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Post by msa on Oct 27, 2015 7:29:04 GMT
Feedback from S..... L.. on the Seedrs discussion board when challenged on the diminishing deal flow: "Hello all. Sorry for the delay in replying as we have been finishing off a large funding transaction in the last few days. The main change in our business in the last few months has been moving to higher numbers of smaller loans which was a little disruptive given we were used to doing one or two £2-3m loans a month previously. Large loans have a higher cost of funds and indeed institutional investors to date cap out at a few hundred thousand loan size. This required a substantial origination process and introducer re-education process that is now completed. Loan applications are on track for over £100m this month and have tripled in the last 60 days and over 2/3 are compliant with our credit policy. Wewill initially fund a lot less than that due to getting the new funds fully onboarded and lending and we have started with the first one in the last month and have today signed the second. We have however also signed a few weeks ago a third £200m funding line committment that will allow us to restart doing £1-5m loan sizes which will kick in Q1 16 once legals are completed. So yes are going in the predicted direction as expected but with a regrouping pause as above for the last few months." Further Feedback on the seedrs discussion board: Hello everyone. In answer to the various questions above;
- the people able to update this discussion are limited and sometimes leave the country to go to conferences and work on large legal contracts so apologies and we will work to answer all questions in 7 days or less going forwards and tighten this up in the future. I have put this system in place.
- volumes have taken a few months longer to grow substantially than anticipated principally because it took several months longer than anticipated to close the contracts with the large institutions and secondly due to having to change our origination to a smaller loan size cap. We did the latter to bring down the cost of funding as smaller loans are lower cost to fund and also because institutions want smaller loans. Hence more loans but smaller size which didn't help our origination numbers for the last few months I agree.
- overall target figures haven't changed , just slipped a few months for the reasons above.
- origination this month will be well over £100m of applications and that is strongly up from a few months ago, 300% of June/July to be more precise so yes volume is coming through.
- we have now signed a second £175m loan flow agreement with a large institution to be announced (subject to approval) shortly.
- we have also signed a commitment letter and are moving towards legals now with a funder of large property transactions - £1-5m per loan. This will allow very substantial growth in lending in 2016.
- we have also now signed the contract for a forthcoming equity trigger event which I am sure is good news to all and we are working on getting that trigger event into this tax year.
Thank you all and thank you for your patience.
S..... L..
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bigfoot12
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Post by bigfoot12 on Oct 27, 2015 9:05:14 GMT
- volumes have taken a few months longer to grow substantially than anticipated principally because it took several months longer than anticipated to close the contracts with the large institutions and secondly due to having to change our origination to a smaller loan size cap. We did the latter to bring down the cost of funding as smaller loans are lower cost to fund and also because institutions want smaller loans. Hence more loans but smaller size which didn't help our origination numbers for the last few months I agree.
S..... L.. This isn't credible (referring to SL not msa). There have been no loans for retail lenders, retail lenders like small loans too. They could have brought smaller loans for us long before they signed the final contract with their investors. And did they not ask the institutions what size loans they wanted when they promised to invest £100m for them? The only good news seems to be that they have managed to raise some more money so platform risk seems to have diminished.
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Post by chris on Oct 27, 2015 9:18:03 GMT
The writing is definitely on the wall for MLIA lenders, like TC say, and it looks like AC are re-positioning for just that. I'd dispute that strongly. I'm primarily an MLIA investor and I'll continue to fight our corner. Part of the reason the MLIA works as it does, with the act of investment being automatic instead of picking and choosing loan parts individually, is so that it can continue to participate with equal opportunity with the other automated investment accounts in the same marketplace. There are also a number of minor upgrades coming to the MLIA in the next couple of weeks to improve its utility. Any platform that tells you that manual investment is the only way to invest and will remain so will either be lying to you, not realising how the market will change, or will be consigning themselves to being a small niche player. If we don't provide automatic investment tools then others will create them seeking to gain advantage over those unable to build them for themselves, as we have seen happen with FC and the way their market was dominated by bots. But that doesn't have to mean manual investment cannot play a part at all. I'm hopeful the MLIA is the right tool to allow all types of lending to co-exist across as many different types of loan we do as possible, and if it isn't then it will evolve until it is.
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Post by chris on Oct 27, 2015 9:25:33 GMT
- volumes have taken a few months longer to grow substantially than anticipated principally because it took several months longer than anticipated to close the contracts with the large institutions and secondly due to having to change our origination to a smaller loan size cap. We did the latter to bring down the cost of funding as smaller loans are lower cost to fund and also because institutions want smaller loans. Hence more loans but smaller size which didn't help our origination numbers for the last few months I agree.
S..... L.. This isn't credible (referring to SL not msa). There have been no loans for retail lenders, retail lenders like small loans too. They could have brought smaller loans for us long before they signed the final contract with their investors. And did they not ask the institutions what size loans they wanted when they promised to invest £100m for them? The only good news seems to be that they have managed to raise some more money so platform risk seems to have diminished. It takes a long time to re-educate the marketplace as to the types of loans we offer and to open new doors to new loan types. The same origination channels and sources don't supply every type of loan and those that do have supply of the loans we want will already have solutions in place that we need to compete against and give compelling reasons for using us instead. Based upon the £100m+ of origination this month, our busiest month of all time by a large margin, that process is finally working and our USPs are being understood by the market. It will take up to 6 months for all those loans originated this month that will eventually draw down to complete and appear on the platform, somewhat following a bell curve, so whilst the origination this month has been stellar there's still a frustrating wait for those loans to convert. But within a couple of months it will convert into a steadily building stream of loans. Our job is to keep the origination at this level, as a minimum, and to work on both the conversion rates and the time it takes to convert the majority of deals (there'll always be stragglers).
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Post by Butch Cassidy on Oct 27, 2015 10:04:03 GMT
This isn't credible (referring to SL not msa). There have been no loans for retail lenders, retail lenders like small loans too. They could have brought smaller loans for us long before they signed the final contract with their investors. And did they not ask the institutions what size loans they wanted when they promised to invest £100m for them? The only good news seems to be that they have managed to raise some more money so platform risk seems to have diminished. It takes a long time to re-educate the marketplace as to the types of loans we offer and to open new doors to new loan types. The same origination channels and sources don't supply every type of loan and those that do have supply of the loans we want will already have solutions in place that we need to compete against and give compelling reasons for using us instead. Based upon the £100m+ of origination this month, our busiest month of all time by a large margin, that process is finally working and our USPs are being understood by the market. It will take up to 6 months for all those loans originated this month that will eventually draw down to complete and appear on the platform, somewhat following a bell curve, so whilst the origination this month has been stellar there's still a frustrating wait for those loans to convert. But within a couple of months it will convert into a steadily building stream of loans. Our job is to keep the origination at this level, as a minimum, and to work on both the conversion rates and the time it takes to convert the majority of deals (there'll always be stragglers). That may all be true but existing lenders have been promised all this for nearly 12 months now (where have all those deals ended up?) & all we have actually seen is a gradual strangulation of deal flow whilst rates have fallen off a cliff from 12-15% down to sub 10% - What happened to pricing for risk?
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Post by chris on Oct 27, 2015 10:14:38 GMT
It takes a long time to re-educate the marketplace as to the types of loans we offer and to open new doors to new loan types. The same origination channels and sources don't supply every type of loan and those that do have supply of the loans we want will already have solutions in place that we need to compete against and give compelling reasons for using us instead. Based upon the £100m+ of origination this month, our busiest month of all time by a large margin, that process is finally working and our USPs are being understood by the market. It will take up to 6 months for all those loans originated this month that will eventually draw down to complete and appear on the platform, somewhat following a bell curve, so whilst the origination this month has been stellar there's still a frustrating wait for those loans to convert. But within a couple of months it will convert into a steadily building stream of loans. Our job is to keep the origination at this level, as a minimum, and to work on both the conversion rates and the time it takes to convert the majority of deals (there'll always be stragglers). That may all be true but existing lenders have been promised all this for nearly 12 months now (where have all those deals ended up?) & all we have actually seen is a gradual strangulation of deal flow whilst rates have fallen off a cliff from 12-15% down to sub 10% - What happened to pricing for risk? We are pricing for risk and will be publishing analysis of our security soon to show that, including expected losses and losses to date vs lender returns. What we're not doing is pricing above risk to generate liquidity as it's no longer borrower price competitive to do so and was strangling the business, and given we also have a surplus of funds and shortage of borrowers pricing above risk doesn't seem to be the right strategy. There's also been a shift to bricks and mortar security with lower LTVs than our previous higher paying loans which has reduced the risk (to my untrained eye). I know many lenders want 12% returns with zero risk but in the current market that isn't practical, and platforms offering those rates are yet to be properly tested and would appear to have their own refinancing issues building up. This is all my perspective from the IT department so I'll see if I can get an official response from the rest of the team who are closer to the details and can give precise answers.
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Post by Ton ⓉⓞⓃ on Oct 27, 2015 10:19:16 GMT
S.L. saidSo presumably that £100m gets whittled down by AC DD to just a couple of million by the time it come to the Lenders?
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Post by Deleted on Oct 27, 2015 10:29:56 GMT
AC suggest they are rather caught between the 1) educate the lender in new types of lending 2) not wanting to give the competition clues about what it trying to do However, I note previous comments from AC and from telecons with AC where they seem to admit that their communication of changes is often behind (sometimes a long way behind) their implementation. Hence, I have to conclude that rather than being caught in the trap as first described they just struggle with "education and communication", given the large number of things they are trying to do I'm not surprised. In my mind's-ear I can already hear Chris pushing back against these comments so I'll just finish by pointing out. If AC were as good educating and communicating with their retail customers as they are with their institutional customers there would be less frustration on this board and that fact that they arn't shows the direction they are facing. When you know the way an army is facing you know the way it is going to advance.  |
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oldgrumpy
Member of DD Central
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Post by oldgrumpy on Oct 27, 2015 10:45:39 GMT
I've just got an email telling me that AC have made some great improvements to the website. It doesn't mention the great undelivered improvements (and much discussed) to the deal flow which has been a constant assurance from on high for over a year. Deals not spiels please AC!! Attachments:
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shimself
Member of DD Central
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Post by shimself on Oct 27, 2015 10:50:29 GMT
Before reading this thread I just withdrew some cash which was doing nothing at all.
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Post by chris on Oct 27, 2015 14:59:16 GMT
S.L. saidSo presumably that £100m gets whittled down by AC DD to just a couple of million by the time it come to the Lenders? A fairly large percentage will not be viable after a quick sense check, others will fail our detailed DD, others will drop because they go with a deal elsewhere, or our pricing doesn't work for them so they drop the fund raise altogether, etc. etc. Unfortunately it's not just lenders we need to keep happy but borrowers and introducers as well. Our conversion rate is a lot better than 2-3% though but it can take up to 6 months to see the full volume of a month's origination to go through to drawdown so despite the great origination it's not an instant fix.
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Post by chris on Oct 27, 2015 15:50:00 GMT
AC suggest they are rather caught between the 1) educate the lender in new types of lending 2) not wanting to give the competition clues about what it trying to do However, I note previous comments from AC and from telecons with AC where they seem to admit that their communication of changes is often behind (sometimes a long way behind) their implementation. Hence, I have to conclude that rather than being caught in the trap as first described they just struggle with "education and communication", given the large number of things they are trying to do I'm not surprised. In my mind's-ear I can already hear Chris pushing back against these comments so I'll just finish by pointing out. If AC were as good educating and communicating with their retail customers as they are with their institutional customers there would be less frustration on this board and that fact that they arn't shows the direction they are facing. When you know the way an army is facing you know the way it is going to advance. It's not educating the lender that's been the problem, it's educating the borrower and broker market. We had our niche, we've moved from there to where we want to be, there's been a huge amount of lag in doing so as brokers move from their existing choices in those areas to considering us and we reach new types of borrower directly. We also needed to on board new introducers who previously weren't dealing with us and unfortunately alienate a few along the way. It really has been like launching a new platform on the origination side and it's taken more effort and more time to do so than we both anticipated and wanted, at least in part because the institutions have taken far longer to complete legals than expected (and they in turn guarantee funding of deals which introducers and borrowers want to see), but that process is now having an effect and origination is getting up to the anticipated levels. That's basically what Stuart has been saying.
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niceguy37
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Post by niceguy37 on Oct 27, 2015 15:57:16 GMT
S.L. saidSo presumably that £100m gets whittled down by AC DD to just a couple of million by the time it come to the Lenders? A fairly large percentage will not be viable after a quick sense check, others will fail our detailed DD, others will drop because they go with a deal elsewhere, or our pricing doesn't work for them so they drop the fund raise altogether, etc. etc. Unfortunately it's not just lenders we need to keep happy but borrowers and introducers as well. Our conversion rate is a lot better than 2-3% though but it can take up to 6 months to see the full volume of a month's origination to go through to drawdown so despite the great origination it's not an instant fix. In terms of pricing, could AC not avoid some of the underwriting expense, by allowing shadow bids on upcoming loans. IIRC, previously AC have said that the FCA rules have stated that lenders must have funds deposited before bidding, but surely something could be done whereby lenders guarantee to fund a given value of a loan, giving them 48 hours notice to deposit the cash before drawdown, else sell some of their existing holdings to fund any shortfall.
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Post by chris on Oct 27, 2015 16:08:40 GMT
A fairly large percentage will not be viable after a quick sense check, others will fail our detailed DD, others will drop because they go with a deal elsewhere, or our pricing doesn't work for them so they drop the fund raise altogether, etc. etc. Unfortunately it's not just lenders we need to keep happy but borrowers and introducers as well. Our conversion rate is a lot better than 2-3% though but it can take up to 6 months to see the full volume of a month's origination to go through to drawdown so despite the great origination it's not an instant fix. In terms of pricing, could AC not avoid some of the underwriting expense, by allowing shadow bids on upcoming loans. IIRC, previously AC have said that the FCA rules have stated that lenders must have funds deposited before bidding, but surely something could be done whereby lenders guarantee to fund a given value of a loan, giving them 48 hours notice to deposit the cash before drawdown, else sell some of their existing holdings to fund any shortfall. Potentially. There's a balance to be made between keeping underwriters happy so that we can still do the larger loans and keeping things price competitive and fair for retail lenders and the borrowers alike. That balance is actually pretty good now but we can introduce further changes if it moves to become out of kilter.
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Post by Deleted on Oct 27, 2015 16:16:07 GMT
AC suggest they are rather caught between the 1) educate the lender in new types of lending 2) not wanting to give the competition clues about what it trying to do However, I note previous comments from AC and from telecons with AC where they seem to admit that their communication of changes is often behind (sometimes a long way behind) their implementation. Hence, I have to conclude that rather than being caught in the trap as first described they just struggle with "education and communication", given the large number of things they are trying to do I'm not surprised. In my mind's-ear I can already hear Chris pushing back against these comments so I'll just finish by pointing out. If AC were as good educating and communicating with their retail customers as they are with their institutional customers there would be less frustration on this board and that fact that they arn't shows the direction they are facing. When you know the way an army is facing you know the way it is going to advance. It's not educating the lender that's been the problem, it's educating the borrower and broker market. We had our niche, we've moved from there to where we want to be, there's been a huge amount of lag in doing so as brokers move from their existing choices in those areas to considering us and we reach new types of borrower directly. We also needed to on board new introducers who previously weren't dealing with us and unfortunately alienate a few along the way. It really has been like launching a new platform on the origination side and it's taken more effort and more time to do so than we both anticipated and wanted, at least in part because the institutions have taken far longer to complete legals than expected (and they in turn guarantee funding of deals which introducers and borrowers want to see), but that process is now having an effect and origination is getting up to the anticipated levels. That's basically what Stuart has been saying. Thanks Chris, appreciate the feedback.
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