Post by savingstream on Aug 20, 2015 10:57:01 GMT
Dear All,
Thanks for your patience and feedback. We recognise this board as an incredibly useful resource and do read all of the comments and take them on board where we can.
We have a situation (a nice one we think) where demand is simply outstripping supply. There are a number of potential resolutions to this - control supply or the demand. We could either strip our margin by offering cheaper rates in the market or strip the rate that we pay to our investors. Neither of which are appealing.
If we strip our margin, this leaves the platform at risk in terms of covering any shortfalls and short of operating capital. However, by lowering our rates and increasing the number of loans we would maintain our strong operating capital, but risk/reward per loan needs to be considered from a strategic point of view. The other potential option that has been discussed is dropping the rates from 1% per month to our SS investors. We simply don't think this is plausible at the moment and we are trying to increase the number of SS investors significantly in order to scale the business so don’t expect that for the foreseeable.
We have a pipeline of over £7m at the moment, with more each day coming through. We are only advertising to a select few brokers and are only accessing a small slice of the potential market. We would also rather not do any loans, than do bad loans as we have said repeatedly.
So, how do we make everyone as happy as possible whilst maintaining as close to the KISS principle as we have tried to do so far?
Our solution for now is the pre-funding option which can be found under your 'Account' settings.
The Pre-funding Option
www.savingstream.co.uk/prefunding
Rationale
We want to give as many people the chance to invest as possible so we will provide an option to buy in before the loan goes live up to a self-determined limit. We want the smaller investors to be guaranteed a position in every loan, and the deeper pocketed investors will also participate at the same amount as everyone else. If there is spare capacity, the larger investors will pick this up subject to their pre-set investment levels.
This will also help us know how much is potentially available to lend out. This has been a continual problem that we just don’t know the exact appetite for our loan products and thus limits the number of loans that we can make.
How pre-funding will work?
Set your limit to invest in each new loan.
When a new loan becomes available, you will be guaranteed at least a portion of your investment amount if not all, depending on the loan size.
You will be notified of your participation and are expected to follow up with a bank transfer, much in the same way as normal.
You can sell your loan if you want.
Potentially complicated numbers stuff coming up…
For example - you set your limit to £1k. There are 400 people who have the same limit and 40 with a limit of £10k. A loan of £1m is launched. All 440 people will get £1k (£400k total) and the 40 people with higher limits will get an additional £9k each in the surplus thus they get £10k in total. The remaining availability will go to the market and can be bought by whoever wants it.
It will become complicated when the loan is less than the amount in the Pre-Fund pot i.e £500k loan, 400 people with £1k, and 40 with £10k. Again, all 440 people will get £1k leaving £60k to divide by the 40 which is an additional £1.5k each, giving a total investment of £2.5k for those investors who set their limit higher.
Those investors with higher limits might be disappointed that they didn't get their full allocation, but they should be happy that they have participated in an equitable distribution model which should assist with the growth and opportunities available. The next loan might be able to take all of their demand plus more.
You won’t be able to review the loan parts or valuation beforehand (yet) but the secondary market is incredibly liquid and we are confident of the ability to sell your position if required.
We are looking forward to your constructive thoughts regarding this new platform feature.
Thanks for your patience and feedback. We recognise this board as an incredibly useful resource and do read all of the comments and take them on board where we can.
We have a situation (a nice one we think) where demand is simply outstripping supply. There are a number of potential resolutions to this - control supply or the demand. We could either strip our margin by offering cheaper rates in the market or strip the rate that we pay to our investors. Neither of which are appealing.
If we strip our margin, this leaves the platform at risk in terms of covering any shortfalls and short of operating capital. However, by lowering our rates and increasing the number of loans we would maintain our strong operating capital, but risk/reward per loan needs to be considered from a strategic point of view. The other potential option that has been discussed is dropping the rates from 1% per month to our SS investors. We simply don't think this is plausible at the moment and we are trying to increase the number of SS investors significantly in order to scale the business so don’t expect that for the foreseeable.
We have a pipeline of over £7m at the moment, with more each day coming through. We are only advertising to a select few brokers and are only accessing a small slice of the potential market. We would also rather not do any loans, than do bad loans as we have said repeatedly.
So, how do we make everyone as happy as possible whilst maintaining as close to the KISS principle as we have tried to do so far?
Our solution for now is the pre-funding option which can be found under your 'Account' settings.
The Pre-funding Option
www.savingstream.co.uk/prefunding
Rationale
We want to give as many people the chance to invest as possible so we will provide an option to buy in before the loan goes live up to a self-determined limit. We want the smaller investors to be guaranteed a position in every loan, and the deeper pocketed investors will also participate at the same amount as everyone else. If there is spare capacity, the larger investors will pick this up subject to their pre-set investment levels.
This will also help us know how much is potentially available to lend out. This has been a continual problem that we just don’t know the exact appetite for our loan products and thus limits the number of loans that we can make.
How pre-funding will work?
Set your limit to invest in each new loan.
When a new loan becomes available, you will be guaranteed at least a portion of your investment amount if not all, depending on the loan size.
You will be notified of your participation and are expected to follow up with a bank transfer, much in the same way as normal.
You can sell your loan if you want.
Potentially complicated numbers stuff coming up…
For example - you set your limit to £1k. There are 400 people who have the same limit and 40 with a limit of £10k. A loan of £1m is launched. All 440 people will get £1k (£400k total) and the 40 people with higher limits will get an additional £9k each in the surplus thus they get £10k in total. The remaining availability will go to the market and can be bought by whoever wants it.
It will become complicated when the loan is less than the amount in the Pre-Fund pot i.e £500k loan, 400 people with £1k, and 40 with £10k. Again, all 440 people will get £1k leaving £60k to divide by the 40 which is an additional £1.5k each, giving a total investment of £2.5k for those investors who set their limit higher.
Those investors with higher limits might be disappointed that they didn't get their full allocation, but they should be happy that they have participated in an equitable distribution model which should assist with the growth and opportunities available. The next loan might be able to take all of their demand plus more.
You won’t be able to review the loan parts or valuation beforehand (yet) but the secondary market is incredibly liquid and we are confident of the ability to sell your position if required.
We are looking forward to your constructive thoughts regarding this new platform feature.
At the moment, many of us have chosen not to abuse the instant deposit mechanism and get you to manually offset BACS deposit shortfalls with the proceeds of loan part sales, although I'm aware some people have been doing that. This system would lead to instant deposits being automatically made at unexpected times (such as when on holiday) and it will be, I assume, very common for lenders to decide to sell some or all of their new purchase immediately after looking at the loan details. Can we assume, therefore, that going forward it's going to be a completely normal, and perhaps automated, process to have the BACS deficit offset by loan part sale proceeds?
.