am
Posts: 1,495 
Likes: 601
|
Post by am on May 3, 2017 18:29:30 GMT
I've been wondering for a while about the feasibility of a mutual P2P business, which was brought into sharper focus by FC's announced withdrawal from the property market (residential property development strikes me as one of the simpler sector, albeit one with a risk of problems if there's a major market downturn). A similar concept has just been floated on the LtPP board.
So does anyone have any informed opinion on the practicability of such a scheme?
I was thinking of running a relatively low interest rate, but paying out an annual dividend based on the amount and length of participation in loans and a risk grade multiplier.
The issues that immediately come to mind are seed capital, operating costs (it would have to hit the ground cash generative), staffing, regulatory issues (such as KYC/AML), and corporate governance.
Alternatives to a loan provider based model are a business model similar to BondMason (or Basset & Gold), or an equity based model (I've wondered about agricultural land as an asset class, which seems to be a gap in the market).
|
|
bigfoot12
Member of DD Central
Posts: 1,817
Likes: 816
|
Post by bigfoot12 on May 3, 2017 21:04:13 GMT
So does anyone have any informed opinion on the practicability of such a scheme? I like the idea, but I'd rate my opinions as thoughtful rather than informed. ...residential property development strikes me as one of the simpler sector... My guess is that the ongoing monitoring makes it quite labour intensive, and the standard expected by the lenders (us) is quite high so not that simple. This is my guess why FC have pulled out. I think that it is worth considering why the institutions generally weren't interested in lending in this sector on FC. (Having said that P2PGI seem to be moving that way.) I was thinking of running a relatively low interest rate, but paying out an annual dividend based on the amount and length of participation in loans and a risk grade multiplier. I would have thought that interest rate should reflect risk and dividend should be a simple participation factor. Many platforms have no problems with the 12% loans, but struggle with the 7% loans. The issues that immediately come to mind are seed capital, operating costs (it would have to hit the ground cash generative), staffing, regulatory issues (such as KYC/AML), and corporate governance. I can't imagine such a platform would be able to hit the ground running in such a way. It wouldn't be able to start now without regulatory approval which will cost something. Some of the other stuff such as KYC can be outsourced. An obvious strategy would be to find a partner, but many obvious ones aren't really in a good position, such as the Coop, or Governor Money (the latter now closed). Big hitters might be found to lend the entity money (PIBS, or similar), but that would then require a quick build up of a loan book, but most platforms starting from scratch have struggled finding enough high quality loans early on. Also staff costs will be very high. Getting high quality staff is easier if you are able to offer equity in a company that might be one day worth something. But without that the downside risk is still high with little upside. One solution might be to find people who have recently retired and are looking for something to do ( pom ? alison (might be wrong Alison) and many others on this forum). But that would introduce additional problems. Perhaps early investors (by which I mean lenders to the platform) might get a guaranteed share of the first few loans. I think that the platform would need to have some USP. Perhaps parents could lend money for a while and then their children could later on get mortgages or something like that. ... an equity based model (I've wondered about agricultural land as an asset class, which seems to be a gap in the market). I would love a platform that buys up green belt land with little chance of planning permission, such that if in 25 years things change there is chance...
|
|
am
Posts: 1,495
Likes: 601
|
Post by am on May 3, 2017 22:12:05 GMT
I was thinking of running a relatively low interest rate, but paying out an annual dividend based on the amount and length of participation in loans and a risk grade multiplier. I would have thought that interest rate should reflect risk and dividend should be a simple participation factor. Many platforms have no problems with the 12% loans, but struggle with the 7% loans. The risk premium could be included in the interest rate, or in the dividend calculation; either would work.
|
|
