The Loan Exchange – A Step by Step Guide

stock exchange

So you have chosen to invest your money into FundingKnight’s peer to business lending scheme. Congratulations!

But now what to do with it?

There are a few choices for the uninitiated to make when investing in FundingKnight loans, such as which company you want to get behind and lend to, how much you want to lend and lastly the method in which you lend.

The first two choices of who and how much are fairly self explanatory but the method of how you lend is an interesting one.

Investors have two choices. You can bid on current new loans where you’ll be bidding in a reverse auction against other investors with the lowest bids – in terms of the interest rate you offer to lend at – being accepted to form the final loan.

The alternative lies in The Loan Exchange. This investment is no longer a live auction but rather, if we look at it in terms of those well known online auctioneers, ebay, a “buy it now” option.

And the process is ridiculously simple. Register as a lender on FundingKnight and deposit an amount of cash that suits you and your investment needs. You are now a bona fide lender and head straight to the my money page. You’re getting close…

   My Money

Now it’s time to choose the business and loan you want to invest in. Head to ‘Find a Loan’ and expand The Loan Exchange option.

You’ll find lots of different loan parts available to choose from.  These are investments that existing FundingKnight lenders already hold but are choosing to sell on, perhaps to release their cash, or perhaps just to spread the investment across more loans ad diversify their portfolio.  Some will be small parts, say £25, others will be much larger, say £1,000 or more.

Choose the loan part you would like to buy.

the loan exchange

Click on ‘Tell Me More’ and everything you need to know about your prospective loan terms, returns, business information, turnovers, financial history and more is there to read in clear, jargon free plain English.

Loan details

And this is where FundingKnight comes into its own: it’s a simple and clear process, user-friendly and quick. Any questions you might have will be answered here but if you need to know more then FK are more than happy to get back to you with further information.

Then one you’ve chosen and done your research (and providing you have enough funds in your account!) it’s a one-click process, just “buy now” and submit. Success! You are now a peer to peer lender!

So why would you want to “buy it now” rather than bid on a loan?

Even to a newbie like me, there are some clear advantages that might make you opt to “buy it now” rather than bidding. Clearly the danger of being outbid is removed and the process is quicker – and we like quick. Also, even if there are aren’t live loans online available to bid on, there will always be loan parts available to purchase on the loan exchange. Sometimes time is of the essence and a one click process is all you have time for.

Another plus point is that it helps you spread your investment and diversify your loans and that keeps it interesting – as well as spreading out your investment to reduce the risk that one bad loan will wipe out the returns on your whole portfolio. It also allows you more flexibility as you are able to invest in past loans that have already come and gone, no matter when you registered as a lender.

The loan exchange also lets you choose shorter term lending periods as some of the loan has already been paid off, leaving less time for the rest of the loan to run. This allows your money to go in and out faster than it might if you bid on a current loan.

Sometimes, it might even be cheaper. Because the investor selling may want quick access to their cash, they might offer it at a discount and everyone loves a bargain right?

And for those who may be slightly impatient (and I count myself in this!) you won’t have to wait around for your cash to start earning interest. No need to wait, get involved straightaway and start to see some returns as soon as possible.

You can find out more about becoming a FundingKnight lender here or click on the Katie’s crowdlending journey to find out more about my adventures in peer to peer finance.

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Crowdlending helps North West business grow

scanning machine

Whilst the UK digests the news that Britain may be heading for a triple-dip recession, Secure Archive Solutions are proving that it doesn’t need to be all doom and gloom for the UK’s small businesses. The business is going from strength to strength proving viable businesses throughout the UK need investment for growth.

Mick Collins, Founder of Secure Archive Solutions said,

“It’s great that small businesses like us can find new ways to get the funding we need. We’ve got big plans for the future and know we can grow profitably with the right small business finance in place.  FundingKnight provide a fast, flexible service. Our loan was live on their website within a week and is already nearly 40% funded.”

Secure Archive Solutions credits expansion into new areas such as scanning as being a key source of growth, and are backed by a strategic vision to find innovative ways to help the company grow profitably and sustainably.

Secured Archive Solutions launched a new round of funding on www.fundingknight.com at the end of last week and the loan is already 40% funded, demonstrating a healthy interest from investors.

The loan still has nine days left to run so if you’d like to get involved simply add funds to your FundingKnight account and go to Find a Loan to place a bid.  If you’ve not yet signed up with FundingKnight head over to register as a lender.  It’s entirely free to join, there are no fees for taking part in a loan and you can start lending with an investment of £25 or more.

New crowdlending opportunity: Secure Archive Solutions Ltd.

SAS Ltd logoA new investment opportunity is now live on our website for all registered lenders to bid on.  If you’re already registered with FundingKnight you can log straight into the website to read all about the loan opportunity, review the financial information and, if you wish, place a bid.  If you’re new to crowdlending or not yet signed up with FundingKnight simply go to www.fundingknight.com to sign up as a lender.  You can start investing with £25 and we charge no fees for taking part in a loan.Whilst it’s early for us to predict rate which potential lenders will achieve, our first auction-based loan provided lenders on average with a rate of 9.98% p.a.

New borrower: Secure Archive Solutions Limited

Amount: £50,000

Period: 2 years

Auction duration: 14 days

Based in Altrincham, Cheshire, Secure Archive Systems provides document storage and archive facilities, offering bespoke solutions in the document management service sector, with a turnover of over £400,000 in the last financial year.It needs the funds to extend its storage capability, installing racking in its newly acquired warehouse, building an extension to its vault, and upgrading its IT.

Once registered, you can find more details by logging on to www.fundingknight.com and choosing Find a Loan.

 

Crowdfunding accountants: Invest in abacus Franchising

abacus franchising logo

New loans are now live on the FundingKnight website, offering the chance to start investing in abacus Franchising.

Abacus is a national network of qualified accountants, supporting small businesses in all aspects of accountancy and taxation.

There are two separate auctions providing a chance to invest in British business:

1 – year loan of £20,000

3 – year loan of £30,000

Each loan will be crowdfunded, using the FundingKnight investment community to attract investors.

You can start investing with as little as £25 and peer to peer lending is fee free with FundingKnight.

To lend to British business you need to register as a FundingKnight investor.  Once that’s done, you simply log onto www.fundingknight.com and choose Find a Loan to start investing.

You decide what to invest in, you decide the rate that you want to bid and you have the chance to access your cash whenever you need it by selling or all or part of your investment to a new lender via the FundingKnight loan exchange.

Read about the abacus loans below, or for full financial analysis and information log onto the FundingKnight website.

Business seeking funding: abacus Franchising Company Limited

Loan 1:

Amount: £20,000

Period:  1 year, repayable in 12 installments

Loan 2:

Amount: £30,000

Period:  3 years, with a 3 month repayment holiday

Auction duration:

Fast track auction of up to 14 days, to close when both loans have been filled at the reserve interest rate.

Reason for loan:

Expansion, following new contract awarded by Scania GB.

Business background:

Incorporated in 2004, abacus has developed a national network of qualified accountants who support SME businesses with all aspects of accountancy, taxation and administration functions.  The network has over 3,000 clients. Its collective fee income would make it one of the top 100 accountancy firms in the UK. Abacus is the only national accountancy franchise for qualified accountants approved by the British Franchise Association.

The loan is to provide finance to support the expansion of the business following an award of a new alliance with Scania GB to provide services to its customers.

Find out more, or search for new loan opportunities by registering as an investor with FundingKnight.

P2P online auctions… how rational are you?

waiting for the hammer to fall

If you haven’t already visited http://www.p2pmoney.co.uk you should put it top of you P2P to-do list.  It’s an independent website dedicated to comparing UK peer to peer lenders and keeping avid fans happy with a pretty steady torrent of news and updates.

I’ve been lucky enough to get the opportunity to contribute a few guest blogs over on the P2pmoney blog and this week’s is P2P Online Auctions: Waiting for the hammer to fall.

It’s a short piece about how irrational people can potentially get when overcome with the frenzy of auctions – and designed to coincide with our first loan auction on the FundingKnight P2P Loan platform.

If you’re interested in how auctions can mess with your minds head over for a look.

Peer to peer loan descriptions: What’s in a name?

analysis

I’m an avid reader of the Lend Academy blog by Peter Renton, in fact, I recently reviewed his book about Lending Club, The Lending Club Story on the Funding Knight blog.

One of the reasons I love Lend Academy is the amount of information and analysis on offer for P2P enthusiasts.  Yes, it’s focused on the US market but it never fails to get me thinking…

This week, it’s the a guest post called Loan Descriptions – Can They Be Helpful When Choosing Loans? that has caught my eye.  Written by Sam Kramer, a financial sector old-timer and keen P2P investor (You can find him on Twitter @P2P_CT), the post delves into historical data to investigate whether the loan description that introduces a P2P loan is at all predictive of its eventual repayment rate i.e. can you predict which loans will default simply by reading their name?

Well, I won’t let all of the results out of the bag, you should head over to Lend Academy to read the full post for that (and subscribe since this is just the opener in a 2 -part guest slot) but here’s a taster to whet your appetite.

chart tracking default rate by loan description length

Default rate by loan description length

Top level analysis: Very short loan descriptions (between 1 and 10 characters) have a reasonably high default rate.  (Note, interestingly, no-description loans have a lower-than-average default rate, as do short loan descriptions of 11 – 350 characters).

The post goes on to look at the impact of longer descriptions as well as drawing attention the the impact that recency of loans will have – if no-description loans are a relatively new thing, then logic says they’ll have a lower default rate since less of them will have grown to maturity.

This latter point is relevant for virtually every piece of analysis you’ll see about peer to peer lending as the whole industry is so young.  Finding a way to compare default rates of very young ‘unseasoned’ loan books with the much more mature lending portfolios of mainstream banks could throw up some interesting analysis… any volunteers?

Rothschild backs peer to peer lending as new meets old

old leaf on new grass

Following Friday’s news that peer to peer lending, including peer to business lending  is set to be regulated by the FCA (the regulator about to replace the FSA), the industry has received a further boost with news that RIT Capital Partners, Lord Rothschild’s London-listed investment trust has invested in Zopa, the UK’s first peer to peer lender who started the alternative finance wheels in motion back in 2005.

It’s a move which will inevitably prompt a whole host of “old meets new” clichés as one of the most famous bastion’s of banking joins forces with a disruptive player on the alternative finance circuit.

Speaking to the Financial Times, Lord Rothschild said,

“We are witnessing the growth of the non-banking lending market.  Following the 2008 crisis many of the banks remain under capitalised.  In these circumstances alternative forms of credit will be developed on a significant scale.  This is happening.”

UK peer to peer lending enthusiasts will no doubt watch to see whether the involvement of such an internationally renowned name does for Zopa what the arrival of John Mack did for Lending Club.

Lending Club have now processed over $1bn of loans in the US and their success has often be credited, in part, to the fact that they managed to engage the support of a recognised industry chief who could bring Lending Club the gravitas it needed to go mainstream.

Although Lord Rothschild left his family bank three decades ago, his name remains synonymous with what was once the globe’s most impressive banking group.  The decision of RIT Capital Partners to invest in Zopa will surely be seen as a rubberstamp for an industry which is rapidly growing from a small stream of niche financing into a genuine alternative to mainstream banking.

FSA to regulate peer to peer lending: Crowdlending gets a boost

FSA

...and we were already talking to the FSA 

The government has announced that it plans to regulate peer to peer (P2P) Lending.

The P2P Finance Association welcomed the news, saying:

“The Peer-to-Peer Finance Association has provided clarity and protection for consumers and businesses, but we have always strongly believed that introducing proportionate regulation was necessary to enable the sector to continue to flourish. “

Well, we’ve always been convinced of that here at FundingKnight, too.

That’s why our CEO, Graeme Marshall, explained months ago why peer to peer lending is an industry that wants to be regulated, but we also took some more concrete action…

 

FundingKnight has been talking to the FSA for several months and is well advanced with its application to become FSA regulated for those parts of its activity that fall within the FSA’s regime.

Rather than simply campaign for regulation, FundingKnight took the view that some of P2Ps current processes already fell within the regulatory regime and applied on that basis.  We hope to be the first regulated P2P Lender

FundingKnight CEO, Graeme Marshall, commented:

“FundingKnight welcomes the prospect of regulation of crowdlending / peer to business lending.  It may be that the news this week relates more to pure peer to peer lending and the extraordinary rates that are being charged to some individual borrowers but, regardless, some clarification and rules would be welcome.

Whereas FundingKnight believes that although matching lenders with business borrowers does not in itself fall to be regulated under the current rules, there are many peripheral activities that are less clear and so Government clarification and regulation would be welcomed.  This will also assist with the setting of standards for this new and exciting activity.  FundingKnight is seeking authorization for those of its activities that are covered by the Financial Services Authority.

FundingKnight has a team well experienced in financial markets who collectively believe that regulation of this industry will help crowdlending to become recognized as a new model for lenders and borrowers to be matched, using the power of an online marketplace.  We look forward to participating fully in discussions with the FSA and Treasury concerning forthcoming regulation.”

Whilst we’re not claiming that our discussions with the FSA prompted the Treasury’s response, we’re glad to see that the move towards regulation is now gaining momentum.

Katie’s crowdlending journey: Can current savings rates beat inflation?

penny jar

In October 2012 inflation, as measured by the CPI (Consumer Prices Index) index, rose from 2.2% to 2.7%. The increase was not anticipated by many and has therefore caused a mild kerfuffle, if you will, in financial circles, let alone to your average ordinary FundingKnight blog subscriber reading this now…

The reason behind the mild horror that has ensued as a result of the CPI announcement is due to the financial repercussions of said increased inflation on the economic health of UK savers.

So, for example if you, YES YOU, are a basic UK taxpayer, contributing 20% of your earnings to the lovely HMRC, you will now need to find a savings account that offers an interest rate of 3.37% (according to moneyfacts.co.uk) which, in this day and age of pretty pathetic savings options available on the high street, is nigh on impossible.

Well, I lie, it’s not wholly impossible but still fairly hard to achieve. Research offers the following statistics: 52 out of 2532 banks would be able to offer basic UK taxpayers an inflation beating savings account. That’s 2.1% of everything out there folk (State Bank of India anyone?) and that sounds to me like a fairly sad state of affairs for people looking for a sound return on their hard-earned cash stash.

Equally, if you are a higher rate taxpayer, lining the pockets of the taxman with 40% of your salary, then you would need to seek out a savings account that paid out nearly a whopping 4.5% interest rate in order to beat that darn inflation index and this is, in fact, actually impossible. At this time, as I type, there are no non-ISA accounts in existence that offer these rates.

A proper UK based savings sob story no? Well yes it really is, so here’s one final sum of misery from The Daily Telegraph money pages to send you on your way and then lets all go on a spending spree:

“The impact of inflation on savings means that £10,000 invested five years ago, allowing for average interest and tax at 20pc, would have the spending power of just £8,899 today.”

Food for thought, for sure. I would love to hear your comments, suggestions or top tips.

Who does FundingKnight lend to?

As a complete beginner to the world of finance and loans, I am going back to basics again with this post. I want to get right to the very core of what FundingKnight can offer businesses looking for a loan.

Looking at the FundingKnight website, it seems like a very straightforward process but in my mind there must be huge amounts of criteria that you would need to meet before even beginning to think about applying let alone the actual paperwork that organising a business loan must entail.

I am endeavouring to find out more, so I asked FundingKnight a few questions about what their basic principles were behind their lending offer.

FK: We specify the following three points for companies looking to borrow money from us:

  • The business must have at least two years trading history
  • They must be limited companies registered at companies house
  • And finally, they must be UK based businesses with a UK bank account

KK: It all sounds pretty reasonable to me and extremely straightforward, but there must be more things to consider beyond approaching FundingKnight as a legitimate business enterprise? Surely you would want to ensure that you are investing in something that is a sound prospect with a solid financial future? As otherwise couldn’t any old debt ridden business be able to approach yourselves in dire straits?

FK: Yes, that’s completely true, lenders come to FundingKnight to get a good financial return and in our approach, there are three key things we look for and to balance applications against, ensuring we lend to the right companies:

  • Is your business well managed?
  • Are you realistic about risk?
  • Will your business generate enough cash to repay our lenders?

KK: Ah ok, that’s more like it – still, it seems very simple and straightforward and basically clear, common sense which has got to be a good thing.

FK: Yes, we think so and we want to make the process as clear and easy as possible as after all, we want to lend money in the same way that businesses wish to borrow money. It’s a win-win situation!

Many of our lenders also want to give the economy a boost and no doubt as FundingKnight grows many will also use it to lend locally but first and foremost people expect a sound return on their money so it’s important to have some good ground rules governing who can apply.

KK: So you don’t offer loans to start-ups?

FK: No we don’t. That’s not intended to suggest that start-ups aren’t a good investment – some are – it’s just that they typically need a different type of funding and benefit from a different type of investor.

KK: Excellent work. Thanks to FundingKnight for idiot friendly responses and I hope that my ignorance will help other people get involved and take advantage of the clear benefits that FundingKnight offer.