Proplend was founded in 2014 in response to the fallout of the 2008 banking crisis. On one hand bank interest rates fell to and have remained at historic lows depriving cash rich individuals and institutions of much needed low risk income and on the other hand banks who had previously been very active in property lending had either disappeared or pulled out of the market.
The sector of the market worst hit was sub £5m commercial lending where there is a staggering £50 billion of existing debt that requires to be refinanced over the next 3-5 years. This is currently being serviced by less than 11 active lenders.
How Investing in Property Works with Proplend
There is a standardised Loan Contract between the Borrower and each of the Lenders, detailing the loan amount, the tranche, the interest rate, and the term of the loan. Proplend Security Limited (PSL), a wholly owned subsidiary of Proplend Ltd, enters into a single set of security documents with the Borrower and holds them in trust for the Lenders. PSL will take a 1st charge on the property offered as security (which is registered with the Land Registry). Proplend also retains the equivalent of 6 months’ interest on the account.
Five Steps to Understanding the Loan Tranche:
- The Proplend Loan Tranche splits the borrower’s whole loan requirement in up to 3 parts or ‘Loan-to-Value (LTV) based tranches.’ Tranches A, B & C.
- Each tranche offers the investor a fixed rate of return, reflecting its position in the capital structure and the underlying loan requirement.
- The higher the tranche or loan to value level, the higher risk but the greater the return.
- The tranches are ordered by a deed of priority which means when a loan is repaid Tranche A investors are paid first, Tranche B paid second and Tranche C paid third.
- Importantly, the whole loan (tranche A, B and C) is secured by way of a 1st legal charge over the property.
Investors not only get to choose Loan Investments on a deal by deal basis but they get to choose which tranche, or a combination of tranches to invest in, and how much to invest.
Why Invest with Proplend?
Proplend makes it possible for interest rates being offered by borrowers to be earned directly by lenders, circumventing the traditional banking system and creating a new asset class. This is the first time that private individuals and institutions have been offered direct access to commercial real estate lending opportunities.
Borrowers gain access to funding which is not otherwise currently available and lenders get the opportunity to earn risk adjusted monthly income.
Please visit Proplend for more information on their investment opportunities. Your Capital is At Risk.