As the globe enters uncharted territory, we wanted to take this opportunity to update you and be transparent to our community of lenders and borrowers. Thus, we’ve put together some FAQ style information for our lender and borrower community to keep you well informed.
Frequently Asked Questions by Lenders:
Q 1: How does it affect already funded/on-going Projects?
A: Our existing projects have seen no disturbance thus far. Many of you are receiving your monthly interest regularly and on time. Only two projects on our platform are development projects and the rest are bridge loans. The former are small scale and the government is allowing construction and manufacturing industries to carry on operating as long they are following the government guidelines of maintaining a two-metre distance and so on.
We are in regular touch with our borrowers and we will keep you in the loop should the situation change. We’re confident that our systems and procedures can continue to support our customers and partners during this time.
Q 2: How does it affect current live Projects?
A: We are keeping a close eye on developments related to the coronavirus. Investments are asset-backed which means they remain fixed, providing a layer of protection against possible losses. Investing in property is a longer-term investment compared to volatile short-term stock market investments.
We lend to experienced property entrepreneurs of SME (small and medium-sized) nature. In the due diligence process, our lending criteria always allows for up to 35% margin in all our loans. The financial underwriting process only approves loans which can meet the financial stress testing in terms of ability to repay (exit) and affordability range. We will be doing our utmost to help ensure smooth operations and also work with businesses to mitigate the economic impact of the virus and make sure that investor funds are protected.
We have adjusted our underwriting criteria by making it stricter, allowing for lower loan to values (LTVs) in light of COVID-19. Capital protection for our lenders is our number one priority.
Q 3: Have rates changed?
A: Rates are fixed and will not change, remaining between 8-10% gross interest per annum.
Q 4: Are property prices going to drop?
A: Inevitably in the short term, prices will be affected. However, with measures already announced by the Treasury and BoE, there is huge effort to keep the economy on track as much as possible. It all depends on how long the COVID-19 disruption lasts. Our underwriting team is taking this into account, and we are also adjusting our lending criteria. For example, we are looking to fund projects with lower amounts and Loan to Value (LTV) compared to normal market conditions.
Q 5: Is it a good idea to invest now?
A: Our projects are asset backed and we will keep LTVs as low as possible. It is your choice which project to invest in. Alternatives like shares are volatile now, and savings rates are close to zero. Whilst savings are Financial Services Compensation (FSCS) protected, if your P2P investment doesn’t perform as expected then there is no FSCS protection and your capital is at risk.
Frequently Asked Questions by Borrowers:
Q1: Are you lending in this period?
A: Yes absolutely. We are open for business and have business continuity arrangements in place, including ongoing service and support for our borrowers. We are lending to projects as usual so please do continue to send us your new loan applications.
Q2: Have rates changed?
A: No, as we are not governed by the Bank of England, we price the risk as we would before. Therefore, the rates remain the same.
Q3: Is the process any slower now?
All borrowers are able to communicate with us as usual and should experience no difference in the internal speed and quality of service you typically receive from us. However, we may face a delay in getting surveyors and valuers out to site visits for the time being.
Q4: Are the valuations expected to drop?
A: The economic situation is unpredictable and uncertain, however, the government has already launched a number of economic schemes to help strands of society, including Mortgage relief period, Statutory Sick Pay (SSP), Coronavirus Job Retention scheme and many more to help provide liquidity in such unprecedented times. We are of course keeping a close eye on values and market conditions and will factor this into our underwriting process as mentioned above.
Q 5: Are borrowers able to freeze payments?
A: No, borrowers are not able to freeze payments. However, the majority of our development loans have rolled up interest at the end of the project, so most borrowers do not face monthly payments. We are happy to discuss this with any borrower facing difficulties on a case-by-case basis.
Q 6: Are borrowers able to extend the loan terms?
A: Yes. With or without COVID-19, we have always been a flexible lending platform. We are indeed able to extend loan terms in these special circumstances without charging penal interest!
We remain open for business (virtually) and believe we will get through this as a collective.
If you have any further questions in the interim then please contact our borrowing or lending team at 020 8050 1523 or email us at firstname.lastname@example.org
We would like to urge everyone to stay safe and stay strong – this too shall pass.
“One who gains strength by overcoming obstacles possesses the only strength which can overcome adversity.” — Albert Schweitzer