james
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Post by james on Oct 8, 2015 7:17:35 GMT
When is 11% better than 12%? When it's accompanied by an immediate 1% bonus and the loan capital is being repaid gradually each month as well as interest. The 1% means getting more than a 12% loan would pay for well into the second year of the loan, money that can be reinvested to make more money. It's easy to look at the headline rate and miss the added value from the bonus and amortising nature combination. Eventually it'll get closer to the raw 11% but on a three year loan you're ahead for a large chunk of the term. Find a buyer a bit short of half way through the term and sell at par and you're ahead. Numbers are approximate, I haven't worked out the exact break-even point. If you're interested, don't leave it to the last minute. ablrateandy clearly has heavy hitters lined up who are going to take the remainder of this loan near to the end. |
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shimself
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Post by shimself on Oct 8, 2015 9:09:49 GMT
If you think that 3 prototype units as security and (I think) no real sales to real paying customers to date, with no up-to-date accounts available, amount to a secured loan, well good luck.
I assume the "heavy hitters" have more info than that, which doubles my unease, as the playing field would therefore be very uneven.
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Investor
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Post by Investor on Oct 8, 2015 9:23:20 GMT
If you think that 3 prototype units as security and (I think) no real sales to real paying customers to date, with no up-to-date accounts available, amount to a secured loan, well good luck. I assume the "heavy hitters" have more info than that, which doubles my unease, as the playing field would therefore be very uneven. Agreed. Additionally, on top of the loan risk, there is a the platform risk that would result from any default. Personally I do not believe that Ablrate as a platform would be able to recover from any default which incurred significant investor losses this early in their evolution.
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james
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Post by james on Oct 8, 2015 14:30:19 GMT
on top of the loan risk, there is a the platform risk that would result from any default. Personally I do not believe that Ablrate as a platform would be able to recover from any default which incurred significant investor losses this early in their evolution. Are you suggesting that because of this loan, people should aviod investing via Ablrate for the next three years in case it defaults? If you think that 3 prototype units as security and (I think) no real sales to real paying customers to date, with no up-to-date accounts available, amount to a secured loan, well good luck. I assume the "heavy hitters" have more info than that, which doubles my unease, as the playing field would therefore be very uneven. The security is a combination of those three units and personal guarantees from directors who Ablrate say they have assessed as having sufficient assets: "Ablrate have seen statements and received a letter from each party stating their total unencumbered personal assets and are content that they are a multiple of the amount of the loan being raised". I think you're right about no completed sales so far but not about no sales. From the proposal document: "have a strong orderbook and are now entering a phase of their business where they need to begin increasing production in order to meet future demand. They already have good orders in place (current orderbook of five orders is in excess of £2.2mio)". While not security, that order base is what provides the underlying method of repaying this loan. While I'm not particularly keen on personal guarantees the units and apparently reasonably decent personal guarantee here, along with the obvious commitment to the business, combined with the order flow that provides the core repayment method doesn't look too unbalanced to me.
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stevio
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Post by stevio on Oct 8, 2015 15:31:18 GMT
James - I do respect your opinion and advice on most points, but differ on this
The assets are very specific.
Their valuation is based on current sales values. This is flawed as it assumes you would have a ready buyer willing to pay full sales value.
Their value is purely what someone would be willing to pay for them. Without any asset comparison or good secondary market, the value could be £0 to sales value and anywhere in between.
As they are prototypes, this limits the market. The only people we are aware of that might buy them would be the companies order book. Should the company default, it's unlikely they are going to offer up their sales book.
So worst case you are left with some very expensive scrap metal
Compare the sell-ability of the asset to property or even empty container crates.
The assets in this loan are in effectively made harder to sell than it would be to sell the container crate that they are made from
Directors Guarantees are not worth the paper they are written on. Should the loan default, the business would no likely go under and their likely several other debtors to do with the business - where you will be in the queue for the Directors Assets and also how long that will take can be infinite.
Surely the 1% CB is only good for the 1st year, where you get effectively 12%. The next 2 years then at 11%.
Yes, you can invest the 1% CB in something else and it is immediate returns, but unless your looking to sell on draw down, you are taking a high risk with the assets
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Post by ablrateandy on Oct 8, 2015 18:54:25 GMT
This is probably one of the more controversial loans  Totally respect individual opinions and that's why we like the forum. The 1pc cash back drops your in-price and so boosts your yield on the whole investment. (To something like 12.2pc as an AER but I'll check that. Or you can re-invest it elsewhere and pick the return from that. In terms of the security - yes it is a subjective value and that's why we took 3 units to give maximum headroom and take the LT Sale V to 50pc. The lady running the company has worked very well with us and been very open and I would hope that even in a worst case she would continue that working relationship as they are aware of their responsibilities to borrowers. Re PGs - I tend to agree that the value can be limited. My exception to that is in a situation like this where the owners have already put substantial cash into the business and would put in more if it was tax efficient. For personal reasons for them (due to some grant funding apparently), it isn't. The underwriters of the balance have no more info than anyone else. On a personal note (as an investor) I am in this loan due to the amortisation because it continually drops the risk. I think that the owners are committed to this business beyond the life of the loan. I have a comparatively high personal risk tolerance so it's not for everyone. Usual story - there is risk but we don't put things up if we feel that it is something that we wouldn't personally buy. Totally understand stevio and shimself 's opinions though. |
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james
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Post by james on Oct 8, 2015 19:06:26 GMT
Surely the 1% CB is only good for the 1st year, where you get effectively 12%. The next 2 years then at 11%. Looks as though ablrateandy will do a proper calculation for us so mostly disregard the approximations used in the first version of this post and go with what he says for the whole term. Maybe he'll be kind enough to do a calculation to say when the rate drops to below 12% if the loan is sold at par just before that happens. Their valuation is based on current sales values. This is flawed as it assumes you would have a ready buyer willing to pay full sales value. Their value is purely what someone would be willing to pay for them. Without any asset comparison or good secondary market, the value could be £0 to sales value and anywhere in between. I agree, though I do expect that if the business was being run down they would look to sell them and the do have orders placed that are worth almost ten times the loan value, so they should be able to place the security to complete the sales, even as used prototypes at a significant discount. As they are prototypes, this limits the market. The only people we are aware of that might buy them would be the companies order book. Should the company default, it's unlikely they are going to offer up their sales book. If they default while still a live business they aren't going to have a choice about that, a court would rule against them and they would either make a deal using the coming orders to finance paying the judgement or find their assets seized. Compare the sell-ability of the asset to property or even empty container crates. The assets in this loan are in effectively made harder to sell than it would be to sell the container crate that they are made from I agree. Directors Guarantees are not worth the paper they are written on. Should the loan default, the business would no likely go under and their likely several other debtors to do with the business - where you will be in the queue for the Directors Assets and also how long that will take can be infinite. I also don't have a lot of respect for director's guarantees. It's unlikely that I would lend based solely on such guarantees. Still part of the picture, though. Given their clear personal commitment and order book I think that the company is likely to survive long enough to deliver the product for the sales already agreed that can pay down the loan. If more are made that's a nice bonus that increases the chance of paying, barring excessive speculative building of product for sales that don't materialise. Excessive stock production is one of the risks that I think is highest here, if they get over-optimistic about the NI market. But with a third party doing the building I'm less worried than I would be if they were investing in lots of plant to do the construction themselves. I've no idea if the company will survive long term but I do think that it'll be OK for long enough to deal with our needs. Up to each potential lender to take a view on that and decide to lend or not.
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Post by ablrateandy on Oct 8, 2015 19:23:40 GMT
Investing at 100p in the pound is an AER of 11.572%
Investing at 99p in the pound is an AER of 12.344%
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blender
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Post by blender on Oct 9, 2015 8:40:20 GMT
Time to wake up those 'heavy hitters' before it is 'game over'. Only £69k.
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Post by yorkshireman on Oct 9, 2015 14:25:51 GMT
No, thanks.
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blender
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Post by blender on Oct 12, 2015 13:34:32 GMT
Question for Andy, please. It is good that this loan application was fully funded on Friday, but how long does the borrower have to approve it? No underwriters are needed and there has been plenty of time to consider and organise the paperwork, and so I hope this is not an open-ended process. I am not suggesting any problem with the time so far.
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Post by ablrate on Oct 12, 2015 15:57:54 GMT
Question for Andy, please. It is good that this loan application was fully funded on Friday, but how long does the borrower have to approve it? No underwriters are needed and there has been plenty of time to consider and organise the paperwork, and so I hope this is not an open-ended process. I am not suggesting any problem with the time so far. Hi Blender The borrower would have 5 days to approve under our terms before we cancel and send back funds, but this one has been accepted and we have received all of the signed paperwork. We are just awaiting a minor change on the system relating to the draw down date of the loan. That should be completed either later today (I am in 'refresh screen mode' as I type!) or in the morning and draw down will take place and we can get the cash back done. Regards Ablrate
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blender
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Post by blender on Oct 12, 2015 16:12:02 GMT
Thank you.
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Post by rookey on Oct 13, 2015 8:50:47 GMT
What's the pipeline looking like? When can we see new loans coming on the platform?
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Post by ablrate on Oct 14, 2015 9:28:04 GMT
Hi Guys
Slight platform technical glitch sorted on the draw down of this one and it will be approved and Instant Returns paid today, and we will get the cash back done.
Regards
Ablrate
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