The fine print on how we work with you.
The following information is intended to aid your understanding about the overall performance of Invest & Fund (I&F) loans and to provide a better understanding of Default.
The tables below provides information on loan performance for each financial year since I&F undertook its first residential property development loan.
The tables below uses figures which refer to past performance and please be aware that these do not provide a reliable indicator of future results
|Outcomes Statement: current default rates and projected and actual capital bad debts||Risk Classification: Senior Loan
Financial year ending 31st March
|Loan Facilities with initial draw in the year (£) (Note 1)||2,173,669||14,494,712||16,393,492||31,288,971|
|Cumulative value of total facilities (£) (Note 2)||2,173,669||16,668,381||33,061,873||64,350,844|
|Live Loan total facilities (£) (Note 3)||724,556||13,976,316||19,328,021||30,458,526|
|Value of Loans in default as a percentage of Live Loans (%) (Note 4)||0.00%||0.00%||0.00%||8.04%|
|Value of Loans in default as a percentage of cumulative loans (%) (Note 5)||0.00%||0.00%||0.00%||0.10%|
|Projected capital bad debt write-off as a percentage of Live Loans (%) (Note 6)||0.00%||0.24%||0.29%||0.60%|
|Actual capital bad debt written off cumulatively (%) (Note 7)||0.00%||0.00%||0.00%||0.00%|
Outcomes Statement: current default rates and projected and actual capital bad debts
|Loan Facilities with initial draw in the year (£) (Note 1)|
|Cumulative value of total facilities (£) (Note 2)|
|Live Loan total facilities (£) (Note 3)|
|Value of Loans in default as a percentage of Live Loans (%) (Note 4)|
|Value of Loans in default as a percentage of cumalative loans (%) (Note 5)|
|Projected capital bad debt write-off as a percentage of Live Loans (%) (Note 6)|
|Actual capital bad debt written off cumulatively (%) (Note 7)|
Notes & Terms used
Capital bad debt write off/written off refers to loans where security is being/ has been realised and there is an expected/ actual shortfall between the amount to be realised and the loan capital which is owed. Any loan interest accrued is not accounted for in the above figures.
1. Total sum of Lending (i.e. loan facilities approved) in the year where at least the initial drawdown has been undertaken
2. Total sum of Cumulative Lending (i.e. total value of loan facilities approved) where at least the initial drawdown has been undertaken
3. The total sum of the 'Live' Loan Facilities
4. Total sum of loans in Default, as defined by the FCA for loans secured on property (i.e. where repayment >180 days past due) shown as a percentage of Live Loans (See Note 3)
5. Total sum of loans in Default as defined by the FCA for loans secured on Property (i.e. where repayment > 180 days past due) shown as a percentage of cumulative lending (See Note 2)
6. Projected capital bad debts to be written off shown as a percentage of Live Loans (Note 3). This includes both a generic projection and any loan specific forecast capital bad debts. The generic projection follows prudent modelling/assumptions and represents a projection of the expected capital loss after the recovery of security as a percentage of total loans made in a financial year and, apart from loans forecast to become bad debts, does not reflect any loan by loan assessment. The generic projections have been made on a weighted average basis using possible default scenarios which may give rise to a loss to capital following the realisation of security but do not provide a reliable indicator of future results. Assumptions used for Senior Loans are the mix of facilities between property development loans and bridging loans; an expected probability attributed to given events of default occurring and the likely level of capital loss resulting. Assumptions used for Junior Loans are that all loans relate to development funding; an expected probability attributed to given events of default occurring and the likely level of capital loss resulting.
7. Total sum of all capital bad debts actually written off as a percentage of Cumulative Lending (Note 2)
The tables above uses the FCA definition of ‘Default’ being a loan secured on property which is 180 days (or more) past it's due repayment date but there are other uses of the word ‘Default’ which carry a different meaning which can sometimes appear confusing.
A Borrower’s loan facility agreement includes clauses describing a range of potential events which may constitute a default and these are known as ‘Events of Default’. These can range from ‘technical defaults’ such as annual accounts not being provided within stipulated timescales, to ‘payment default’ (late partial payment) or, more seriously for example, the facility not being repaid by the expiry date which could potentially result in a bad debt.
Should there be an Event of Default on a loan, the severity, including the coverage of the loan against the security, will be considered when deciding upon the most appropriate course of action. Available actions may include;
An Event of Default will not always lead to a bad debt or recovery action being taken.
Before making a decision to lend, Lenders should ensure they have reviewed sufficient information to ascertain the legal, financial and tax implications of a loan, and understand the potential risks to enable them to make an informed decision.
To aid this we publish in our Credit Summaries a ‘Description and Illustrated Net Return’ which describes a fair description of the net return and points out that lenders should take into account the potential for capital losses, Invest & Fund facility fees and any income tax which may be payable when calculating their net return.
For further information on our default procedures please see our Lender FAQ section.
What role does I&F perform in Originating and Reviewing potential loans for our Platform?
I&F seeks to originate loans through a regionally dispersed team of Business Development Managers both directly from borrowers and through suitably screened intermediaries. Invest & Fund has an expert team of credit specialists who review individual loan applications aided by detailed monitoring of all loan applications supported by independent surveyors, valuers and specialist lawyers.
For more information on this see the section How Risk Is Assessed
How do I&F agree pricing for loans it originates?
We set the pricing on our loans by reference to the relevant market conditions, the individual characteristics of the loan and to reflect the competitive environment of the market in which we operate. The terms of the loan are set in the agreement with the borrower and are not varied via the marketplace.
Do we advertise target rates on loans we originate?
I&F does not advertise target interest rates for portfolios of loans. We make lenders aware of the coupon rate of the loan (i.e. the rate of interest to be paid by the borrower) and in the credit summaries for new loans provide a fair description of the likely actual return taking into account fees, default rates and taxation.
Do lenders or I&F select which loans you buy?
I&F never selects loans on behalf of our lenders. We encourage all our lenders to review and consider each loan on its merits and assess which are right for them. We do also offer a “Bidding Mandate” product (see below) which allows for the acquisition of loans according to criteria determined by the lender.
Do we ever select P2P agreements for our lenders?
No, we do not provide advice or exercise any discretion on behalf of lenders.
We do however operate a non-discretionary Mandate Service.
Do we ever offer portfolios of P2P loans to our lenders?
No, unlike many other platforms we do not trade in funds or portfolios of loans. Our lenders make their own decisions on a loan by loan basis as to which loans they want to lend to.
How does our “Resale Marketplace” operate?
Any lender, through the website can place for sale any loan position from their holdings. This is then available for all lenders to view and purchase. We charge a 0.25% fee for all successful
transactions execute this way. No sale Is guaranteed by us and you should not consider that your loan holdings are “liquid” and readily realisable because the ability to sell via the Resale
Marketplace depends entirely upon the willingness of other lenders to buy.
Loans which are in formal default are generally prevented from being traded on the Resale Marketplace.
What tax liability arises for lender purchasing loans through I&F?
I&F credits lender accounts with the gross interest (after deduction of facility fees) paid by the borrower. It is then the lenders responsibility to declare this income (unless your holdings are within our IFISA wrapper product) with your annual tax return. We are required by HMRC to declare all interest payments we make to individual lenders. I&F does not provide tax advice so if you are unsure about the tax position then you should seek advice from a suitably qualified professional.
How does I&F deal with a loan in late payment or default?
I&F seeks to work constructively with borrowers in circumstances where developments fall behind schedule or sales of finished units are slower than anticipated. This may lead to a restructuring of the loan. In many circumstances facilitating the completion of a project or the sale of completed units results in the best outcome for all.
Where a borrower is unresponsive or in certain other circumstances, we then apply an enhanced rate of interest to the loan. This is typically 9% above the prevailing rate.
Loans which are in default are generally prevented from being traded on the Resale Marketplace.
What assumptions are used to calculate expected future default rates?
The Finance Director has used a probabilistic model to generate default rates and recovery rates for both development and bridge loans based on worst case experience for residential property in the UK including the period of the financial crisis in 2007-09. These are aggregated statistics and do not take into account the regional composition of the I&F portfolio nor experiences of other alternative finance lenders operating in the same market as I&F. They are necessarily therefore only a proxy for what could be the realised performance of loans we originate.
See Outcomes Statement for further information.
The FCA requires us to provide certain information about each of the transactions we make available for sale through our lending marketplaces. The following information is provided to ensure that lenders can better understand where they can access this.
Credit Summary – much of the key information listed below is to be found in the Credit Summary of each loan, and this document can be accessed on the pitch page along with other key documents including the valuation and monitoring surveyors report.
Price of P2P Agreement
This is provided in a table towards the front in the Credit Summary.
Maturity Date of P2P
This is provided in a table towards the front in the Credit Summary. Additionally, if you the holder of a specific loan you can find the precise maturity date in your “Current Loans” tab (accessed via your Lender Dashboard) against each of the loans in your account.
Frequency and Amount of Repayments
Loans originated by Invest & Fund are due for repayment at the maturity date of the loan albeit partial repayments may be made by the borrower to release security (for example, when a developed unit covered by the loan is sold). Each Credit Summary will describe the ‘Exit’ of the loan, in other words how it is intended that it will be repaid. The amounts of repayments due are also summarised in the Credit Summary document.
A fair description of the return
A fair description and illustration of the likely actual return is provided towards the front in the Credit Summary and takes into account fees, default rates and taxation.
Assets backing the loan agreement
Details of the physical security such as legal charges on property, personal guarantees and debentures underpinning the loan are provided in a table at the front of each loan’s Credit Summary.
The fees payable by all relevant parties
The fees to be paid by lenders are disclosed in a table at the front of each loan’s Credit Summary. Fees due from Borrowers are also detailed in the same document.
The risk categorisation applying to a specific loan
I&F has only two risk categories of loan: Senior and Junior. Both are priced to reflect prevailing market conditions. As Junior loans carry a much greater risk of loss of capital these loans are only made available to lenders who are classified as either Professional or as Eligible Counterparties, in other words these are not available to lenders classified as Retail clients (High Net Worth or Sophisticated).
Are the loans auctioned at variable terms?
No, whilst we offer loans through a marketplace the terms of the loan are fixed, and these terms are described in the Credit Summary.
Where do I get up to date information regarding the current yield, outstanding principal, historic repayments of the loan?
This is available under the “Current Loans” tab on the master menu of our website which provides information for each current P2P agreement you participate in together with the “Transaction History” tab within the “Account Statements” section of the website.
How am I made aware of any change in creditworthiness of a loan?
I&F emails current lenders to a loan if there is a new drawdown, a new surveyor’s monitoring report, an I&F site visit report or an Update to Lenders available, these documents are to be found on the pitch page for each loan where all other relevant documents can be found.
Invest & Fund offers lenders the opportunity to enter into a “Bidding Mandate” arrangement with the company. This allows lenders to have loans purchased on their behalf through the platform auctions according to pre-agreed parameters that are chosen by the lender. This can provide a convenient way for a lender to acquire diversified loan positions over time in a convenient and efficient way.
Under this arrangement Invest & Fund does not exercise any discretion and acts solely in accordance with the instructions provided by the Lender. A Lender should only consider this route once it has satisfied itself that it understands the nature of the loans being entered into and is satisfied that it understands the risks attaching to such loans, including the possible loss of capital.
If, after discussion with the Invest & Fund Lender Relationship team (email email@example.com), a lender decides this route is for them then they will need to review the Bidding Mandate documentation (see link here) and importantly specify the appropriate loan metrics in the Appendix to that document which satisfy the lenders risk appetite including, the minimum gross yield for any loan they buy, the maximum loan tenor and the maximum investment in any given transaction.
Upon having been allocated a portion of a loan under a mandate agreement, the lender will be notified by e-mail and directed to read the Credit Summary and the other key documents provided. on the loan. If upon review the lender wishes to reverse their decision to lend they may place their holding on the Resale Marketplace within 30 days to make this available to other lenders to consider purchasing their holding. I&F will not charge any resale transaction fees in these circumstances.
In all other respects those lenders that sign mandate agreements will be treated identically to other lenders. Importantly they will be able to access all the relevant information referred to earlier about the key characteristics and performance of individual loans as well as in relation to loans on a portfolio basis.
Please refer to the “General Information and Ongoing Disclosures” section of this part of the website to ascertain where you can find this information and also the FAQ’s.
If you are interested in finding out more about Bidding Mandates please email our Lender Relationship team (firstname.lastname@example.org).
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