In simple terms there are two approaches to PtPL
platforms. The first is to offer minimum
risk and simplicity of operation and scale it up to satisfy both institutional
investors as well as a mass market. Typical
examples of these platforms, in the UK, are Zopa and Ratesetter.
These platforms typically lend to domestic borrowers with no
asset security. This means if a default
occurs then a full recovery is unlikely and, at best it may take a long time to
get the money invested back. For this
reason, Zopa and Ratesetter have contingency funds to protect the lender from
losses, resulting in typical interest rates to the lender of between 4.5% and
6.5% over 3 to 5 years.
Saving Stream
Asset backed loans represent a much better option for the more
adventurous Peer to Peer Lender. Money
is lent against a tangible asset with a verifiable value. There are a number of specialist platforms
for Asset-based loans. Saving Stream is
one of the simplest and offers 12% on every loan, with 1% being paid every
month.
Saving Stream bridging loans were originally against boats
but they have more recently shifted to land and property with many loans being for
well over a £1M. These typically have a
term of about a year.
LTV
One of the key parameters with an asset-based loan is the
Loan to Value (LTV). For example, if a
picture valued at £1M is used to secure a loan of £500,000 then the LTV is
50%. Assuming the valuation is accurate
then this leaves plenty of cash available, should the loan default, to arrange
for the sale of the item and return all the cash owing to the lenders.
Ablrate
It’s surprising what a range of assets you can lend
against. Ablrate began with loans
against aircraft but have shifted towards industrial machinery such as bottling
plants and shipping containers. Their
shipping container loans are currently paying 14%. The loan funds the purchase of a number of containers
and the loan is paid off once the containers are sold. These typically run for 6 months at a time
with an option to renew.
Money Thing
Two other players, Money Thing and Funding Secure originated
from the pawn-broking industry. Money Thing
also offers a fixed rate of 12% across all loans. My loans with Money Thing currently include
several cars, managed portfolios of jewellery and electronics, several artworks
(paintings) and finally a piece of land.
Money Thing are currently expanding into both land and property and also
into the supercar market.
Funding Secure
Funding Secure also offer a mix of land, property and other
assets. Their loans are usually 12% or
13% with a renewable term of 6 months.
Other assets I’ve lent against with them include historical book
collections, railway memorabilia, micro-sculptures and a replica of an 18th
century schooner!
I have to say asset-based lending is far more interesting
and rewarding and wins hands down
against the more mundane Zopa model of lending money to a householders to buy second-hand
car or for a bit of home improvement.
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