Lending FAQs

Basic FAQs

How can I become a lender?

Simply register online, we will perform a few background checks, then once approved you can credit funds to your rebuildingsociety.com account. These funds can then be put towards investment applications or to purchase micro loans in the secondary market. We hold all lender funds in a separate client account with Barclays.

What is my rate of return?

Your rate of return is a gross annual rate, rather than over the course of the term. Repayments consist of capital and interest, with more interest repaid at the start of the loan because borrowers pay interest on capital outstanding – like a capital and repayment mortgage. The stated rates of return do not include deductions for your personal tax obligations.

Please be aware that a borrower can refinance at any stage for no fee and in this event only your capital outstanding will be repaid to you.

What action does rebuildingsociety.com take when a loan repayment is late?

Rebuildingsociety.com recognises the need to balance its recovery processes with taking a proactive approach to recover lender debts and working with a borrower to ensure that a mutually beneficial arrangement is reached for the full repayment of the debt.

Our process for following up on late repayments is as follows:

1. Where a repayment is not received on the day it is due, we will attempt to make contact with the borrower via email and phone, to make them aware that the repayment is late and ask that they see that the repayment is made immediately. Most late repayments are resolved this way.

2. When a repayment falls 3 days behind, it will then show as overdue on the repayment schedule that is visible to lenders. At this stage we will ordinarily post a note on the relevant discussion forum informing lenders that we are aware of the overdue repayment and report any communication we may have had with the borrower.

3. Each day that a repayment is not received, and we have not heard from the borrower as to why it is late and when we can expect payment, we will continue to email, call and text the Company / Director.

4. If a loan falls 14 days behind we will write formally to the Director/s at the company address to request repayment.

5. When a loan falls 30 days behind on a repayment we will write a formal warning letter to the Director/s of the company as well as relevant guarantors, informing them of the missed repayment and request that the overdue repayment and the next repayment be made. We will also make them aware of the consequences of default.

6. At 30 days overdue we will also suspend Micro loan trading.

7. If at this stage, we have still had no repayment or communication with the borrower, we will continue to try make regular contact. If contact is made we will attempt to arrange repayment a debt restructuring plan or where necessary take relevant collections steps.

Where a repayment is more than 7 Days overdue, this will show up permanently on the borrowers repayment record, which is visible to lenders throughout the term of the loan.

What are Bids and Investments on the Dashboard?

Your bids are recorded on the Dashboard and a breakdown is available under the My Bids tab at the bottom of the Dashboard page. Once a bid has been made, it is binding. Should the borrower reject the loan offer, your bid will be cancelled and returned to your Available Balance.

Investments are created once bids are accepted or when Micro Loans are purchased. These can be held until the loan matures, or you can list them for sale on the Secondary Market. Should an investment go bad and turn into a default and eventually a Bad Debt, it will then appear in the Bad Debt modal.

What are your bad debt and default ratios?

Please refer to our lending statistics page  for up to date information on bad debts and defaults. Lenders should spread their risk by building a diverse portfolio to minimise the impact of bad debt on their overall return.

As rebuildingsociety.com’s data is relatively immature, we cannot provide accurate long-term default estimates. However, we believe we’re operating similarly to other more mature platforms and expect our data to track theirs. www.p2pmoney.co.uk provides a comprehensive list of data in this area.

How do you calculate your risk gradings?

In assessing borrowing applications we use data provided by the borrower in their application, data from leading credit agencies and data suppliers:

Information supplied by borrowers typically includes:
- Statutory Accounts
- Management Accounts
- Statement of Assets
- Additional security details

External sources are used to provide information on:
- Business Trading History
- Business Payment history
- Adverse information ( CCJ’s, winding up petitions ect)
- Verification of accounts supplied
- Directors associated businesses
- Directors Consumer scores
- Adverse Media

      All collected data assessed by our underwriting team and is used to determine the risk rating of the business. Risk ratings on rebuildingsociety are between A+ and D, applications below a C are not listed.

How do you verify security offered by borrowers and what do the different types of security mean?

Borrowers are required to offer security on our loans.

For loans up to £50,000 this can be a personal guarantee. For loans above £50,000 an asset must be offered by the borrower. When borrowers offer a personal guarantee, we ask them to fill out a Statement of Assets, Liabilities, Income and Expenditure (SALIE). This is signed as true by the borrower who receives independent legal advice.

When borrowers offer a charge on a residential or commercial property, we instruct solicitors to carry out checks on the title register to ensure the person offering the security owns the property. We also require the most recent mortgage statement and an independent valuation to estimate the loan to value ratio of the asset. If all of this information is to our satisfaction we will register a legal charge on the property on completion of the loan.

When borrowers offer a charge on a named business asset, such as a piece of machinery, we require an independent valuation from the manufacturer and an estimate of the likely resale value of the asset. We also need the asset to be removed from any existing asset debenture that may be in place.

When borrowers offer an all-asset debenture as security, we check that there are no other debentures in place, which are registered at Companies House. This entitles rebuildingsociety.com to become the primary creditor, should the business default on its loan and liquidators appointed to repay creditors through a sale of the business assets.

How much can I loan to a business in one go?

At present, the maximum amount you can lend to a company in any one bid is £2,000. Lenders can make multiple bids of £2,000 on applications.

Can I lend as a business?

Yes, you will need to create a lender account with your own name, address and date of birth, but with the name of your business as a username. Be sure to add the full name of your business to your account settings. Like our other users, you will take full responsibility for your tax requirements.

What fees apply to lenders?

We do not charge lenders any account servicing fees! The only fees applicable to lenders is the micro loan sale fee.

0.5% micro loan sale fee

If you decide to sell a micro loan, there is a 0.5% commission fee based on the outstanding capital, which is payable once your loan part is sold. For example, if you sell a loan part with £100 principal remaining, the sale fee would be £0.50 once the loan part sells. No charges apply if a loan part is not sold.

What is the risk associated with lending?

We cannot guarantee that a business will repay its debt.

However, we credit check potential borrowers and make sure they supply statutory accounts and supporting documentation. The discussion tab allows you to put questions directly to borrowers.. We highly recommend that if you have any questions about the business you are thinking of lending to, that you put these to the borrowers in the forums.

Read more about the risks of lending to SMEs.

Where is my money held?

When you transfer funds to your online account they are held in a separate Barclays client bank account. You will be able to access any uncommitted funds whenever you wish by clicking the “withdraw” tab in your investment dashboard, your returned funds should be visible in your bank account within 24hrs of making your request.

Will I know who I am investing in?

Yes.

Companies looking to borrow money to grow their business will apply online. In their application, the director(s) will explain what their business does, who they are and what the the loan is for. This way you can have full control over who you invest in and can tailor your investment to suit your interests or to help businesses in your community.

If I lend to a business, can I get my money back early?

Yes.
If you need to access your money, you can sell your micro loan to other investors in the secondary marketplace. After a micro loan is sold, the proceeds are returned to your balance. If you want to access this cash, you need to submit a ‘withdraw’ request from the Dashboard.

If you choose to sell micro loans individually, you can select and sell micro loans at a premium or discount of up to 5%. If you sell at a premium, you can earn a profit, but if you sell at a discount it is likely that you will be able to access your money sooner.

If a borrower is late in repaying, what do I do?

In the event that a business is late in a repaying an instalment, we’ll be the first to know. As soon as we become aware that a borrower has fallen behind on their payments we will contact them on your behalf to find out the reasons for missing a repayment and when we can expect it to come in.
If the business has run into some financial difficulty we will negotiate with them to find a way by which the balance can be repaid on different terms. In the event that the borrower is not able to repay the loan, you will be given the option to take a repayment holiday which allows the business to pay the interest and not the capital. Should the borrower continue to under-perform we will get a debt recovery company involved in order to recover the debt.

For more information on our debt collection policy and process please see our Terms and Conditions.

How can I monitor my loans?

All your information is available on one screen at a click of a button.

Whenever you log in to your account at rebuildingsociety.com you will be directed to your Investment Dashboard. This will present you with all the information about your funds and investments, from the funds you have available to invest, the funds you have committed by bidding, to information about the status of your investments.

When will I start getting my repayments?

Once the loan has been accepted by the borrower, it will set up a standing order to coincide with the repayment schedule, according to which all payments will be made.
Once a loan that you have bids on has been accepted by the borrower you can view the repayment schedule on the borrower’s profile page, so you know when to expect repayments.

What is the secondary market?

When lenders need to get quick access to their cash, they will sell their micro loans to other lenders in the secondary market.

How do I sell micro loans?

Selling your micro loans is easy and a great way for you to be able to realise a quick profit and gain access to your cash.
You can sell your micro loans by visiting your Dashboard, and selecting Action. You will then be able to select the rate at which you want to sell your micro loan at. You can choose to sell your micro loans at up to 5% mark-up or mark-down.
Once you have selected your sale preferences your micro loans will be listed in the secondary market.
Interest on micro loans is accrued on an incumbency basis, meaning that should you sell a micro loan you will waive the right to the interest due at the next repayment date.

How much will my micro loans be sold for?

The outstanding principal amount lent, plus (or minus) the chosen rate of premium (or discount) selected.

Interest on micro loans is paid to the micro loan holder, so the best time to buy a micro loan is just before a repayment is due (check the repayment history to see if this has been made) and the best time to sell is just after a repayment has come in.

What is the Buyer's Rate?

Imagine a loan of £100 at 13% won in an auction. When some months later the lender sells this loan she sells the loan of the outstanding capital (e.g. £93.27), which continues to earn the new owner, the buyer, the same rate of interest (i.e. 13%). The buyer pays more or less than £93.27, depending upon whether the original lender, the seller, applies a premium or a discount.

If the seller applies a premium of say 3%, then the buyer will pay £96.07 for this loan of £93.27. The new owner, the buyer, will continue to receive monthly interest payments equivalent to an annual rate of 13% of the outstanding capital each month (i.e. £93.27 at outset). Although the interest will equate to 13% of £93.27, it will equate to a lower % of the amount paid (£96.07) for the outstanding capital (93.27). This lower % is listed as the “Buyer’s Rate” and gives a more realistic indication of the interest which will be earned after the seller’s premium has been taken into account.

If the seller had offered this loan for sale at a discount, then the Buyer’s Rate would have been higher than 13%.

The value of the Buyer’s Rate depends upon the value of the premium or discount, and also the remaining term of the loan.

Why can't I sell certain micro loans?

Sometimes a loan will complete, but there will be exceptional circumstances that mean we prevent micro loan sales temporarily. For example, we could require a charge over a property to be registered with the relevant authorities. Should anything happen that means the loan has to be cancelled, there will not be a complicated trail of redress.

Also, if a business is in default, we prevent the sale and purchase of its micro loans.

Are you regulated by the FCA?

Yes, from 1 April 2014, we became regulated by the Financial Conduct Authority. This means the Financial Ombudsman Service is a route of recourse for lenders. Please note, your capital and interest is not covered by the Financial Services Compensation Scheme.

Can I put my rebuildingsociety.com loans in an ISA?

The most recent budget in March 2014 stated that peer-to-peer loans would be allowed in ISAs. At present, this isn’t possible through rebuildingsociety.com but when we’re working to make it happen.

What is promotional credit?

When users earn cashback by participating in our affiliate scheme or qualify for incentives, we pay you using promotional credit. This is added to your balance in the same way and can be used just like regular credit, but you can see it separately to the funds you have added or earned through interest repayments or Micro Loan sales.

You can also earn promotional credit through active participation in loan auctions, we offer upto 0.5% cash back through a number of lending incentives for various lending behaviours. Vist the Loan Offers page of any live listing to see the various ways in which you can earn a little more.

promotional credits will not be accumulated through the use of Transfer bids, however if you bid in addition to your transfer bids, these will go towards any lender incentive you may be eligible for.

What happened when the auction expires and the loan is not yet fully funded?

If a loan request does not 100% fund, we do not release the funds raised to the applicant borrower.

Towards the end of the auction, we contact the borrower or their broker to discuss their options depending on how the loan request has funded.

Once the auction ends, if the loan request is not 100% filled we can, at our discretion, offer the borrower the option to extend the auction at the current loan request, or alternatively lower the loan request and extend the auction.

If the applicant wishes to withdraw their request completely, the auction will be cancelled and lender funds will be immediately returned. No interest will be earned on bids made where an auction eventually is cancelled or withdrawn.

If the applicant communicates their desire to extend the auction to try and reach 100% of their funding target, we can offer a one or two week extension to the auction. We can also, on occasion, reduce the amount requested if the applicant wishes to lower their target to a more achievable amount.

Whenever an auction is extended or the amount requested is changed, lenders will always have the right to cancel any bids made before the change occurred. Notice of the change will always be posted on the ‘Loan Updates’ tab of the application page and is also visible via your lender dashboard.

The update notification post will contain details of how to request a bid cancellation and the deadline for any requests. 

When can I request cancellation of bids?

We can cancel existing bids only when there is a material change to the auction. For example, the loan amount requested is amended, or the security offered or auction deadline is changed.

In these situations, an update will be posted in the relevant Loan Updates tab informing lenders of their right to cancel prior bids with the instructions for requesting a bid cancellation and the deadline for requests.

Advanced FAQs…

Can I lend with Euros?

Yes, you can credit our UK bank account using Transferwise. There is a small fee, but you are given a better exchange rate than you would get with a bank, because this is a Peer-to-Peer currency exchange platform. All loans are made in GBP, when you withdraw your funds you will need to provide your IBAN (International Bank Account Number) and SWIFT code.

We also use Transferwise to return your funds as Euros into your bank account. Most credits and withdrawals happen the same day, so there is not much of a delay for the currency conversion.

Please note that you…

  • may suffer from exchange rate fluctuations, which may effect your returns
  • are responsible for declaring your interest earnings to your local tax authorities

How does BidPal work?

BidPal is a feature that enables you to make investments in new opportunities as soon as they become available. It is the best way of quickly investing your capital so it is always working for you.

If you choose to use BidPal you will be able to choose which risk band you would like to invest in, the rate that you will bid at and the denomination you would like to lend to each business.

So if you have £1,000 to lend, and you would like to invest in businesses that have been classified as being in Risk Band A+ and you would like to invest £100 in each business, you will essentially have placed bids to lend with 10 businesses within that particular risk band.

BidPal is principally a tool which allows you to invest in more businesses and in the process spread your risk.
BidPal will bid the amount specified for each risk band but there is a restriction to lend no more than 5% of your available funds to each new lending opportunity.

It only works for new auctions, not in the micro loan market. All purchases here are manual.

Why is my Miroloan Gain/Loss showing a negative number?

If you purchase a microloan on the secondary market, you may have paid a premium or benefited from a discount (of up to 5%). For example a microloan with £92 capital outstanding may be sold at a 3% premium, meaning the buyer pays £94.76 to the seller (who pays a 0.5% fee). The difference between what is paid by the new lender £94.76 and the capital outstanding amount of the microloan £92 is reflected as a small capital loss in the box for Microloan Gain / Loss. The inverse is true for microloans sold at a discount.

What are ‘Transfer Bids’?

Transfer bids allows you to transfer your remaining capital outstanding in micro loans for a business that has previously borrowed through rebuildingsociety.com and is looking to refinance the existing loan with a larger loan request.

So, if you had £100 outstanding on A Company Ltd, this would be shown on your Dashboard, My Loans. If A Company Ltd looked to refinance their loan through rebuildingsociety, you would be able to Transfer your £100 to the new listing (or your amount to the nearest £10). When the loan completes, this Transfer bid will be converted to an ordinary bid.

Then when A company Limited’s first loan is redeemed on completion of their second listing, you will be repaid any capital outstanding that you did not Transfer and any interest due to you at the time of redemption. Transfer bids will not be count towards any lender incentives on that loan, however if you bid in addition to your transfer bids, these will go towards any lender incentive you may be eligible for.

So Transfer Bids allows you the freedom to support a business you have previously supported by Transferring the Capital you have with them rather than having to Add more funds to your account. Of course if you wish to support them with more than the capital you currently have with them, you can always bid additional funds as normal.

What if I don't want to use ‘Transfer Bids’?

You do not have to transfer all or any of your capital outstanding to a business’s latest loan request.

You have the ability to choose, how much you would like to transfer, in what denominations you would like the Transfer Bids to be and at what rate you want them to be lent at.

If you do not use Transfer Bids where available, you will be repaid your capital and interest due as normal when the loan is repaid, which is usually when the latest loan auction completes and is accepted.

If I loan £100 out at 14% why don’t I receive £14 interest every year?

Loan interest for all loans, personal; business; mortgages; etc, is calculated in the same manner.
Whenever a repayment is due the interest is calculated based on the current capital outstanding.
As an example, if you lent £100 over 10 months at 12% pa then the 1st repayment would be:
£10 capital (1/10th of the total) and 1/12 of 12% which is 1% or £1 of interest.
The second month would be £10 capital but as there is only £90 capital outstanding you would only apply the 1% to the £90 remaining so £0.90

This carries on so:
£10 capital, £0.80 interest
£10 capital, £0.70 interest
£10 capital, £0.60 interest
£10 capital, £0.50 interest
£10 capital, £0.40 interest
£10 capital, £0.30 interest
£10 capital, £0.20 interest
£10 capital, £0.10 interest
For the other repayments.
As you can see the total interest you receive is £5.50, much lower than the £10 if the interest was applied flat on the years borrowing.
This is why your calculations show a difference, you only receive interest on the capital you currently have loaned out not the total amount loaned over the lifetime.

If that is how interest is worked out why is my repayment amount the same every month?

A varying repayment amount would be inconvenient for both the lender and the borrower, as such a formula is used to calculate the total amount of interest payable over the lifetime of the loan and then this is added to the outstanding capital to get the total amount repayable.

The total amount repayable is then spread evenly over the lifetime of the loan ensuring that each repayment is for the same value.

These repayments are then split between capital and interest to ensure that interest amount is still as it should be.

In our above example (£100 lent for 10 month at 12%) we have a total repayable of £105.50, £5.50 interest and £100 capital.

Splitting this £105.50 over 10 months gets us a repayment amount of £10.55.

By subtracting the interest we earn in each month from this total we can see the amount of capital being repaid:

Month Capital Outstanding Capital Repaid Interest Paid Total Repayment

1

£100.00

£9.55

£1.00

£10.55

2

£90.45

£9.65

£0.90

£10.55

3

£80.80

£9.75

£0.80

£10.55

4

£71.05

£9.85

£0.70

£10.55

5

£61.20

£9.95

£0.60

£10.55

6

£51.25

£10.05

£0.50

£10.55

7

£41.20

£10.15

£0.40

£10.55

8

£31.05

£10.25

£0.30

£10.55

9

£20.80

£10.35

£0.20

£10.55

10

£10.45

£10.45

£0.10

£10.55

As you can see, you are still earning the correct amount of interest and by repaying less capital early in the loan and more in the late stages the repayment amount can stay the same each month.

What happens to the money invested from the date of bidding to the loan completion? Who earns interest during this idle period?

Money is held in a protected client account and Rebuilding Society is not allowed to touch the client money, it’s one of the fundamental difference between us and banks.
So no one benefits from the auction period which means that Rebuilding Society earns no interest nor does the lender and it takes longer for borrowers to get funds. Therefore it’s in everyone’s interest to get the auctions funded quickly.
Lenders start earning interest from the time the loan has completed and drawdown been made.

What happens when a loan is refactored?

Refactoring’ a loan refers to the process where we take an existing loan with the original loan agreement and structure and create a ‘new loan’ with the same borrower but with new requirements.

We work hard to ensure that there is no change to the security in place as well as no extra barriers to enforcement should the borrower default on the ‘new loan’.

Legally speaking, the refactoring takes place through the signing and execution of an amended loan agreement which sits alongside the original loan agreement and works to amend the terms of the original loan agreement. The penalties for non-compliance and our enforcement powers remain unchanged, and our legal security documentation contains the requisite clauses to enable them to remain in effect for any loan amendment until the total arrears are repaid.

In most scenarios, the only thing that changes when a loan is refactored will be the repayment amounts, loan term and in some occasions, the repayment dates.

When a loan is refactored, a new listing page for the ‘new loan’ is created which will display the new repayment timetable, new term and any other changed features of the loan. There will always be a link to the ‘old listing’ so that lenders can see the borrower’s previous repayment history and the previous details of the loan. Usually, the reason for the refactoring will be made clear on the ‘Loan Updates’ tab.

In most cases, loan refactoring takes place because of repayment difficulties which have led to a borrower being unable to maintain regular repayment. Some borrowers may propose an alternate repayment plan to either spread the arrears over the rest of the life of the loan, or extend the loan term by a few months to allow the arrears to be paid after the rest of the capital and interest has been repaid.

We seek on all occasions to put the decision of whether to accept the new repayment proposal or continue with our legal enforcement action to the lenders who have capital invested in the loan. We do this through lender polls, which you should be notified of by email should you hold capital in a distressed loan which will be refactored. Should the majority of lenders vote to accept the new repayment proposal, the amended loan agreement is drafted and sent to the borrower, and once signed and returned, the new refactored loan page is created.

 

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