Loans secured on "business assets" and not much else
Jan 22, 2016 18:27:11 GMT
phlitb and yorkshireman like this
Post by oldgrumpy on Jan 22, 2016 18:27:11 GMT
It is good to see the new pipeline loan list, and we have all noted that many interest rates are on the low side. andrewholgate has explained clearly on another thread how the pipeline of loans develops, and why, to be competitive, rates often need to be well sub 10%, especially if "loan quality" is to be maintained (!).
I note that many of the SME loans in the pipeline are now being offered with only "business assets" as security, yet offer just 7-9.5% interest rates.
That I feel is a cause for concern. Such interest rates with property + business assets would be one thing. Without the property back-up, not so. Personal Guarantees can not be relied on.
Of course, I recall the loan to a plumber which was secured primarily on business assets, (+ his property) and those assets, together with the cash from a £700K loan had almost all "disappeared" within very few months. The borrower had to sell his home, yet we still expect to lose about half our capital.
That loan (increased within just a few weeks of initiation) was at 12%, and it might be said we took the rate for the risk.
Maybe the argument will be, "go look at Frosted Cereals with their 6-8% (after fee) unsecured offerings". I feel that a failing company about to default will have already lost most of its "business assets" before it "goes under". OK, don't come back at me with the "don't like - don't invest" line. I just feel that the trend is a change in what AC has to offer.
Curry time.
I note that many of the SME loans in the pipeline are now being offered with only "business assets" as security, yet offer just 7-9.5% interest rates.
That I feel is a cause for concern. Such interest rates with property + business assets would be one thing. Without the property back-up, not so. Personal Guarantees can not be relied on.
Of course, I recall the loan to a plumber which was secured primarily on business assets, (+ his property) and those assets, together with the cash from a £700K loan had almost all "disappeared" within very few months. The borrower had to sell his home, yet we still expect to lose about half our capital.
That loan (increased within just a few weeks of initiation) was at 12%, and it might be said we took the rate for the risk.
Maybe the argument will be, "go look at Frosted Cereals with their 6-8% (after fee) unsecured offerings". I feel that a failing company about to default will have already lost most of its "business assets" before it "goes under". OK, don't come back at me with the "don't like - don't invest" line. I just feel that the trend is a change in what AC has to offer.
Curry time.
Only just put the rice on 
