DD Central
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Post by registerme on Sept 24, 2015 18:34:56 GMT
He could be called Warren......
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Post by trentenders on Sept 26, 2015 7:13:23 GMT
Could someone please PM me with their referral details?
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Post by bonfemme on Sept 26, 2015 7:53:24 GMT
Could someone please PM me with their referral details? Hi trentenders, I'd love to refer you. My email address is jean****@***.com If you send me your email, I'll drop you a referral. Cheers Jean
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Post by Ton ⓉⓞⓃ on Sept 26, 2015 8:52:37 GMT
I'm treating Making money on the forum/Offering your details for a fee as a breach of forum rules, or requesting such.
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SteveT
Member of DD Central
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Post by SteveT on Sept 26, 2015 9:21:07 GMT
Could an experienced LC hand please confirm whether their system sends you an email if you're outbid in an auction, as ReBS (sometimes) does? I'm getting one every time I place a new bid but "Email Preferences" doesn't list any other email options.
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grahamg
Member of DD Central
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Post by grahamg on Sept 26, 2015 9:21:45 GMT
I'm treating Making money on the forum/Offering your details for a fee as a breach of forum rules, or requesting such. Well misread that one, thought they were just trying to start a dating subboard. Is that allowed i wonder?
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bjorn
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Post by bjorn on Sept 26, 2015 9:33:55 GMT
Could an experienced LC hand please confirm whether their system sends you an email if you're outbid in an auction, as ReBS (sometimes) does? I'm getting one every time I place a new bid but "Email Preferences" doesn't list any other email options. Yes - I've been getting emails when I'm outbid on auctions. Haven't fiddled around with email preferences but at least the default seems to be that they send you notification of being outbid.
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Post by nanniema on Sept 28, 2015 19:24:50 GMT
I see that the current "New Summer Lenders" offer is due to close at the end of the month (Sept 2015). Will a new cash back offer for new investors be made for the winter? I shall be looking to open an account in early October. It looks as though LC have heard you and obliged with an extension to November. Good news also for all those Flatulent Camel refugees - and the timing is perfect, being on the first day of the non-auction regime.
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bjorn
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Post by bjorn on Sept 28, 2015 19:27:25 GMT
I see that the current "New Summer Lenders" offer is due to close at the end of the month (Sept 2015). Will a new cash back offer for new investors be made for the winter? I shall be looking to open an account in early October. It looks as though LC have heard you and obliged with an extension to November. Good news also for all those Flatulent Camel refugees - and the timing is perfect, being on the first day of the non-auction regime. Yes - it strikes me that the timing of announcing the extension to this offer was no coincident! ;-)
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arbster
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Post by arbster on Sept 28, 2015 20:36:02 GMT
Disappointingly, my wife attempted to sign up with LC tonight, but despite giving far more information than has been required by any of the established P2P websites she was requested to provide scanned copies of a number of personal documents as proof of identity. There's no way that's happening with a relatively unknown and completely unproven financial institution, not yet regulated by the FCA. We'll be looking elsewhere.
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SteveT
Member of DD Central
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Post by SteveT on Sept 28, 2015 20:48:33 GMT
That's odd. All I had to do was type in my passport number and my account was open in no time.
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