Guide to Peer-to-Business Lending with rebuildingsociety
Peer-to-business lending can help you build a diverse and profitable investment portfolio. It is being used by investors young and old from around the UK. rebuildingsociety average investment is just over £5,000 per lender, ranging from £100 to over £750,000.
It’s an exciting time… investors will soon be able to use their NISA allocation for peer-to-peer lending. Tax-free lending could result in vastly improved returns, particularly for higher rate tax payers.
At rebuildingsociety, they show gross returns, because individual investors need to allow for tax deductions and bad debt, which may affect your rate of return.
Illustrative return on £10,000 invested through rebuildingsociety at the total weighted average from January 2013-August 2014 of 16.1%* gross return: easier and cheaper.
*They forecast an average default rate of 3% to 5%. Their current bad debt rate is 2.2%
Past performance is not indicative of future performance and the rate of tax payable is dependent on the investor’s higher marginal rate of tax.
How Does it Work?
Entrepreneurs describe their business on an online loan profile, explaining why, how much, how long and specifically what they need to borrow for. People then bid amounts of money with an interest rate they want to lend at, which should reflect the risk a lender sees in the business.
When the auction ends (7-21 days), the auction is closed. Borrowers then consider the average interest rate offered and decide whether to accept the loan or not.
A repayment schedule is then setup so that repayments are distributed from the borrower to the many lenders, according to the individual loan amounts and rates.
The Secondary Market
The rebuildingsociety Secondary Market is where investors can trade micro loans from completed deals. Investors can charge a premium for micro loans to increase their returns, or offer a discount if liquidity is the aim. All their available micro loans are listed along with the borrower’s repayment history and the company’s question and answer section. Investors can buy in bulk using the rebuldingsociety Portfolio Builder facility.
One of rebuildingsociety’s most popular borrowing features is their early repayment charge waiver. Lenders need to be aware that when purchasing a micro loan for a premium, the stated return is over the life of the loan and should the borrower refinance early, only interest payable in the month of refinancing is due.
Institutional or HNW investors can capitalise on the growing peer-to-peer lending market by quickly buying a portfolio of performing business loans.
Rebuildingsociety.com offers the best gross returns on the peer-to-business lending market, according to the industry news site, p2pmoney.co.uk.
Each loan is backed with the minimum of a director’s guarantee and in many cases with asset security, either a residential property or the business’ assets. All loan data is available on request.
Liquidity is strong in their secondary market. Loans re-sold at par or just above are typically sold within 10 days. This gives easy-access to your investment funds.
On current volumes, they can place up to £500,000 a month spread over at least 25 separate loans. As loan repayments are made, further portfolio diversification is possible as new loans are created.
They’re also innovators. They help others establish platforms using their proven technology and can introduce institutional investors to their partners across the world.
Accessing Your Money
Loans to businesses are between 6 months and 5 years, so this could be the length of time your money will be repaid over, unless you cash in early. rebuildingsociety offers instant access to any funds that are not ‘committed’, so neither a loan or a bid.
You can also either wait for loan repayments to come in or use their Secondary Market. This allows you to sell loans to other lenders.
The Secondary Market is often used by new investors to quickly acquire a diverse portfolio. However, should a borrower choose to refinance, only interest due in the month or refinancing is due. However, lenders should be aware that unpaid interest is foregone if borrowers refinance.
Many savers want to get back to having a passive income from their interest payments on savings. Allowing businesses to work your money can net you a decent living, from the interest payments alone. For example, an 8.5% return on £250k capital is £21,250 pa gross before deductions for tax and accounting for bad debt, which we estimate to be approximately 3-5%.
Please visit rebuildingSociety for more information about their investment opportunities. Your Capital is At Risk.