28th December 2011
ThinCats.com - The first year of operation
It’s now the end of the first year of operation for the Business Loan Network and the headline results are that we have attracted 331 lending members of whom 40% have deposited funds totalling £3m. We have made 20 loans totalling £2.65m and members have received £341k of interest and capital repayments so far which means that we currently have £3.34m under management. Lenders have won bids at interest rates ranging from 7% to 15% and the weighted average interest rate is currently 11.16%.
No investment is without risk but we deliberately set out to provide high quality secured lending opportunities suitable for pension funds and we limited our growth by insisting on ‘quality rather than quantity’. So far all of the loans are repaid up to date despite the difficult economic problems and so it has not yet been necessary to call in any of the security.
Apart from the very attractive interest rates available lending on ThinCats provides stability to an investment portfolio because loans are at a fixed interest rate and returns are not subject to the performance of financial markets.
For the first 9 months of the year we were constrained by the number of active lenders and their capacity to meet demand. This meant that we had some difficulty trying to meet requests for larger loans (£300k plus) and the ‘thin market’ kept interest rates surprisingly high, generally in the 10-14% range. Over the last three months this situation has changed as more lenders joined and gained confidence in using the Business Loan Network. The increased competition for shorter and smaller deals has sometimes driving down interest rates to less than 9%. This is still better than any near-alternative investment and is particularly attractive because the loans are all secured and lenders get the rate they bid without fees or charges.
Now that we have demonstrated that the business idea works well 2012 will be a year of accelerated growth. As well as expanding our network of ‘sponsors’ who vet lending opportunities we will steadily increase the size of loans that we are able to auction. We also have exiting plans for next year including the introduction of a “Retail Fund”. So far we have aimed our service at sophisticated investors who have the experience and the time to read and understand the detailed information we provide and make their own investment decisions. Now we are working with a FSA Regulated Fund manager who will be providing an investment management service for those without the time or experience to make their own decisions and offering “ThinCats Bonds” to a much wider range of investors. The first issue of ThinCats Bonds is planned for late January 2012.
The introduction of ThinCats Bonds will naturally lead to the creation of a full secondary market for loans allowing existing loans to be resold by auction and providing liquidity to existing lenders and the opportunity to create an ‘instant portfolio’ for new members. We plan to have this operational by the end of Q2.
5th August 2011
Turmoil on stock markets persist
This article By Kevin Peachey, Personal finance reporter on the BBC News website puts it very well: "All those red numbers on stock market boards may appear to be a strange and mysterious mix of data to many people.
But the story they are telling at present will be affecting anyone with a pension, those considering retirement, savers with Individual Savings Accounts (Isas), and even money set aside by families for the cost of children's university education.
link to the full article
For the past few years we have sufered from unprecidented flucuations in all of the major financial markets, generally poor returns on investments, rising inflation and historically low interest rates for a record 2 1/2 years. One ThinCats founder shareholder had the good fortune/judgement to sell a business recently and move the proceeds into Swis Francs on the basis that "so long as they continued to print £s and $s those currencies will be weak". The results were a rapid gain of about 25% and this was before last Friday's crash.
Meanwhile another member has spent the last few months getting out of equities and bonds and transferring it into a SIPP to lend over £500k through ThinCats. Thse loans are producing a non-volatile return in the region of 10%pa.
Not all of us have the good fortune to have benifited from those timely moves but in the middle of all this turmoil the returns on ThinCats Loans are stable and predictable and most importantly, still available.
The tax benifits of using a SIPP to lend can produce returns that an EIS investor would be pleased with but with a defined exit and a fixed return. You can download our Guide to using a SIPP here.
15th July 2011
The problem caused by high interest rate bids
It’s been a very busy few weeks with a great deal of publicity and many more new members signing up. Hence the lack of new information on this page over three months.
We have received some excellent press comments including being the Financial Times "Deal of the Week" and we are preparing a separate page with information on ‘what the papers say’.
In the past month we have almost trebled the number of lending members and increased the total funds to £1.5m.
There have been two recent auctions (one is still in progress) which appear to have given the impression that it is possible to achieve excessive levels of interest on ThinCats and this cannot be good for borrowers, lenders or ThinCats.
Because of an unique situation an auction offered lenders an opportunity to achieve 15% interest and several did. In the current auction some new members are offering funds at between 20% and 25% interest and we are not comfortable with this.
Other P2P lending platforms have an upper limit on bid rates and we are considering introducing one ourselves. Of course such high bids are very likely to be displaced by more sensible bids towards the end of the auction and we could just allow them to fail but in the meantime these unrealistic rates which are never going to be acceptable to our borrowers will put new applicants off. Remember that a borrower is not forced to accept an offer but if the whole auction fails because the interest rate is too high we all miss out on a good opportunity.
There is another problem; if we are achieving interest rates of double those on offer with other P2P lending sites lenders might assume that our loans are higher risk whereas we work hard to keep risks low and are the only P2P lending system to offer secured loans. At the level of risk we are offering 9% should be very attractive.
12th April 2011
New Risk Committee to provide consistantly high standards
As our business develops we are realising how fortunate we were to find two very experienced former senior bank managers (Bob Cox and Tony Lucas) with great experience of packaging deals and arranging security who are closely involved in establishing the systems and proceedures. This started to become apparent as we set about finding a network of 'Sponsors' to cover the whole UK and realised that traditional 'Corporate Finance’ specialists were not used to defining appropriate security or arranging the documentation. Their experience is normally limited to presenting a case to potential funders. This created a potential problem for us because of our determination to establish very high standards of security in order to limit the risks.
Our solution is to establish a ‘Risk Committee’ responsible for identifying the potential risks and specifying the security needed to address those risks. They will also help with documentation.
Initial responses from the Sponsors we have spoken to are very positive, they recognise that this area was often a weakness that they had no method of addressing and it takes some of the burden from them. At the same time we will be expecting Borrowers to cover our costs but they will always be less than they would pay a bank for a similar service. Over the next few weeks we will be formalsing the proceedures and working to minimise the administrative burden. It remains a key advantage for BLN that we can be more responsive than a bank and provide a more personal service.
29th March 2011
Dynamic Bidding gets underway with 3 deals in auction at the same time!
It's really interesting to see how the new dynamic bidding process is working on BLN; for the first time bidders do not know what they are competing against. Bids appear to be higher with lenders apparently asking for 13% or more for a secured loan but the actual 'best price' they would be happy with can be up to 5% lower (only the bidder knows how much lower!). Some bidders may still be making fixed price bids but there is no way to tell until the loan has enough bids to satisfy the loan and higher priced bids start getting displaced. At that time the computer will start to lower the dynamic bids to try and keep them below the cut off point. The eventual outcome will depend on demand for each deal from the Lenders.
14th March 2011
The Result is in! The auction for the TGI Group loan of £250,000 for business development succeeded in attracting bids to the value of £270,000 at interest rates ranging from 9.5% to 10.5% and the 'cut' came at 10.4%. Anyone bidding more than that failed to get into the syndicate.
Considering this is a secured loan over 3 years repayable in monthly instalments that is considerably better than most other investments and particularly good when compared with the rates available on other peer-to-peer lending websites. Other sites only offer unsecured loans and charge lenders a fee of up to 2% pa. BLN does not charge lenders a fee but adds 1.5% to the interest rate charged to the borrower so in this case the borrower will be paying 11.469% for their funds.
Raising £250,000 for a single loan represents a major milestone in the short life of BLN and brings the Lenders funds to a total of £750,000. There is no doubt that it stretched the funding capacity of the current lender members and if BLN is to raise the minimum of £400k needed for the next auction it is going to have to find quite a few more lending members whilst hoping that current members will have more appetite for this type of investment.
8th March 2011
New “Bid and Forget” Bidding Option:
We plan to introduce a new enhanced bidding system before the end of March 2011. In addition to the current system which encourages last minute bidding and favours those able to be on-line at the end of an auction a new option of “Bid and Forget” bidding will also be offered.
Bid and Forget bidding will allow bidders to tell the computer the lowest price they are prepared to offer but to begin bidding at a higher price. Then, if they are undercut by another bidder threatening to displace them from the auction the computer will automatically re-bid on their behalf in decreasing steps until either the bid is accepted once more or the bidders lowest price is reached.
Bid and Forget is intended to encourage early bidding and to reduce the advantage bidders might get by being available right at the end of an auction and undercutting others within the last few minutes.
When using Bid and Forget you will be asked to input two interest rates, one will be your lowest price and the other will be the price that you wish to start bidding at. There is a limit on the difference you can specify between these two figures, which may change from auction to auction.
As before bidders can still use the simple bidding system and they can make multiple bids at different rates and different amounts if they wish.
6th March 2011
BLN currently has £740,000 of Lenders funds of which £411k is available for bidding. Lender have committed funds ranging from £1,000 to £215,000 and with an average of just over £30,000 each.
18th Febuary 2011
We have now introduced a new notification system. It works like eBay and lets you know when you have been outbid. It will also tell you (if you wish) when someone asks a question about a loan offer and when a reply is posted.
You can decide at the time when you place a bid if you want to be notified if your bid is displaced by a lower bid and you can receive that notification by email or text message or both.
Rest assured that you can turn the system on and off whenever you want to.
However, you cannot receive these messages unless you have set up your email address and/or your mobile phone number in your account details.
We have prepared a short video demonstration of how the system works Please click on this link to see it
The new notifications will also help us to administer the system more efficiently and will tell you when we have credited funds to your account. However it will not tell us if you have sent any money to your Street UK Client account (which is entirely independent from the Thincats System) so it is always a good idea to send me an email when you do that so that I can look out for the funds arrivingin your Barclays Client Account and credit them to your Thincats account as soon as possible.
17th Febuary 2011
We completed the second BLN loan of £73,000 to Bell Finance Ltd today and the Loan to the Property Company is on schedule to complete next week once we have the documents related to the security charge over the land completed.
So far we have had funds totalling £585,000 placed into the Client Accounts ready to bid and that taking into account the two deals above there remains £256,000 available to bid on future deals. Up to the end of January repayments of capital and interest from our first loan totalled £13,903.50 so the total amount in client accounts is now £269,903.
Although there are no loans on the system to bid on at present we are working on several new ones and hope to have the next one available within a week.
