|We’re pleased to announce that a new loan is now live on the FundingKnight crowdlending auction site, offering the chance to lend to Red Advertising Ltd.You’ll find full details of the loans and all the usual financial information available on our website, but to whet your appetite, here’s a quick summary:
Red Advertising Ltd provides cloud based recruitment advertising and candidate management software for recruitment agencies and employers throughout the UK.
It needs the funds to expand its call centre in Cannock.
You can find more details by logging on to www.fundingknight.com and choosing Find a Loan.
Add funds to your account:
You may only place a bid out of available funds in your FundingKnight account. If you need to transfer funds to your account, click here to do this now and go to Add Funds in your My Money account. Remember you can invest as little as ￡25.
Once funds are added please go to Find a Loan for further details on the business opportunity and to make a bid.
And now you can ask questions:
As part of our continued improvements to the FundingKnight website functionality and user experience we are launching Q&A facility to enable lenders to submit questions to borrowers. Questions will be sent directly to the borrower. This facility will help lenders gain the additional information required when making a decision on whether to bid on a loan.
Last week, research from Moneyfacts showed that the average cash ISA rate is now 1.74% – a significant and worrying drop from the 2.55% that was on offer a year ago.
A study by Which? reveals that it’s not just ISA rates that have suffered. What they describe as the “interest rates freefall” has spread across the entire spectrum of savings accounts.
Why the drop? After all, the Bank of England base rate has been historically low for some time now.
The answer, according to Which? is the Funding for Lending scheme which the Government unveiled back in August 2012 as its solution to the lending crisis that was preventing consumers getting mortgages and businesses from finding the business finance they need to grow their way out of economic uncertainty.
Despite the honorable intentions of the scheme – few would disagree that more business funding is needed – the unintended consequence of the scheme is that banks have cut interest rates on savings accounts because they now no longer have such a pressing need for customer deposits.
The link between savings deposits and lending is too often forgotten when it comes to coverage of the economic problems faced by the UK. Back in the days of local mutuals, customers hoping for their first mortgage would add their name to a list and only find their application accepted when enough customer deposits – savings – had come in at the other end of the business.
Now it’s a little different, of course, but money still needs to come from somewhere. Viewed simplistically, banks and building societies have too options when it comes to generating money to lend out to its customers. They can use the savings deposits they’ve taken from other customers or they can raise “new money” through trading the markets.
Pre credit crunch, most large banks funded a pretty large chunk of their mortgage or small business lending through the latter – with the exception of a few, they certainly didn’t have enough customer deposits to offset the amount they lent.
Then the world changed; banks couldn’t borrow as easily – or cheaply – on the open market, they were asked to re-capitalise and the need to bring deposits and lending values closer together led to a massive scramble for savings customers.
That’s why for so long, savings rates remained far higher than base rate.
Whilst that’s great news for the millions of savers who would otherwise see their money reduced by inflation, it does beg the question of sustainability.
Then came the Funding for Lending scheme that offered banks access to cheap finance to lend on to customers. Great news… at first. Except that now, banks aren’t quite so desperate to real in savers and, as a result, interest rates have tumbled.
What does this have to do with crowdlending or P2P Finance?
A lot, actually.
The problem with Government schemes is that they often have unintended consequences. The decision for Government to lend via some peer lenders could have equally unintended consequences if it leads to reducing rates on the platforms involved.
In short, it’s difficult to fiddle with one bit of an eco-system without huge consequences elsewhere – it’s what gardeners deal with everyday, we just need a bit of common sense applied to the financial eco-system.
What crowdlending offers is not a tweak to the current system but a new system. That’s why it’s sustainable and that’s why it can offer good value for all – for investors, for borrowers and for the platforms themselves.
Crowd lenders don’t need to hold capital against the loans made as their simply arranging loans, not facilitating them. Likewise, there are none of the costs of a big banking network to eat into returns or ramp up costs.
Savers can put their money to work (fee free in the case of FundingKnight) and borrowers can access finance generated by real people – not Government schemes or money market trades that are unsustainable at best, risky at worst.
Alternative finance is just that – a real alternative – it’s time to spread the word to investors and keep peer to peer lending going from strength to strength.
|A 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
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.
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
Period: 1 year, repayable in 12 installments
Period: 3 years, with a 3 month repayment holiday
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.
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.
Perhaps an industry knows it is on to something when someone who confesses to being “congenitally pessimistic about most things in life” admits to being really optimistic about its future… Certainly, the latest comments from Andy Haldane, director of financial stability at the Bank of England will be music to the ears of peer to peer lenders in the UK.
Speaking to the Independent in an interview published today, Andy Haldane told Margareta Pagano of his bright hopes for the future of crowd lending:
“It’s a time of opportunity knocking for finance. Hopefully, the growth of peer-to-peer lenders, such as Zopa, Funding Circle and Thin Cats, and those involved in crowd-funding, such as Crowdcube, will help solve the problems we have in the UK with lending for SMEs.”
Haldane went on to explain how he thinks online technology has “the potential to transform finance and fill the gap left behind by the big high street banks which have little appetite for taking on risk in lending to SMEs.”
You can read the full article “Bank supremo: Peer-to-peer lending is a good reason to be cheerful” in the Independent, or start peer to peer lending yourself by registering as a lender at FundingKnight and taking part in one of our live peer to peer loan auctions.
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.
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.
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?
Last week’s news that peer to peer lending is about to be regulated by the FCA was met with pretty unanimous support from the industry, with both borrowers and lenders and the peer to peer lending platform owners themselves all agreeing that regulating peer to business lending is likely to boost rather than stifle peer to peer finance in the UK.
So that’s one battle won – or at least the first round, no doubt there is a whole host of further debate to come regarding exactly what shape the new regulation takes…
In the meantime, however, there’s an existing regulation that peer to peer lenders want changed – and that’s the treatment of losses.
Whereas banks and other financial institutions are able to off-set bad debt against interest earner, peer to peer lenders are not under current HMRC rules.
This is not only unfair but fundamentally compounds the impact of any peer to peer losses. P2Pmoney.co.uk has helpfully crafted a suggested letter that anyone who agrees that the current state of affairs is wrong can cut and paste and send on to their local MP.
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.
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.