ThinCats launches tax-efficient social investment product

The loan is now live.

Which is a shame.  It's a decent, low risk proposition for higher rate taxpayers.  I think it needs a re-launch, but I'm not sure that TC has enough lenders who will want this kind of investment even when it's properly explained to them.  Too many are obsessed with funding property development at high rates.

From what I can see (and I haven't spent a lot of time on it because I'm not currently a higher rate taxpayer) I'm not so sure that it is low risk or more precisely that I can properly evaluate the risk.  As it can't be sold on the SM you are locked in to a 5 year loan which is unsecured.  The company is not making any profit and last year the bad debt charge was 50% of its turnover. The P&L account seems 'designed' to come out at nil profit through the receipt of certain grants up to the required level. In other words the company does not seem to be operating or reporting on a normal commercial basis. If I cannot make sense of the business model how can I understand the risk?  

TC have not done a good enough job of explaining how these social lending businesses work.  They do indeed incur substantial bad debts (in this particular case about 1/5 of loans seem not to be repaid) but these are expected and have historically been covered by grant income.  There are changes in the grant landscape which are making life more difficult and I would not wish to lend on the offered terms if there was not a very substantial surplus in the balance sheet, but there is a very large surplus and I do not expect that grant or other charitable funding to cover losses will dry up completely.

If funding for losses did dry up, the company would have to run down its book.   Net assets at 31 March were over 83% of debtors which means that, simplistically, a 17% recovery (compared to historical norms of about 80%) would see lenders repaid in full.  I know it would not be quite as simple as that but the cover is more than adequate.

I agree the illiquidity means this won't be for everybody but I think it compares very favourably with some other social investments out there, such as community solar and wind, now that they are no longer eligible for EIS/SEIS.

The proposal is back asking for a more realistic £250k and a low minimum of £75k.  The IP is somewhat more helpful this time, but it does not really explain the P&L and balance sheet.  I've tried to fill this gap on the VIP forum (where I am Alison) and in the Q&A. 

My personal view is it's very low risk.  I will be putting £10k in, which is a lot for me.

Alison is male but the forum entry was his wife/partner I don't know, but was revealed somewhere, and rather than create another identity he uses Alison.

I think TC is much more likely to be around in 5 yrs than many of the new platforms, and they have a method in place for a wind down in the event of platform failure, like most of the better platforms.

I'm probably not positively in 40%+ interest for the next five years to make it a good investment for me, but almost tempted.