An application has to go through 3 distinct Stages prior to listing and it could be rejected for a number of reasons throughout this period. In the operations team we receive around 40-50 applications and enquiries a month and reject 79% of these. We only allow the strongest applications with appropriate security on to the platform.
We reject 24% of our applications in Stage 1. We filter out any application that does not meet our basic criteria (more on this below) and some applicants choose to withdraw at this stage.
In Stage 2 we gather all of the required information for the application including security information and accurate accounts. This is the longest part of the process as applicants often have to engage their accountants to make edits to their management accounts to bring these in line with our minimum standards and expectations. It is important to us that the accounts are presented to the lenders in both an accurate and comprehensible way. We have 36% of all applications rejected or leaving the process at this stage.
In Stage 3 all of the gathered information is passed to the underwriting team to ask questions about the accounts, assess the risk of loan and to determine its suitability for listing. 15% of all applications are rejected at this stage which represents 37% of the applications that make it to this stage.
The remaining 25% of applications make it to listing, where 2% fail to raise the funds, 2% fail during the completion process and 21% are fully funded and completed.
18% of our rejected borrowers are ineligible and do not meet our basic criteria of turnover, entity, UK based, profitable and able to provide the required accounts.
23% of those rejected meet our criteria, but are rejected by the underwriting team because they do not pass our risk model, or in some way are unsuitable for the site. This includes 6% with insufficient security, 4% where the loan is unaffordable.
14th Jun, 2016
When we receive a loan application, we take it through a number of checks and verifications, and a whole lot of scrutiny, before we allow it to be listed on the platform for your consideration.
These checks focus mainly around the business and its ability to service a loan at the likely rate that it will achieve on the site, as well as taking a look into the business’ previous trading history and the associated businesses linked to it through its directors and shareholders. Much of this information is driven by third-party data services, which use thousands of touch points to bring together a more comprehensive picture of the applicant business.
This information is then used in our bespoke risk tool, and the accounts supplied by the business are further analysed by our underwriters to ultimately determine a risk score between A+ and C. A business can fail in its application at any stage through this process; only 20% of the businesses that apply make it through to listing.
Aside from looking solely at the business, we go a step further and also look at the people behind the businesses. We take into account the businesses they are involved in, and the businesses they may have previously been involved in, as well as their personal credit history.
We do this because we understand that many businesses are strongly driven to success – and sometimes, ultimately, to failure – by the direct actions of their directors and majority shareholders. What’s more, if a business does fail, all loans on rebuildingsociety.com have at least a Personal Guarantee, which means that the directors may ultimately become responsible for the debt of the business should it fail to make its repayments. It is therefore important for us to know more about the directors and their personal financial history, and we do so by carrying out personal credit checks. This data is then used to further our assessment and risking of the business, contributing to the final rating.
Where a director of an applicant business has a poor credit score or has adverse information, their application may well be declined on this basis.
24th May, 2016
We understand that, as an investor, you want to be kept in the loop about what is happening on the loans you have invested in – both whilst the auction is still live, and also throughout the life of the loan.
We also understand that you may have invested in a large number of loans and that keeping track of the latest news on each can become a mammoth task.
That’s why we have implemented a feature that has been requested by many of you to solve just this problem.
You can now, from the ease and comfort of your own Lender Dashboard, view all the recent updates on any loan that you are currently invested in, this includes live loans, active loans on the secondary marketplace as well as any loan that may be in default.
Whenever an update is posted by one of the Rebs team, this will show on your ‘Loan Updates’ tab, right between ‘My Statement’ and ‘Repayments Calendar’. Not only can you see when there is an update, you can also read the full update from your dashboard, saving the need to navigate away.
The Loan Updates section will be used to post a variety of updates, from notifications of an auction extension, to updates on the completion of a loan, to updates from the directors of the business, as well as updates from Rebs as part of its ongoing loan monitoring process.
18th May, 2016
In line with our campaign for improved transparency and communication with lenders, we crunched the numbers on our loanbook to deliver you a picture of the average returns enjoyed by rebuildingsociety lenders.
The data we analysed covers the period between our inception up to the end of the 2015/16 tax year, and takes into account all interest received up to this point, losses relating to bad debt, and expected losses on any under-performing loans. The figures do not include promotional credits or any profit/loss from Microloan Trading.
As always, past returns are not necessarily a guarantee of future performance.
So here are the facts:
- 15.5% AER: If you had placed the same amount on every loan in the said period, your net return would have been 15.5% AER, which compares very favourably with the reported 7.3% AER for one of our largest competitors.
- Security Counts: The most notable impact on returns was the security offered. It will come as no surprise that loans with only a personal guarantee represent our lowest returns for lenders at just 8.88% AER – though still higher than the 7.3% AER reported by our largest competitor.
- Size Matters: Our medium sized loans (£50,001 – £99,999) gave the best returns, narrowly ahead of large loans (£100,000+). This is to be expected given that additional security is required above £50,000, so the medium and large loans are unhampered by the poorer performance of loans backed only by a PG.
- Cream of the Crop: By quite a margin our highest rates of return were offered by loans that were medium sized and backed with property as security.
Want the numbers to sink your teeth into? Download an excel spreadsheet containing the data.
13th May, 2016
Start earning interest straight away. All bids on marketplace loans now attract interest from the day you place your bid (including loans which are currently listed).
Between the 13th May and the end of June 2016 we are running a Summer Special on all current loans on the marketplace as well as any new loans listed between this time.
- All active bids at the close of auction will be credited with interest
- Interest will accrue daily from 13th May 2016. For example, on a 7 day auction, if you bid on day 1 you shall receive 7 days’ interest, if you bid on day 7 you shall receive 1 day’s interest.
- The interest rate earned is the final aggregate loan rate at auction close. All lenders will get the same rate regardless of bid. For example, if you bid 20% at the start of a 7 day auction, are out-bid on the last day and rebid at 18%, you will get 1 days’ interest at the auction close rate which might be, hypothetically speaking 18.64%
- Interest will be paid to each lender at the point the loan is drawn down when funds are sent to the borrower. Interest will only appear on a lender’s dashboard and statement at this point.
- If the loan is not drawn down and is instead cancelled by the potential borrower or rebuildingsociety.com, no interest will be paid.
- If a loan is extended and you withdraw your bid, you will earn no interest for the period your bid was active (as per point 1).
- A ‘day’ ends at midnight, e.g. whether you bid at 9am, 6pm or 11.59pm you will accrue 1 full day’s interest at midnight.
- This is a Summer Special initiative run by rebuildingsociety.com. Interest will be paid by rebuildingsociety.com and not the borrower. The Special will continue until the end of June, at which point it will be reviewed for possible permanent inclusion.
Remember before bidding on any loans you should carry out your own due diligence on the applications and iof you choose to bid, you should do so at risk adjusted rates.
Past returns are not necessarily a guide to future returns. Any unrepaid capital is at risk of arrears or default.
25th Apr, 2016
New partnership with crowdfunding app announced.
rebuildingsociety.com are delighted to announce a brand new partnership with crowdfunding aggregator OFF3R. All our new lending opportunities will now be available on OFF3R, which is a free-to-use crowdfunding aggregator providing its users with the latest opportunities from over 25 of the leading platforms in the UK and Europe.
The OFF3R partnership is the latest to make use of the leading rebuildingsociety.com API, as we endeavour to integrate more closely with those who aggregate the industry and widen access to crowdfunding and peer-to-peer lending as it grows.
The mobile app is available on both iOS and Android, and allows users to tailor specific notifications and settings according to their lending tendencies and the areas of crowdfunding that interest them most. The app can be downloaded from www.OFF3R.com.
20th Apr, 2016
We’ve established a new, simple formula to calculate your annualised net returns. This new formula will provide a more accurate understanding of your returns while better accounting for elements of the loan repayment process that we can’t perfectly predict.
To calculate the annualised net return, we consider the return generated from the capital employed for each period. A period is defined as the number of days that pass in which the capital employed remains constant. The calculation of capital employed is taken from the sum of deposits less withdrawals. (i.e. funds added minus funds withdrawn) on a cumulative basis.
How will it work?
We aggregate NetGains as follows:
We then annualise the rate of return for each period in the series:
The more frequently you withdraw credit from the platform, the more periods you will have in your series. This addition to the formula improves the accuracy of how we track the capital employed. We also take a weighted average of the annualised rate of returns against the number of days so that longer periods of consistency weigh heavier in the formula than single days of unusually high losses or gains.
Why the change?
This new method has several advantages over the previous formula:
- It is based on historic data
- Defaults are discounted according to their probable loss
- Idle (unemployed) capital on the platform contributes to a lower yield
- The benefit of compounded returns is included
Until recently we had been using a simple formula to calculate an indicative net return shown on the lender dashboard. But, the new calculation is more accurate and therefore will be more useful to you!
For example, the new method better accounts for all your money invested by accounting for employed capital and not just live investments. And, the old method failed to account for the probable recovery of defaulted loans, which created a less positive summary than was realistic.
Many lenders have had an improved site experience since we began sharing the “Probable Recovery” analysis. However, we also hear your questions about why the ability to recover debt isn’t closer to 100 percent, for example when a loan has a second charge. While it is true that stronger security does improve the likelihood of recoverability, we rely on the expertise of our legal recoveries team to make informed adjustments to the probability. We would rather state a prudent recovery probability and adjust upwards as recovery is successful throughout the process.
Defaults become a bad debt only after bankruptcy proceedings or at the discretion of the recovery team. Bad debts represent a loss, but other types of defaults do not necessarily mean a loss.
What’s next for me?
It’s difficult to give a perfect net return calculation, but this updated method gives you a more accurate net return of capital employed with the platform.
In the future, as a further improvement to the lender dashboard, we plan to add 3 tabs that will allow you to filter your dashboard stats to see “All Time Stats” (as current), “Rolling 12 Months” and “Current Tax Year.” We will keep you posted about when this feature will be available!
On request, we can give you your aggregated return data for each period, for you to perform you own analysis, please allow us 2-3 weeks from request to prepare this for you.
Please direct any questions or suggestions to the customer support team at: firstname.lastname@example.org
Feature image courtesy of Steve Jurvetson, Creative Commons
20th Apr, 2016
It was with pleasure and excitement that I accepted Joanne Lavan’s invitation to present to her Chinese delegation from Guiyang earlier this month.
I’ve been fortunate enough to enjoy a few international trade missions, thanks mainly to my past work with Web-Translations, so I know the value of these types of exchanges.
Crowdfunding is in its infancy in China, so many are keen to learn from more mature markets, including the challenges we face and how we plan to overcome them. As one of the early P2P lending platforms, rebuildingsociety has seen a few ups and downs. During a meeting with the delegation, Kylie presented the role the regulator played in consulting with industry and shared examples of our responses to the consultation papers, which were ultimately used to help shape the compliance requirements of our new industry.
I was impressed by the presentation and efforts of the officials who have been hard at work making Guiyang attractive for Crowdfunding entrepreneurs. They ‘have the crowd’ and with the right infrastructure they envision their city as a global crowdfunding leader by launching China’s first crowdfunding exchange. They hope to list more than 3,000 crowdfunded companies in a secondary market within three years.
P2P Lending is a very popular form of alternate investment for many Chinese investors. No less than 75 platforms were launched in 2015, contributing to a total of 159 that raised approximately £654m in 2015.
We were invited to participate at the World Crowdfunding Conference in Guiyang in October. It will be interesting to see if the less stringent regulation promotes growth and to what extent lender confidence is affected from any misconduct. There has already been considerable fraud and run-away entrepreneurs, but the market continues to grow.
Chinese culture requires you to establish a relationship of trust before doing business. The courts and legal system need to catch up to facilitate loan enforcement. A key requirement of any P2P platform is the legal system within which it operates and the enforceability of contracts.
Over the years I’ve seen a few entrepreneur friends head east. I really enjoy some of the international conferences, but it’s always nice when they come to your home city.
By Daniel Rajkumar, managing director of rebuildingsociety.com
19th Apr, 2016
We’ve made some key updates to our Ts & Cs and Loan Conditions
As part of our continual effort to improve and strengthen our platform and the experience of our users, we have recently updated our Loan Conditions and platform Terms and Conditions. It is important to be aware of both documents, as the Loan Conditions form part of the Loan Agreement and dictate the contractual agreement between Lenders and Borrowers, and the Terms and Conditions govern the relationship between you (as a Borrower or Lender) and rebuildingsociety.com.
Here, we will take a closer look at the updated changes and see how they pertain to you as a Borrower or a Lender on our platform.
29th Mar, 2016
Elite Training Assessing & Development provides teachers with training and qualifications on a flexible schedule. This company has brought first-rate training to future teachers in Wigan and Manchester. With a £50,000 loan from the rebuildingsociety community, Elite hopes to improve cashflow to hire additional staff and soon move to new premises.
A commitment to education
The three founders met when they were lecturers at a college together. They decided to start a company in an area they were all passionate about — teaching — in November 2012.
The company provides the same level of training and certification as other options but offers additional flexibility and customization.
“People trust our reputation and the qualifications we offer,” said Clodius Ngwenya, one of the directors.
Elite strives to be a highly ethical business with a deep commitment to the communities it serves. That’s part of what drew Ngwenya to rebuildingsociety — those shared values made it a natural fit.
“Because we are a community interest company, we were looking for a funder who is ethical and understands the community side of things.”
Elite is offering personal guarantee from two of the directors as security for this loan. You can learn more about this opportunity on the application page and discussion.