25th Jan, 2016

P2P Weekly: A Look at the Evolving Lending Market, and Other News

“The Evolving Nature Of P2P Lending Marketplaces,” TechCrunch

The world of P2P lending continues to adapt and grow, with bigger investors and even banks getting in on the action. This article from TechCrunch takes a broad look and offers feasible predictions for the future.

“The sharing economy probably means much less inequality, not more,” The Telegraph

Fintech and crowdsharing markets could lead to a new economic structure — and perhaps a much more horizontally distributed one.

“Taking flight: The allure and the peril of Chinese fintech companies,” The Economist

The Economist breaks down the Chinese P2P market, which is one of the fastest growing and most fraught in the world. Nearly 1/3 of companies have had major problems, so the Chinese government is rolling out new regulations. Despite high risk, the market appeals to investors around the world who want to get in on the ground floor of an exploding market that is quickly expanding its reach internationally.

“Regulations Galore Part II: Peer to Peer Lending in China,” Crowdfund Insider

A careful look at the aforementioned regulations on Chinese lending.

“FCA Publishes Consultation on Loan Based Crowdfunding. Agency Seeks to Simplify Client Money Requirements,” Crowdfund Insider

“According to the FCA, presently an investors money held in relation to peer to peer loans must be segregated from the firms own money and any other assets. The regulator agency understands that some debt based platforms find this process burdensome as many P2P lenders have not developed systems to easily segregate funds between P2P or B2B lending agreements. The FCA is proposing to allow firms to elect to to hold both kinds under CASS 7, if they wish to do so. Firms may then segregate P2P and B2B monies together, but separately from the firms’ money, without breaching CASS 7.”


20th Jan, 2016

Finance firm Seeks New Income Stream

An exciting new application from One Stop Business Finance Limited breaks new ground for the company and for the rebuildingsociety platform.

OSBF is a business finance brokerage that primarily provides loans to those who have been refused credit by banks. They tailor financial solutions to each client’s needs and plan to add this loan from rebuildingsociety to a robust portfolio of loans from High Net Worth Individuals that maintain the cashflow of the business’s own book lending.

In the 18 months since incorporating, no client has defaulted on a loan from OSBF. Though this loan doesn’t have a personal guarantee (more on that in the profile), managing director Andrew Mackenzie is confident that he has a secure loan on offer. Alongside the security OSBF holds through its loan book, it is also offering a first ranking holding company debenture.

“To date we have lent £1,048k over eleven transactions with all loans fully secured by company debenture and directors personal guarantee as a minimum. Our financial projections for the current financial year show sales of £250k with a PBT of £51k. As this sales value is 73% covered with current order book (with six months to go) it is considered prudent. Next year turnover will increase to £410k and profit to £89k. It goes without saying, therefore, that this first rebuildingsociety loan is fully serviced from business cash flow.”

A Responsible Model

“Our model seeks to be entirely responsible in our lending, is client focused, thinks long term and as one client said ‘provides the customer service the banks say they will.'”

Lenders have transactions that last as few as six weeks and can take out loans for a maximum of 18 months. Every loan is secured by debenture and director’s personal guarantee and includes flexible terms that match the needs of each client.

This bespoke approach ensures that each investor is getting a strong return on their investment through OSBF.

A Unique Partnership

OSBF chose to work with rebuildingsociety in order to drive down borrowing costs in the long term, and in the short term it will allow them to expand the types of investors who can access their services to include more than just HNWs. A diversified income stream reduces risk to lenders and borrowers. And, for OSBF, P2P offers a chance to break new ground in the corporate short term lending world. Mackenzie believes OSBF is the first company of its kind to work with a peer-to-peer lender.

The relationship between OSBF and rebs comes naturally, as they are local to each other.

“When we first met Rebuilding Society last April we were very impressed. There are many similarities in our business philosophies. It seems a very comfortable and obvious business relationship.”

Please review One Stop Business Finance application page for more information and a robust community discussion.


18th Jan, 2016

P2P Weekly: FinTech Gains Traction as 2016 Kicks Off, and Other News

“Why smart businesses are turning to crowdfunding,” The Telegraph

A look at what makes crowdfunding and peer-to-peer lenders promising markets in this new year.

The Telegraph notes: “from next year, hundreds of thousands of investors are expected to pour money into crowdfunding and peer-to-peer when qualifying investments become eligible for Isa status. From April 2016, individuals will be able to keep many crowdfunding and peer-to-peer returns tax-free as part of their ISA allowance.”

“Kickstarter Reports 64 Percent Increase In Pledged Donations,” Tech Times

Campaigns for tabletop and video games received the bulk of Kickstarter pledges in 2015. Across categories, people are donating less money to smaller projects, opting instead to go with campaigns by individuals and companies they already trust. This is a response in part to more and more Kickstarter projects failing to follow through with promised rewards.

“P2P ISA Challenge: “We Recognize that We as an Industry Need to Work to Persuade Advisers to Embrace P2P Lending,” Crowdfund Insider

“The introduction of the new ISA also highlights an ongoing issue for P2P platforms: The profound need to inform and educate potential investors and advisors of their services.”

“CIBC CEO Victor Dodig on banking’s tech revolution,” Canadian Business

Canadian banking leader Victor Dodig commented on the potential threat that peer-to-peer lending poses to traditional banking, saying: “With the small-business segment, speed matters more than price. In the consumer segment, speed matters, but price matters as well. That’s where the peer-to-peer lenders can actually drive a wedge, but we won’t let them do that.”


07th Jan, 2016

Tax and Relief on P2P lending

Lets face it, HRMC have been pretty kind to us P2P platforms and lenders…

Legally, we could have been made to withhold tax on interest earnings at 20%. Lack of enforcement has been an indirect subsidy as it has allowed lenders to compound their gross earnings. P2P lenders are expected to declare their earnings on their self assessment forms, due imminently. Whereas platforms are required to submit an Other Interest report so that treasury are informed about who earns what.

The newly regulated P2P lending industry is growing up and the government is helping.

Things will change from 6th April 2016…

The UK government may offer relief to P2P lenders for irrecoverable loans. So lenders can use next year’s tax deductions towards current bad debt relief, allowing you to substitute one deduction for another. Hurray!

Interim rules have recently been published by Treasury, but will change once formalised. We’ll confirm once published, but we have an idea of what’s likely to happen. We’re expecting that platforms will need to deduct 20% of interest earnings as received from lenders. We will change the ‘Fees’ tile on the dashboard to ‘Deductions’ and show the detail on the pop-up.

The IF-ISA excludes ‘Wrapped’ microloans from taxation

So lenders without any taxable income cannot use bad debt relief. Unless they use more than one platform, in which case taxes accrued in one platform may offset losses from another.

We’ll have more info on the IF-ISA very soon.

rebuildingsociety CEO Daniel Rajkumar says:

“The Crown is sharing in some of the risk of lending to SME’s. Hopefully this will manifest itself with a widening of risk appetite and further support for the productive SME economy.

Equity crowdfunding enjoys great relief through EIS & SEIS, so its great to see similar incentives applied to credit based lending.”

It’s bitter-sweet

They say that the only things that are certain are death and taxes… We knew this was coming, so we’re grateful for the:

– all of which soften the pain.

Net earnings may not reduce

With gross yields near 15%, a 20% tax will clip yields to 12%, that’s an overall deduction of 3%. So on a portfolio of £100k invested, £3k which would be taxed can go towards bad debt instead. Many lenders without bad debt will have an allowance that can be traded for non-performing loans.

Total interest pay-outs are expected to exceed £1.5m for next tax period across all lenders, at 20% this would net the Crown circa £300k. This is about the amount we have in defaults, we are expecting to recover £100k, but defaults will rise as some businesses fail. If lenders are able to maintain losses below 3% of your portfolio (and yields at 15%) then you’ll suffer no more loss from bad debt, than you would from taxation.

Its important to re-iterate that decisions on interest earnings taxation is still pending, but we believe that from April 2017, platforms are likely to have to deduct 20% from most lenders (depending on their tax bracket).

Risk appetite…

We’re working on a ‘non-performing loans’ or ‘tertiary market’ where risk adverse lenders can sell underperforming loans however they wish and optimistic buyers may find a deal. More on that at the lender’s evening next Thursday.

Hope to see you there.

Photo credit to: Kadellar


04th Jan, 2016

P2P Weekly: Lending Future is Bright in China, and Other Stories

“China Lays Out Rules for Peer-to-Peer Lending Platforms,”
Wall Street Journal

The China Banking Regulatory Commission has released rules for the P2P lending industry and is seeking public comment. Clearer regulations for the more than 2,500 P2P lending operations in China have been in the works for a while, and 2016 should be a big year for the industry in that country.

“Report: China P2P Lending Topped $150 Billion in 2015,” Crowdfund Insider

The P2P lending industry in China generated more than £100 billion in 2015, according to Chinese news reports. This indicates a high level of interest from the public in this industry, since P2P lending gets almost no institutional money in the country.

“Peer to peer lending is set to explode,” Business Insider

Writes John Mauldin: “I’ve been a fan of private credit for a long time. Recently, I have once again been exploring the private-credit world, and it seems this market is growing faster than I had thought.”

“RBI plans guidelines for peer-to-peer lending,”
The Economic Times

The Reserve Bank Of India plans to develop guidelines to regulate the burgeoning P2P industry.

“They should be regulated under the State Money Lenders Act,” said Raman Agarwal, chairman of Finance Industry Development Council. “On these platforms, lenders are individuals and State Money Lenders Act applies to individuals, and not entities. In this case, individual is not an individual lender but a camouflaged lender.”

“Funding Circle passes £1bn lending milestone,”
The Guardian

Funding Circle surpassed £1 billion lent in 2015 and is on track to lend a further £1 billion in 2016.


04th Jan, 2016

Join us on January 14th to meet the team

We are thankful to have such a dedicated and enthusiastic community, and we want to bring our virtual relationships to the real world with a special Lender Evening.

On 14th January, we’ll host an evening of conversation at the rebuildingsociety offices in Leeds. Refreshments and wine will be served.

We’ll have presentations from our managing director Daniel Rajkumar and from our underwriting and recoveries teams. This will be a special opportunity to ask questions of the people who form the backbone of our loan operations. And of course, we will be thrilled for our lenders to get to know each other, share resources and ideas, and strengthen their understanding of peer-to-peer lending.

The event will be Thursday, 14 January from 18:30 to 21:00. We look forward to hosting you at our offices at No 1 Leeds – 26 Whitehall Road Leeds, West Yorkshire LS12 1BE GB

You can learn more and register for the event at our Eventbrite page.

Thank you again for your commitment to the rebuildingsociety community! We look forward to seeing you on the 14th of January.


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