Navigating your way through a loan process can often prove to be challenging and may seem like a long road obfuscated by a fog of red-tape and administration.
At rebuildingsociety.com we have made our processes as simple and transparent as possible to help you navigate the path to a successful loan application. You can either refer to our handy flowchart or digest the information below.
Do you meet our basic criteria?
- We can help Limited Companies, LLPs, PLCs and social enterprises
- We require at least two years trading and filed accounts. (If you are a recently incorporated Ltd Company with a trading history as a different entity such as a sole trader then you may still be eligible)
- No outstanding CCJs of £250 against the business
- The business must be profitable and VAT registered
- Directors/Partners must be UK residents
- Turnover greater than £150k (we will also consider businesses that are on course to meet this requirement in the current financial year)
If you meet this criteria, we would love to receive an application which you can complete online.
On average it takes less than 10 minutes to complete the application form and once we have all of the required information, we can get you a decision within 24 hours.
We require the following information to process your application:
- 2 years filed accounts
- Management accounts, including balance sheet and P+L covering the period ending no earlier than 60 days prior to the date of submission
- Details of any existing borrowing, including providers, monthly repayments and amounts outstanding
- Completed statements of Assets, Liabilities, Income and Expenditure for all directors
- Business bank statement covering the most recent 3 months
- Personal credit report for all directors
Once we have received all of the required information, the application will go across to our underwriters for assessment. During the assessment process they may have some questions on the application or accounts which they will raise via the listing discussion forum.
You will receive an email notification when any questions are posted and in order to respond to these questions you simply log on and reply directly to the underwriter. Any pertinent topics will be left visible for our lenders once the loan goes live. Any information provided which is sensitive or not directly relevant for the lenders will be removed before listing.
Once your application is approved by the underwriters you will need to review and approve the listing before it goes live.
Reviewing the listing is your last chance to make any changes to the listing blurb before it goes live to be viewed by potential lenders. As the listing is the first thing potential lenders will see about your business, it is always beneficial to make sure that it is of sufficient detail to give a true and fair picture of your business, what you need the loan for and why lenders should invest.
We also have the capacity to upload any pictures, files or embedded videos that you would like lenders to see, so you may wish to send us any of the following for inclusion:
- Business plan
- Introductory video
- Cash flow forecasts
- Asset valuations / property valuations
- Promotional pictures
Before your loan goes live you may wish to consider the security you have offered. Well secured loans attract lower final rates, fund faster and may also qualify for a discount on the starting rate of up to 5%.
You can find out more HERE or speak to one of the rebuildingsociety.com team:
Your Application is LIVE!
Once you have approved the listing, we will email you to let you know that the loan is now live on our site and attracting bids.
It is good practice at this initial stage to add an introductory message on the discussion board to introduce yourself, so that the lenders are aware who it is they are addressing and who to direct their questions to.
Once the loan goes live you will be asked questions by lenders. These questions will be asked by potential investors and the answers given will often dictate whether they decide to invest or not. It is important that you ensure that you answer these in as much detail and as promptly as possible.
By subscribing to the listing discussion forum, you will be automatically notified via email each time a new question or reply is posted on your listing. Alternatively, you can visit the site at any time to engage with the lenders.
Previous applicants have found that engaging with our lender base at this stage is an excellent way to get the most out of the P2P lending experience. Our lender base is comprised of a wide cross-section of individuals from various ages, demographics, professions and business experience. Applicants have found this stage of the process to be a valuable opportunity to engage with potential customers, potential new business contacts and gain a number of potential new stakeholders with a vested interest in seeing their business succeed. Building a good rapport with our lending community from the start of the application will likely see the application fund quicker and at a better rate.
Your Loan Has Been Fully Funded
What happens next?
The day after the auction closes, we will send you a completion email which will lay out the steps you need to follow before we can release the funds.
This email will contain:
- A confirmation of the final interest rate and a breakdown of fees and funds
- A step by step guide on how to complete the online loan acceptance
- The legal documentation for the loan (e.g. Loan Agreement, Personal Guarantee)
- Details of the ID, bank statements, additional contact details and security documents that we require
We try to make the completion email as easy to follow as possible, however if you do need any additional assistance with any part of this process, we’re always available to provide guidance, so please get in touch via email or telephone.
Once you have completed all of the steps and posted the completion documents back to us, you just need to wait for us to confirm the transfer. Once our team has reviewed the submissions, we will be in touch to let you know that we have authorised the transfer and that
12th Jan, 2017
Following the success of the inaugural event in 2016, FinTech North 2017 is once again set to take place during Leeds Digital Festival week and aims to attract 350 delegates and support from the FinTech community in the Leeds City Region, across the UK, and internationally.
FinTech North 2017 will be hosted on the 26th April 2017 at aql in Leeds. The goal of the event is to generate collaboration and knowledge share within the financial services and technology community and to generate tangible economic benefits for the region.
The agenda for the one day conference will feature a number of well-known keynote speakers who will cover topics including innovation, alternative finance, big data and analytics, machine learning, digital identity and authentication.
View the 2016 FinTech North video:
In recent months the interest and activity in the FinTech arena in Leeds has heightened, with developments including the publication of a FinExtra report into FinTech in the Leeds City Region and the announcement of a new Digital Laboratory which is being led by Finexus and has gained high profile corporate support.
Julian Wells, Director of Whitecap Consulting, says: “There is a strong desire by numerous stakeholders in the Leeds City Region to increase the profile, capability and economic value of FinTech in the region. This year by launching FinTech North we laid the foundations which will enable us to deliver an even more impactful event in 2017 and help put FinTech firmly at the heart of the northern digital economy – particularly the Leeds City Region – making it attractive to UK and international organisations.”
Dr Chris Sier, Director of FiNexus and FinTech Envoy for the Northern Powerhouse, who spoke at FinTech North and will chair the 2017 event, says: “Opportunity was a theme from every speaker at FinTech North 2016. The challenge for Leeds is to work together to ensure our City has the best chance of exploiting the opportunity to become a true FinTech centre of excellence.”
Nearly 200 business leaders attended the first FinTech North conference in Leeds, and speakers and delegates were drawn from places as diverse as Estonia, Germany, London and Manchester.
Dan Rajkumar, Managing Director of rebuildingsociety.com and White Label Crowdfunding, summed up why the next FinTech North event will be a great opportunity for the region: “There is no doubt Leeds is now seen as a key FinTech and digital leader outside London both for infrastructure and talent. FinTech North 2017 will provide the delegates with a fascinating day of insight and the opportunity to network with industry peers and some of the region’s best known FinTech companies and governmental bodies.”
Registration for FinTech North 2017 is now open – click here to book your free place.
For speaking and sponsorship opportunities, please contact Whitecap Consulting.
19th Dec, 2016
Last year, Taylor Made Property Management Limited tested the crowdfunding waters. They applied for a loan of £103,500 on rebuildingsociety.com; a loan that was fully funded and successfully completed in January 2015. Now, they’re back; this time with a loan application seeking £125,000. The company is the first to make the most of the new changes to the marketplace that we recently introduced, regarding security-dependent interest rate reduction.
Taylor Made Property Management Limited was incorporated in October 2014 with the express purpose of taking over the Preston-based Martin & Co. franchise. This purchase was successful, and the company began trading a few months later.
The funds the company raised through their first crowdfunding efforts in early 2015 were used as planned; to purchase the existing residential letting agent, Woodholme Residential Lettings Limited. The purchase was successful completed on 28th February 2015, just over a month after the loan completed on rebuildingsociety.com.
Richard Taylor has extensive knowledge of the property industry, both in terms of running his business, and as a landlord. We spoke to him about the company’s recent history, their future plans, and the appeal of crowdfunding.
Richard, thank you for talking to us today. Tell us, what made you come back to rebuildingsociety, rather than seeking additional funding elsewhere?
The more traditional funding sources make it so difficult to refinance or even borrow as a business that the obvious choice when looking at refinancing was to come back and see what could be done through rebuildingsociety.com, who I have a track record and history with. I knew that my application would be judged on actual business viability, which I would have the ability to discuss with someone, rather than on a set of rules and criteria that a computer processes and rejects with no human interaction.
Is this interaction something you experienced during your first crowdfunding experience with us?
Yes; and I think the opportunity to communicate directly with lenders is a definite plus. It’s a great way for those who struggle to get more ‘traditional’ sources of funding to begin or progress their business ideas.
How has your company progressed since you completed the loan in early 2015, nearly two years ago now?
It’s been an interesting two years. Regarding the business I acquired, there was a lot that needed to change to bring it up to speed with the industry, and embrace some of the technological changes that would enhance the service offered to tenants, landlords and vendors.
This led to changes in personnel, and so much of the first year was taken up with simply steadying the ship and implementing correct procedure, all of which I am pleased to say were well received. We did not lose any landlords or properties; in fact, we added over 20 properties to our fully-managed portfolio.
The second year has been about building on that success, and we now have a steady, reliable team who are on board with the direction in which the business is going. This is great, because it has allowed me to take a more holistic approach to the development of the company, and to look at areas of potential growth and diversification.
What have been some of these areas of potential growth?
Well, for example, we have had particular success in the vibrant student market in Preston. We now have about 270 rooms available for the 2017/18 academic year, which includes 244 rooms in new, purpose-built, private student halls, which we are the only agent in Preston to be marketing. We have also been working with a number of developers, both locally and nationally, who have seen the potential in Preston and are looking to convert and build residential properties for both the sales and rental markets.
You are currently seeking £125,000 of funding through rebuildingsociety.com. If the loan is fully funded, what will you use the money for?
A large part of it, £75k, will be used to pay off the existing loan with rebuildingsociety. The remaining £50k will be used to fund a strong marketing campaign for the next 12 months, to help us increase our market share in the sales market, as well as reach some other key business development objectives and provide some stability in terms of cash flow.
We recently introduced some changes regarding security-dependent interest rate reductions, and you are the first company to benefit from these changes. What are your views on these improvements?
This is something that has definitely benefited me in applying for this loan. I think the improvements are a plus for both parties, as it encourages the borrower to provide better levels of security which can help reassure lenders that the security offered can genuinely repay the loan should the worst happen.
Why should lenders consider lending to your business?
I have an excellent track record of repayment, which will obviously continue with the new loan. There are a number of challenges facing the housing market at the moment; I believe that we have a good, strong business model with a clear vision of the areas of development and improvements needed to ensure that we can continue in spite of these changes.
With this in mind, what do you hope the future holds for Taylor Made Property Management?
Further growth of the franchise, both within the current geographical area and then potentially expanding to surrounding areas, as well as diversification into property development.
You can find Taylor Made Property Management’s loan profile here.
15th Dec, 2016
Regulation is a key, constantly topical issue in the world of finance. The Financial Conduct Authority (FCA) is undergoing a review of crowdfunding regulation in the UK and is collaborating with the Cambridge Centre for Alternative Finance (CAAF) in order to carry out a Regulation Review.
Through this research programme, scheduled to finish on the 22nd December, the FCA and CAAF aim to obtain feedback that can give them insight into any changes in the nature of the industry; its clients and their expectations; and its position in the financial services landscape. The team at CAAF also expect the research to cover topics such as risk assessment, due diligence management, and investment variation.
The intention is that this feedback be current, free from bias and driven by data. It is expected that the results will demonstrate the ways in which the sector has developed since the 2014 introduction of regulation.
Where you come in…
The feedback from crowdfunding platform users is always important; it enables us to enhance our site, develop improvements and hone the services we offer to better suit those who use them. On this occasion, input from our community is particularly vital, because the feedback received will be used to shape regulation. It is with this in mind that we not only invite, but also encourage you to complete the below surveys by the deadline of next Thursday, 22nd December.
Thank you for participating and helping to shape the future of crowdfunding!
23rd Nov, 2016
Assets can often be purchased through a hire purchase agreement, but where this option is unavailable a business loan can fill the funding gap and allow you to spread the cost of potentially expensive equipment. In some instances the asset can act as security for the loan which will somewhat reduce the risk.
In 2015 more than £29 billion in finance was provided by members of the The Finance & Leasing Association to assist with asset purchases. This figure is further boosted by the work being carried out by the Peer-to-Peer funders who offer an alternative route to finance outside of the traditional sources.
Business acquisition is the process of acquiring another company in order to build on strengths or weaknesses of the acquiring company. The aim is often to aid growth in a quicker manner than would normally occur organically. We have also supported new business owners who are able to show experience in their field of purchase and where security is strong to support the acquisition.
Successful businesses typically have a healthy cash flow, but even the best run businesses can experience fluctuations and cash flow finance can be an effective way to ease cash flow issues during busy periods. For short term options, businesses can use credit cards and overdrafts where appropriate. Longer term requirements such as construction firms covering a shortfall before they are paid by their customers and import/export or retail businesses making large inventory purchases to save money a loan can offer timely support to help plug this gap in finance. Another popular option is invoice financing and it’s important to consider the best fit for your organisation before entering in to any agreements.
A fairly common use of a loan is to consolidate other debt. This may seem confusing but there are three main reasons why a business may wish to take this route; businesses can spread the cost of an expensive loan over a longer period, combine several smaller loans into one more manageable loan or they may wish to refinance at a better rate.
Some debt consolidation companies have a bad reputation and Money Saving Expert, Martin Lewis rightly warns his readers to be wary of these in this excellent piece on his website.
The key here is to make sure the deal is the right one for you. Are the savings on the monthly payments going to help you and your business to succeed? Once you have considered the likely rate and repayments on the consolidation loan you will be in a better position to decide if this is the right move for you, but whatever you do, do not blindly accept a deal without considering the benefits or potential pitfalls.
If you are looking to grow your business, expansion can take many forms. There are a plethora of options for expansion including taking on new employees, larger offices, additional sites, product diversification and taking your product online. You may find a cash injection from a loan helpful in achieving your desired growth. It can help to pay for the new revenue stream in it’s early stages before it starts to pay for itself and could help you to achieve your planned expansion earlier than you may have through organic growth.
Before taking a loan for expansion you should be confident that you have planned effectively and considered the relative risks and challenges. If the expansion is unsuccessful for any reason you will still be expected to pay the remainder of the loan from your existing profit, so it is vital that there is a clear route to profit before accepting finance to fund the project.
14th Nov, 2016
Our lender base is made up of a wide variety of savvy and well connected individuals, many of which are greatly involved with local entrepreneurs and businesses. Growing businesses need access to capital and we’re here to help.
We’d like to reward our members for referring businesses who are looking for additional finance.
If you refer a business to us that successfully raises finance through rebuildingsociety.com, we’ll reward you with a referral fee of 1% of the amount raised. All you have to do is send them our way and ask them to mention you at the point of application or first contact.
We’re looking for businesses that you love and support, that:
- Have been trading for at least 2 years as a Ltd company or LLP; and
- Have an average turnover of £50,000 a quarter
To find out more about our lending criteria, please visit How to Borrow
To refer businesses applicants to us, send them the link http://reb.so/apply.
Terms of Referral
* The loan must be fully funded by 31st Dec 2016
* You should not be a shareholder or director of the referred applicant
* You may not act as a broker on behalf of the applicant
* You must be registered lender of rebuildingsociety.com
11th Nov, 2016
In 2014, Candy Hero Ltd. came to rebuildingsociety.com looking for an influx of funds in order to expand. They planned to use the investment to boost wholesale sales, strengthen equity and then open a new UK store in time to maximise Christmas time sales.
Candy Hero Ltd. was founded in December 2008, by two entrepreneurial siblings with a mission to bring unique, specialist and delicious sweets from all over the world to sweet-toothed customers in the UK and Europe.
The online shop was launched in 2009, to be followed later by high street shops in York and Leeds. Visit one of their shops, and prepare to be tempted by Birthday Cake Golden Oreos, exploding cinnamon candy, Nerds, giant lollipops, wasabi candy and boxes of Jelly Belly Buttered Popcorn Jelly Beans, to name just a few from the vast collection. The 10,000 square foot warehouse in Bradford sees around 4,000 unique product lines carefully handled by employees individually chosen to fit the company’s high energy, innovative ethos.
The sweet importers and retailers’ first loan application was a great success; brothers and co-owners Frank and Leo managed to raise the target £50,000 from investors. Candy Hero Ltd. invested the money they raised into the wholesale distribution of imported sweets, snacks, and groceries. They decided not to open a shop, as they were unable to find an adequate unit within their chosen city. Instead, they focused on their online sector. In the last two years, the company has:
- grown turnover significantly; 2015 to 2016 saw 83% growth
- increased their stock-holding capacity from 5,000 to 10,000 square feet
- acquired a great number of additional wholesale customers
- built a proprietary pre-order system
- co-ordinated a huge UK product range comprising around 10,000 lines available for pre-order and export
- improved internal systems with strong procedures that improve staff training processes
- added powerful price and margin controls and mitigated currency fluctuations
Frank commented on their experiences with rebuildingsociety:
“They provided a smooth process prior to listing the application, support throughout, and a platform that is clear and easy-to-use. Rebuildingsociety is a very impressive social business that is a powerful tool when you need extra finance above and beyond what may have been already possible.”
Perhaps one of the keys to their online funding success was the company’s open-door policy. Frank discusses business with his team quite openly, “from the top to the bottom of the organisation, in response to any question.” Therefore, he embraced the discussion forums available on rebuildingsociety.com, believing that “talking business with lenders in a peer-to-peer environment with the same openness and clarity builds up the confidence to invest in us.”
Now, Candy Hero is back with a new loan application. The return borrowers are well-supported by rebuildingsociety’s lender base, something they hope will help them fund their £300,000 loan application. If successful, the team plan to refinance £184,000 to achieve cheaper interest per month and fewer capital repayments per month, and use additional capital to add to the stock cycle.
When asked why they decided to return to Rebuildingsociety, Frank explained that while their bank is very supportive, recently offering them a new import loan facility, they cannot approve a loan of this size. As he commented: “The only method of gaining a loan of this size would be crowdfunding and the only place I want to crowdfund is Rebuildingsociety.”
Read about the company on their website, and find out more about their loan application at rebuildingsociety.com.
Lending to businesses carries risk. Past returns are not necessarily a guide to future returns. Any unrepaid capital is at risk of arrears or default. To find out more please visit http://reb.so/risk
07th Nov, 2016
Any investment involves risks. Whilst we pride ourselves on our ability to minimise the possibility of the borrower not repaying through our careful selection of businesses that meet our lending criteria and our proactive approach to credit control, there will unfortunately always be occasions where a business will fail and cannot repay capital and interest as agreed.
In this situation, it becomes necessary to commence our legal enforcement process to enforce the security offered by the borrower to secure the loan. Whilst this is not an option we take lightly, we are confident that our security requirements and our close working relationship with credit control agents, debt recoveries experts and in-house and external legal agents, we are well prepared to utilise the many tools at our disposal to recover the debt.
In this post, we briefly discuss a few of the types of security we take and the various powers of enforcement they each provide should the worst happen.
The key advantage in holding a debenture for security is the powers it gives you to enforce the charge against all assets of that business. Our debenture form creates a fixed and floating charge over the assets of the company. This fixed charge applies to the assets of the business not subject to any other legal charge. A fixed charge creates conditions over how the company deals or disposes with the assets in question. A company cannot sell the asset without either paying our charge or obtaining our permission.
The floating charge over all assets grants more flexibility to the chargee in what it applies to, and additional flexibility to the chargor by dispensing with some of the restrictions on use or disposal of the asset. The company is free to deal with its assets in the ordinary course of business, but we are protected when a ‘crystallising event’ takes place and the charge is crystallised. Along with any fixed assets (things like premises, machinery, tools), the debenture also creates a charge over the book debts of the company, and the floating charge applies to assets current and future.
Critically, the existence of a debenture grants secured creditor status, meaning that the debt is given preferential status and must be repaid before that of unsecured creditors. The book debts (which comprise individuals or companies which owe the business money), and all other assets of the business can be recovered to pay off our loan before unsecured creditors debts are considered.
Another advantage of a debenture is that it gives the holder the right to appoint an administrator to place the business in administration. This allows us a method to place our appointed insolvency practitioner in control of the company’s assets and operations, and allows the administrator to take appropriate actions to protect the assets of the company to satisfy its creditors and make a judgement on the survivability of the company in question as a going concern.
Our debenture also contains a ‘negative pledge’ which prevents further charges from being registered against the business without our express permission. This acts both as a safeguard to prevent the business in question obtaining additional secured credit, and also a way to protect the priority of our creditor status and limit the number of other parties with access to the powers a debenture provides.
Legal Charges over Property
On loans secured by way of a property charge, we have additional safeguards and powers regarding enforcement of the debt.
Before the funds are transferred to the borrower, our lawyers complete the legal registration of the charge at the Land Registry. Once this is done, this means that the borrower cannot sell their property without first satisfying our charge in full. Further, the borrower cannot remortgage the property or take additional charges without either satisfying our debt or obtaining our express written permission. This allows us a degree of certainty that the equity position in the property will not have dissipated when it comes time to call in our loan.
A property charge also gives us the power to petition the courts to force the debtor to sell the property in question, with the monies received from the sale used to satisfy the charges on the property. Whilst this is a powerful tool, it is worth remembering that not only are there several barriers to forcing a sale, but even when successful, it is often a time-consuming and expensive legal process. Further, factors like dependents in the property, children under the age of 18, a partner or ex-partner with a share of the equity are taken into consideration by the court and can complicate or delay the sale. Along with the time and legal cost involved, frequently the sale price achieved under a forced sale is less than a sale in optimal market conditions. For these reasons, wherever possible it is normally beneficial to use a forced sale only as a last resort when other options have been exhausted. Frequently, the threat of a forced sale is enough to bring a debtor to the table to either settle the debt in full or establish a repayment plan.
Personal Guarantees and Bankruptcy
Critically, as discussed in our previous blog post in this series, Personal Guarantees create a personal obligation for the debt. This allows us to go after the guarantor even if the original business has been wound up and ceased trading.
This gives us two main avenues to reclaim funds against the individual- bankruptcy and court judgements.
Instead of seeking bankruptcy, we also have the option to seek a court judgement for the money owed. By applying to the County Court, we can ask for them to issue a CCJ against the individual to set out how the debt should be repaid. A CCJ is a court order mandating the repayment of the debt and setting out whether it is to be paid all at once or through regular monthly repayments. The court sets the repayments based on the defendant’s income. The CCJ is entered on the Register of Judgements, Orders and Fines and remains for six years. If the CCJ is unpaid, we have the authority to return to the court to enforce their judgement. Using this method, we can send bailiffs to collect payment. The bailiff will ask the debtor for payment within seven days and, if it isn’t paid in this time, will visit the debtor’s home or business to seize goods to pay the debt.
The advantage of a CCJ is that it allows you some additional freedom in enforcing the debt. If the debtor has commenced new employment, we can apply to the court for an attachment of earnings order to deduct money from the debtor’s wages and have it paid directly to us. We can also apply for a third party debt order, which allows us to petition the court for an order to seek our funds from a third party who owes money to (or holds money to the credit of) the judgement debtor. This can allow us, in certain circumstances, to apply to take money directly from the bank or building society account of the debtor.
Another tool available to us to pursue an ‘unsecured’ debt is a charging order. This is a tool placing a charge to secure the debt against the debtor’s property. This can only be pursued once a court judgement has been obtained, and usually only when the repayment terms of the judgement have been broken. Once a charge is placed on a property, the owner cannot sell or remortgage the property without paying off the debt.
The disadvantage of CCJs is that, whilst they may appear to have a number of possible enforcement options associated with them, each have their own specific advantages, disadvantages and costs. They all rely on the administering of an order by a judge, and are only available in specific circumstances. A CCJ also nowhere near as effective a ‘threat’ as bankruptcy, which holds with it the possibility of your entire estate being liquidated, and can prove a very effective way of ‘encouraging’ co-operation.
There is also the ‘superseding’ effect of bankruptcy, and the dangers of wasting effort and funds on prior enforcement measures. Whilst it sounds tempting to utilise all of these various court orders and tools to enforce a debt, at the time a borrower defaults to us, they have often defaulted to one or more other lenders. If one of those lenders makes the debtor bankrupt before the CCJ is registered and the particular enforcement measure is successfully pursued, then the CCJ is essentially superseded by the bankruptcy. This means that the money and time spent obtaining the CCJ and petitioning the court to grant a particular enforcement order is wasted.
Bankruptcy is usually a ‘final resort’ in situations involving a defaulted loan and in fact, to successfully petition for bankruptcy you must demonstrate that all reasonable options have first been pursued, as the court seeks to prevent bankruptcy hearings being used as a ‘normal’ credit control method. Our legal agents are experienced in satisfying the legal pre-requisites to, where necessary, seek a bankruptcy order against a non-paying guarantor.
In bankruptcy, the bankrupt’s assets are assessed and their estate is vested in the bankruptcy trustee. The Trustee liquidates the bankrupt’s estate in order to pursue a realisation for creditors. Thus, once a bankruptcy order has been made, it falls to the Trustee to oversee the bankruptcy and work in accordance with the law to secure any creditor realisation.
Where the bankrupt has attempted to dispose of assets quickly at any point in the five years before the bankruptcy below their proper value (or indeed as a gift) the Trustee can apply to the court for an order voiding any transaction made at an undervalue. This offers a degree of protection and recourse to us from the risk of a debtor disposing of assets before being made bankrupt.
A further method to do this is by way of a freezing order. We can apply to the court to grant a freezing order which prevents a debtor (individual or business) from disposing of assets before liquidation proceedings.
This was a brief introduction into some of the recovery options available to us and a discussion into the additional powers granted by particular security types. It is by no means final or comprehensive, and in each circumstance the tools utilised by us to recover your debt are decided upon after careful consideration of the case in hand and close discussion with skilled legal professionals with many years experience in debt recovery.
Lenders should be aware that irrespective of these tools, capital is always at risk, recovery is never guaranteed and past returns are not necessarily a guide to future returns. To find out more about the risks associated with Peer to Peer investments please visit our Risk Page.
24th Oct, 2016
We’ve been working hard to bring you good quality borrowing applications for you to consider. Currently businesses that are eligible to borrow through rebuildingsociety.com, must have at least two years history, an average turnover of £50,000 a quarter and offer at least a personal guarantee as security. The average final rate paid by borrowers on our loan book is over 20% APR*, this rate is paid usually regardless of the security offered in support of the loan.
Currently, the risk rating given to the borrower drives the maximum starting rate for bids. To incentivise applicant borrowers to offer more or better security we are introducing a modifier to the maximum rate ceiling on the loan auction.
Whilst we currently take security into account during the underwriting process, it is not a significant factor in determining the risk rating given to the borrower, and therefore has little bearing on the cost of the finance.
From the 26th October 2016, the starting rate on a loan will be driven by the security strength and Loan To Value (LTV) score of the security rather than the final risk rating. The underwriting of the loan will be done in the same manner as before and risk ratings between A+ and C will continue. The weightings attributed to the determination of the Risk Rating in our model will remain unchanged, therefore a loan that was rated as C risk earlier, will still be rated as a C rated loan, allowing you still to view the suggested relative risk of the business.
The Changes in Practice
What is it?
A new borrower incentive to encourage borrowers to offer more and better security in support of their loan.
How does it work?
The borrower can offer a wide variety of security to support their loan. We’ve assigned a nominal value to the different types of security, making some security ‘more valuable’ than others. For example a 1st charge on a property will be deemed a more valuable form of security than a company debenture, and as such they will be rewarded with a lower starting interest rate.
The more security added, the more the starting rate will be reduced* as the security added works in a cumulative way linked to the loan to value ratio.
The starting maximum rate will never be modified lower than 5% of the standard maximum rates, which are currently as follows:
- A+ = Max rate 11%
- A= Max rate 14%
- B= Max rate 17%
- C= Max rate 20%
Therefore a C rated loan will never have a maximum starting rate of less than 15%.
The security we can accept from a borrower is ranked in priority below.
- 1st Charge Commercial Property
- 1st Charge Non Residential Property
- 2nd Charge Commercial Property
- 2nd Charge Non Residential Property
- 1st Charge Residential Property
- Fixed Asset Debenture
- 2nd Charge Residential Property
- All Assets Fixed and Floating Debenture
- Corporate Guarantee
- Personal Guarantee Insurance
Therefore, depending on the LTV on the security, a 1st legal charge taken on a commercial property in support of a loan will be ranked higher than a loan with an All Assets Debenture and may be achieve a lower maximum loan rate. Similarly, based on the above a loan secured on a 1st charge non residential property with an exceptional LTV will not achieve a better rate than a loan secured on a 1st commercial charge that also has an exceptional LTV, unless the former is accompanied by additional security.
Personal Guarantee’s do not qualify for a reduction in the interest rate as this is a mandatory requirement for all loans.
Why are we introducing it?
We have received feedback that the security being offered should have a more direct effect on the rate of loans. As such, we are rewarding borrowers who choose to back their loan with additional security. In the long run this should result in a higher percentage of secured loans and an increased rate of recovery.
When will it be introduced?
The security discount will apply to all new loans from Wednesday 26th October 2016.
How will this affect you and your use of the site?
The bidding process of the site remains unchanged as does indicative risk rating given to each loan, the only change will be the maximum starting rate of any loan that achieves the reward.
Will this be applied to historic loans?
No, but existing borrowers who reapply for new finance may qualify for the ceiling rate reduction.
Will this reduce my returns?
We expect any reduction in average gross returns to be offset by an improvement in net returns.
As ever you should always review each loan application in detail before lending. Where you have questions in regard to an application you should put these to the borrower via the discussion forum on each application.
11th Oct, 2016
Loans on rebuildingsociety.com carry varying types and levels of security, but what does this mean?
What is security?
Loans on rebuildingsociety.com can carry the following types of security.
- Personal Guarantee
- Corporate Guarantees
- All Asset Debentures
- 1st and 2nd Priority Charge Legal charges over property
Each loan profile will highlight what security is being offered on the particular loan. The headline information can be found on the Overview tab. Every loan on rebuildingsociety.com, unless otherwise stated carries at least a Personal Guarantee.
Security on a loan is the instrument that will be used to recover funds owed should a borrower fall into arrears and their account declared to be in default. The security will allow you or rebuildingsociety.com on your behalf to try and recover the money owed to you. Therefore, generally speaking, the more security offered by a borrower the greater the chance of recovering the debt if things go wrong.
Should it affect my lending decision?
In deciding to lend to a business, the security offered by the borrower should act to give you a higher level of comfort in your decision.
While each lender has their own underwriting system and investment strategy, generally speaking when assessing a business before bidding to lend, you should carefully assess the merits of the business itself rather than solely focusing on the security being offered. This is because loan security should only be a back-up to the lending decision itself as it only becomes a factor should the business be unable to maintain repayments and default. Many lenders may consider it prudent to first assess the business’s ability to repay the loan through assessment of the accounts and other information supplied before assessing the security as a later consideration.
It is important to note that whilst all loans on rebuildingsociety.com carry some level of security, recovery of funds owed to you are never guaranteed.
How is the Rebs loan book secured?
Rebuildingsociety,com has some of of the most stringent criteria on security being offered on its loans when compared to other platforms. What we mean by this is that whilst many of our competitors may offer loans of over £200,000 ‘unsecured’ (without a personal guarantee, or with a personal guarantee but nothing else), we insist that all loans carry at least one Personal Guarantee from the main directors or shareholders, and where the loan is for more than £50,000 we require extra security in addition to a personal guarantee.
How has this changed over time?
We try and source a variety of different businesses with a variety of different security so that there are opportunities to suit a diverse range of risk appetites.
We’ve taken a look into the level of security offered on all loans. Taking into account that many loans carry more than one type of security, we have only taken into account the ‘primary’ security on the loan. So for example; where a loan is secured on a PG, Debenture and 2nd Charge, we regard the 2nd charge as the ‘primary security’ as it is generally regarded as the strongest of the three and as such we have not included the other ‘secondary security’ in the graphs below.
The below pie chart illustrates the current primary security levels of all active loans in the Rebs loan book.
70.99% of the current active loan book is secured with more than a personal guarantee, with over 32% currently secured on a legal property charge.
Over time our lender base have asked us to provide them with more property secured lending opportunities, a call we have tried to answer.
The graph below shows the change in percentage of all loans over the years secured by the various primary security types. As you’ll be able to see, the number of loans secured only on a personal guarantee has decreased year on year since 2014, whilst the proportion of loans secured by 2nd charges has increased year on year at a higher rate. This year already, we have secured more of our loan book on 1st and 2nd legal charges than any year prior to it .
Going forward, we will continue to try and source creditworthy businesses backed with higher levels of security.