Peer to Peer – Lendy

Just over a year ago, in May 2019, P2P facilitator, Lendy, went into administration. It’s being reported today, across various media outlets, that the founders have had their assets frozen given allegations of misappropriation of funds.

At the time of the administration order there were loans outstanding in the region of £150m, with funding coming from around 9000 retail investors.

Looking at some of the loans facilitated by Lendy to business borrowers (by doing a search on companies where Lendy was security holder) it’s fair to say the book is and will be seriously eroded. I suspect those retail investors who lent their money across the Lendy platform will see minimal (if any) returns on their money.

The point being made, not withstanding any wrongdoing, is that lending across P2P platforms is extraordinarily risky. Platforms will entice retail investors with high to very high (certainly disproportionate) returns and then attempt to offset any concerns by quoting their rigorous credit policy and historic default rates.

Some of the credit decisions made are poor, with businesses in some cases, barely, or poorly, scrutinised prior to approval. I have also seen and heard of instances where historic default rates are manipulated, usually by ambiguous definitions of what is classified as default.

There also seems little comfort from the phrase ‘FCA Authorised & Regulated’. Lendy had all sorts of FCA granted permissions (as did others).

Before ‘investing’ across a P2P platform anyone should ask themselves whether they are prepared to lose not just a proportion of their money but their entire investment.

Peer to Peer Lending

Sky news are reporting that Metro Bank is in talks to buy the Peer to Peer Lender, Ratesetter.

Its not April 1st so there must be a degree of credibility to the story, but a Bank, ‘beset by problems during a troubled 12 month period’ contemplating buying a P2P lender would be a very courageous move.

During the Covid-19 driven crisis, lenders (investors), across the Ratesetter platform are only receiving 50% of their interest, the balance going into the provision fund, for the benefit of all investors.

Their borrower portfolio, much of which will be fixed rate, will be subject to considerable erosion as a consequence of the pandemic.

It will be interesting to see how this unfolds and I suspect other P2P platforms will be watching closely.

Coronavirus Business Interruption Loan Scheme

The list of accredited lenders continues to grow, with over 80 now listed on The British Business Bank web site, as at 8th June 2020.

(The Bounce Back Loan Scheme (for loans from £2k to £50k, has far fewer accredited lenders, listed here, again, as at 8th June 2020)

One aspect that remains frustrating, certainly for their customers, is the absence of Handelsbanken from either list. A number of sources suggest appropriate applications have been made, but no approval has been given.

This gives a real problem to a number of their customers seeking support but having to go to other lenders, many of whom will only help, understandably, their own customers.

CoronaVirus Loan Statistics

As of today, June 2nd 2020, figures from the British Business Bank reveal the popularity of the Bounce Back Loan scheme, with 699,354 cumulative approved facilities with a cumulative approved value of £21.29billion; to me that looks like an average loan size of just over £30k.

The cumulative value of approved loans under the CoronaVirus Business Interruption Loan Scheme (CBILS) is £8.92 billion representing 45,843 facilities, suggesting an average loan size of just short of £200k

Add the CoronaVirus Large Business Interruption Loan Scheme where £1.1billion is the cumulative approved amount, across 191 approvals and nearly three quarters of a million businesses have benefitted from over £31billion in loans.

The numbers are remarkable but there is worry in the banking community, specifically relating to the Bounce Back Scheme with some suggesting around half of them will never see any repayments at all.

The implications 12 months hence could be significant, for government in underwriting the loans, for banks, if government don’t honour guarantee and for borrowers if repayment falls back to them.

CoronaVirus Business Interruption Loan Scheme

As at today, 20th May 2020 there are 76 accredited lenders offering CoronaVirus Business Interruption Loans, these can be found on the British Business Bank web site.

One curiosity is the absence of Handelsbanken, their catch line ‘A bank that puts customer satisfaction first’ appears a little thin as some of their customers struggle to obtain funds under the CBILS

Many of the accredited lenders will only deal with their own customers and others will only offer facilities if wrapped up in invoice or asset finance. Some have financial restrictions and/or geographical limitations.

Given Handelsbanken operate a branch network, and have a profile far larger than many of the accredited lenders this seems strange.

Hopefully they will be able to contribute soon.

Bounce Bank Loans

A local business to Stratford applied yesterday (5th May) to Lloyds for a £50k Business Bounce Back Loan under the scheme which went live on 4th May. The facility was approved and the money was credited to the businesses bank account today, 6th May.

I appreciate the facility is 100% backed by the government, although there are still risks to the lender but I think credit should be given to the Government for this and other Coronavirus Business Interruption Loans. Likewise, in this case, credit to Lloyds for the speed with which the loan was delivered.

Its vital the economy is kept going in order for a basic infrastructure to exist as and when we come through this crisis.

Fraud Management

Some years I ago I delivered courses to an assortment of bankers and invoice financiers; a key element was entitled ‘The 6 ‘V’s of Fraud Management’, those all important ‘v’s being Verification, Validation, Value, Vision, Variations, Vigilance.

These remain as valid today as they were then and it’s really important that no elements are forgotten during the current crisis.

I’ve seen some loans lately that reflect poorly on the lenders involved as it looks as though any credit policy in force has been, at best, diluted, at worst, ignored.

Coronavirus Bounce Back Loan Scheme

  • Launching 4th May
  • Loans to businesses, from accredited lenders of £2,000 to £50,000
  • Terms up to 6 years
  • Government guarantee 100%
  • No fees or interest in first 12 months
  • Businesses must be UK based, negatively affected by Coronavirus and have been a viable enterprise pre outbreak
  • If already claimed under CBILS then cant apply, but if you have already borrowed (under £50,000) under CBILS, amount can be transferred to Bounce Back Loan Scheme

More information to follow