Secret Investor: Defaults mount at Funding Circle and Crowd2Fund raise expansion capital

Totals lent to date (15th November 2017)

*All data correct at the time this blog was compiled.

LOANS TO BUSINESSES

Assetz Capital - £373,704,023

Crowd2Fund - £4,000,000
Funding Circle - £2,900,000,000
FundingKnight - £31,485,000
FundingSecure - £188,092,059
Money & Co - £6 million approx
Rebuildingsociety - £12,000,000
ThinCats - £257,850,000
Invest and Fund - £3 million plus
LendingCrowd - £21,764,996
ArchOver - £50,549,000

PERSONAL P2P LENDING

Zopa - £2,790,000,000
RateSetter - £2,178,267,531

Lending Works - £77,425,275

…………..

LOANS TO BUSINESS

Assetz Capital

Lent to Date: £373,704,023 – fortnightly increase of £11,851,279 – 3.28% growth.

When this blog was compiled there were 58 loans in the pipeline with none imminently due to be drawndown. The pipeline was over 70 not so long ago.

Highlighted Loan: A Property Developer was looking to raise £1.323 million to construct 8 apartments which will overlook the sea in Cornwall. This will be a staged drawdown overseen by a Monitoring Surveyor. The pictures indicate a superb location and the GDV is expected to be around 60%. This is one of AssetzCapital's safer, lower yielding loans which offers investors a return of 6.5% pa. I decided to allocate some funds to this rather than have them sitting in my account.

Managed Accounts: The following accounts automatically distribute funds on behalf of investors across different sections of the platform's portfolio and are covered by a discretionary Provision Fund (the target rates of return are in brackets):

Quick Access Account (3.75% pa)

30 Day Access Account (4.25% pa)

Property Secured Investment Account (5.5% pa)

Great British Business Account (7% pa)

Green Energy Income Account (7% pa)

Crowd2Fund

Lent to Date: £4 million – latest figure available.

There were 2 auctions added to the site in the past fortnight. As loans are listed for 30 days, only recent additions are noted in this blog.

Highlighted Loan: Insulation experts were looking to raise £100k for the consolidation of existing borrowing and to fund their expansion plans. The business was profitable but there was a big downside as the only security provided was a Director's Guarantee and, for this reason, I felt a return of 10% pa was a little on the low side.

Platform News: As well as loans, Crowd2Fund also enable small businesses to raise capital via their platform by offering shares. As Crowd2Fund are attempting to raise £10 million worth of expansion funding from institutions, they have decided to invite investors to contribute 10% of that total via their site. They anticipate a very impressive 22x yield by 2022 when the company plans to exit by selling to a larger institution or floating on AIM.

Funding Circle

Lent to Date: £2,900,000,000 – the platform should hit the £3 billion mark before the end of the year.

The loan request page now redirects to the investor's summary page so no one can see the new borrowers who are receiving funding.

Highlighted Loan:

Before the loan request page was put out of bounds I noted the following borrower: Building contractors were looking to raise >£61k of working capital because they had won a piece of work that required them to purchase materials up front. The financials were over a year out of date but showed a profitable business with 75% of the loan amount in their Net Assets. As these did not fully cover the capital I was surprised Funding Circle gave this borrower an A rating with investors getting a return of 7.9% pa.

Defaulted Loans Update: The day after the last blog went to press, a loan to a furniture retailer was defaulted after the business became insolvent. Three quarters of my original investment - £30 – was outstanding.

I had 4 more defaults last week despite the fact that I have now sold around 70% of my Funding Circle portfolio since AutoBid became compulsory on 18th September – I guess these loans must have already been downgraded and therefore not permitted to be put on the Secondary Market.

Total losses for this fortnight were not far shy of £250. My annualised return has reduced from 7.8% a few months ago to 6.6%. The number of loans defaulting seems to have increased in recently – something which is backed up by comments on the forums.

Whether this is the beginning of an economic downturn or a result of poor due diligence because of Funding Circle's quick turnaround policy is difficult to say although I have not noticed any rise in bad debts on the other platforms I am involved in. One wonders what the future holds for FC – and indeed my remaining funds on this site!

FundingKnight

Lent to Date: £31,485,000 – no change.

There were 0 auctions ongoing when this blog was compiled – only 1 loan has appeared on this site in 2017. The platform is planning a relaunch in 2018.

FundingSecure

Lent to Date: £188,092,059 at the end of October – monthly growth of £13,891,301 (7.97%)

Today 4 auctions were launched on the site.

Highlighted Loan: A borrower was looking to raise £60k to convert a former church into a 2 bedroom house. The current valuation is £90k giving an LTV of all the sixes – 66.6666% recurring. The projected value on completion is £250k although there is no evidence of the borrower having previous experience with projects of this nature. FundingSecure believed this loan was slightly less riskier than their usual offerings as the return was 12% pa instead of the usual 13%.

Defaults: There has not been any progress with my loans that have been defaulted but at least the number of bad investments has not increased although the borrower who offered a powerboat as security seems to be having delays in obtaining the funds required for repayment.

Money & Co

Lent to Date: £6 million approx. (latest available figure)

When this blog was compiled there was 1 auction taking place. This was the seventh tranche of £50k to facilitate the take-over of a financial services company which was highlighted in previous blogs.

rebuildingsociety

Lent to Date: £12,000,000 – fortnightly increase of £200,000 – 1.69% growth.

There were 0 auctions taking place when this blog was compiled.

ThinCats

Lent to Date: £257,850,000 – fortnightly increase of £375,000 – 0.15% growth.

There were 2 auctions taking place when this blog was compiled.

Highlighted Loan: A regular borrower returned to ThinCats to raise £200k of working capital to fund the production of TV programmes which are paid for when they are delivered to the broadcasters. Investors were offered a return of 11% pa and, to date, the company has repaid £1.3 million worth of capital and interest on previous ThinCats loans.

Invest & Fund

Lent to Date: Over £3 million

There were 0 active auctions taking place when this blog was compiled.

LendingCrowd

Lent to Date: £21,764,996 – fortnightly increase of £572,660 – 2.70% growth.

There were 3 auctions taking place when this blog was compiled.

Highlighted Loan: Glass manufacturers were looking to raise >£146k to expand their factory to enable them to introduce a finishing process that they currently outsource thereby improving profit margins. LendingCrowd gave the company quite a high risk rating (C+) and they do appear to have considerable existing borrowing however the Net Assets were positive to the tune of over £1 million therefore I invested the £40 that had recently been repaid into my account at a return of 14.5% pa.

Platform News: LendingCrowd have added a crucial piece of information to their account summary page which provides investors with their Actual Rate of Return. Mine is 7.4% which is a little over 2% less than the Estimated Rate of Return which was previously indicated (and I had assumed to be reasonably accurate!). It seems, after defaults, it is tough to beat 7% pa on any P2P platform unless a reckless approach with funds allocated to a small number of borrowers gets lucky.

ArchOver

Lent to Date: £50,549,000 – no change.

There were 0 auctions taking place when this blog was compiled.

Highlighted Loan: A sales and marketing business operating in the financial services sphere recently raised £750k via 3 £250k loans to fund their expansion plans. Archover have a first charge over all the company's assets along with their future revenue streams but as the loan is not insured, investors were offered a return of 8.5% pa which is higher than the norm for this site. As I was concerned about a lack of certainty over future income, I gave this a miss.

PERSONAL P2P LENDING

Zopa

Lent to Date:  £2.79 billion – fortnightly increase of £40 million – 1.45% growth.

Returns: Zopa's 2 accounts offer returns of 3.7% and 4.5% pa with the latter allocating some funds to riskier loans that offer higher returns.

Zopa distribute investor's money mostly to unsecured consumer loans.

Ratesetter

Lent to Date: £2,178,267,531 – fortnightly increase of £28,347,071 – 1.32% growth.

Returns: Interest rates are set according to supply and demand. They currently range from 4.6% pa to 5.8% pa depending on the length of the investment. The latter figure is slightly lower than a fortnight ago.

Capital is covered by a Provision Fund. Ratesetter proudly boast that no investor has lost a penny since they launched in 2010.

Lending Works

Lent to Date: £77,425,275 – fortnightly increase of £1,668,447 – 2.2% growth.

Returns: 4.0% pa and 5.3% pa via an IFISA or standard account for 3 and 5 year investments respectively. Compared to 2 weeks ago, the latter figure is 0.2% lower.

As well as a Provision Fund to cover investor's risks, this site also insures borrowers against redundancy, fraud, illness and accidents making this a very fair site for all concerned.

****Disclaimer: This blog contains the views of the Secret Investor. Your capital is at risk when lending via all P2P Platforms. You're recommended to speak to a qualified Independent Financial Advisor.