ThinCats specialise in loans with security

ThinCats is the UK market leader for peer to peer secured business loans.

Businesses sometimes fail, and so default on their loans. The problem with an unsecured loan is this will often result in a complete loss of lenders’ capital. But secured loans offer a degree of lender protection. Unlike most peer to peer platforms, ThinCats specialises in secured loans – backed by real assets which can be claimed in the event of a default.

Each loan is given a Security grading, as well as Credit grading. The Security grading is based on the ratio of loan amount to the value of secured assets, at the time of valuation. The highest grading (five padlocks) runs to considerably more than 100% loan-to-security value. You are therefore able to select loans based on the proportion of assets you will be able to reclaim, should the borrower default.

Normally all ThinCats loans are secured but there is one important exception; a relatively small number of special loans that attract tax relief and are sponsored by ‘Community Chest’ are unsecured.

(Data prepared on 31st August 2016)

The ThinCats approach to security

As a minimum this security is in the form of a debenture. A debenture creates fixed and floating charges over the present and future assets of the borrowing company. Additional security may be taken in the form of a specific charge over assets such as freehold and leasehold property, a chattels mortgage may also be provided in respect of specific items of plant and machinery. The debenture is legally binding and is registered at Companies House, as is a chattels mortgage and certain specific charges. Where appropriate specific charges are also registered at the Land Registry.

Where a company is part of a group, we will also take cross guarantees from the associated companies, often supported by a debenture over the guaranteeing company. In addition, we usually take personal guarantees from the directors of the company. The security taken for each loan is bespoke and appropriate to the nature of the business and is set out in the information pack. Should a borrower default, our first call is on the security taken. Should that not be adequate, then we would call on the cross guarantee and personal guarantees.

ThinCats monitors loans throughout their lifetime, and we have our own Risk & Recovery resources to work with the borrower to find a solution to their financial difficulties. It is in everyone interests if the business can continue to trade and payoff its loan. The team will also help recover our members’ capital in the event of a formal default. This is supported by our unique Sponsor relationships, who work closely with the company in the event of difficulties.

Notes:

1. Arrears means: Loans in arrears (but not in default) by 45 days or more as a percentage of the loans made in that year. Note: ThinCats is unusual among peer to peer lenders because of the close relationship that it establishes with a borrower in conjunction with the loan Sponsor. When a payment is missed the Sponsor will investigate what has caused the problem. Sometimes it is appropriate for lending syndicates to agree a change in a repayment schedule proposed by the Sponsor, and the P2PFA rules require these agreed changes to be shown as defaults even when the loan repayments are fully up to date as far as lenders are concerned.
2. Loans in default means: Loans where a default has occurred as a percentage of the loans made in that year. Note: These figures represent the amount outstanding on the loan at the date of default but do not take into account any recoveries (please see note 3 below).
3. Expected loss of actual defaulted loans means: The expected losses after the forecasted recovery of security as a percentage of the loans made in that year. Note: Security is in various forms and recovery can takes several months. This figure represents our best estimates of the eventual loss, however forecast is not an indicator of future results.
4. Expected lifetime bad debt rate means: The expected lifetime bad debt at origination date as a percentage of amount lent in the calendar year. Forecast is not an indicator of future results.

The benefits of diversity

ThinCats offers peer to peer loans across a broad range of businesses, from manufacturing, through healthcare to renewable energy, as the graph below shows.

Diversification is an important way in which investors can mitigate the risk. The wider the range of loans you hold, across a breadth of business types, the less will be the impact of a particular loss.

Diversification within your ThinCats loans

Holding a range of different loans means that your loan portfolio will be less vulnerable to specific economic conditions than one where loans are concentrated in one business- or asset-type, such as property. So, for example, a manufacturer of computer components will be subject to different market forces than a care homes business, which in turn behaves very differently than a windfarm.

ThinCats spread of loans per industry (Jan 2011 – June 2016)

Hands on vetting by experts

Peer to peer lending, in its present form, is a fairly new concept. But the way we do it at ThinCats is tried and tested. We do this through close partnership with a network of financial professionals who vet and structure the loans and continually monitor the underlying businesses. We call these professionals “Sponsors”. Additionally, the loans are reviewed by the internal credit team.

Sponsors are the first point of contact for potential borrowers. They are financial services professionals, always in teams that include at least one person with banking experience. They assess the business proposals and vet applications for loans. They help the borrower to prepare the loan information pack. That includes meeting with the borrower at least twice, getting to know their business, as well as assessing the security on offer. They answer questions from lenders during the auction and monitor the loan after it has been completed. All loans on ThinCats have to be supported by a Sponsor. The Sponsor’s reputation depends on the quality of the deals they back and how they deal with the questions and problems.

The Sponsor presents a detailed loan information pack for each loan and after the loan is made, is expected to provide quarterly monitoring reports on the progress of each loan. Sponsors make no recommendations and offer no investment advice.

In addition, all loans are reviewed by ThinCats in-house Credit team. The Credit team vets all loans before they are put up for auction, clarifies any areas of uncertainty with the Sponsor, and ensures all the information is presented in a consistent and clear fashion. It also has the power to reject loans it feels are unsuitable.

Last but not least, all loans at auction carry two gradings:

• Credit quality, represented by a one-to-five-star grading
• Security quality, represented by a one-to-five-padlock grading

This provides two ways of judging any loan: the ability of a company to service its loan obligations, and the value of the underlying security relative to the size of loan.

Making an informed peer to peer lending decision

Be fully informed before making an investment decision. Each loan, along with information on the borrowing company, comes with a comprehensive information pack, alongside two quantitative loan gradings:

• Credit quality, represented by a one-to-five-star grading, which tells investors about the ability of a company to service its loan obligations. The grades have been subjected to extensive analysis against the wider UK SME universe – some 3,000,000 firms, of which 500,000 are borrowers.
• Security quality, represented by a one-to-five-padlock grading, which focuses on the value of the underlying security relative to the size of loan

To download the latest information packs you have to register as a member. Membership is free of charge, you can sign up here.

ThinCats loans have the potential to deliver a steady pension income when held within a Self-Invested Personal Pension (SIPP) or Small Self-Administered Scheme (SSAS).

Loans transferred to a pension fund immediately attract tax relief at your marginal tax rate. In addition, the interest earned by a SIPP or SSAS is tax free**.

Whether you’re growing your pension fund, or drawing your income in retirement, discover how you can take advantage of the significant benefits of lending your pension money on ThinCats. To find out whether a SIPP or a SSAS is more appropriate for your circumstances, and which provider is likely to best suit your requirements, click here for a jargon free guide to pension funds and P2P loans.

**Tax treatment depends on the individual circumstances of each client and may be subject to change in the future

Choose the loans you want. Create a portfolio to suit your needs

ThinCats is one of the pioneers of peer to peer lending in the UK and was the first to offer secured business loans. It was set up by a group of experienced private investors looking for a low-risk way of getting a good and predictable return on their investment.

As a ThinCats lender you can research and build your own portfolio from a range of business loans. Because we are bypassing banks, both lenders and borrowers get a better deal. To download the latest information packs you only have to register as a member. It’s easy and it’s free.

The 9%* interest rate quoted isn’t a target or maximum rate, but a historic weighted average. The ThinCats platform contains a broad range of loans and you select the interest rate you want.

ThinCats’ members can access the lenders’ forum to share their experience and participate in auctions, with the money deposited in their ThinCats account. The minimum amount for each loan is £1000. There is no maximum. If you are bidding in a variable rate auction, you pick the interest rate you are happy with, and if your bid is successful you get the rate you have chosen. You can make multiple bids at different rates of interest and for different amounts. If more than one bid is successful you will have more than one stake in that loan. Fixed rate loans are even simpler: you just lend money at the set rate of interest and the loan is made up of those that bid first.

ThinCats members can select loans by the criteria that suits them: Such as length, interest rate, business type, credit grade, security grade, location – indeed, using any of the factors covered in our exhaustive information packs. You can invest in an individual loan, or to spread investment risk, build a diversified portfolio. The choice is yours.

*Weighted average annual interest after all costs and provisions for losses of actual defaulted loans after forecasted recovery of security but before income tax (all time). Past performance is not indicative of future results. Capital is at risk.

Benefitting from the wisdom of crowds

ThinCats has brought the power of the crowd to lending in a way no other peer to peer platform has. Hundreds of people – experienced investors, business people, accountants and others – scrutinise each lending proposal. They ask the most awkward questions: if they don’t like the answers, they don’t invest. You have the opportunity to harness this collective wisdom.

This process enables our lenders – whatever their level of expertise – to get a good overview of any loan before they make the decision to commit their funds. We call this ‘Crowd Due-Diligence’.

So ThinCats members can pick the brains of experienced investors, ask questions from the owners of a business they are interested in lending to, or grill the experts who have put the loan application together. If they need any further information in order to make an investment decision, there are a wide variety of experts there to provide it.

We believe that markets are conversations, and efficient markets are well-informed conversations, involving both buyers and sellers – or, in this case, borrowers and lenders. Discussions take place in the ThinCats online Forum. You just click on a discussion thread to read it, post your own comments or queries, or start a new thread.

Supporting British businesses

Since the global financial crisis, bank lending to small and medium-sized businesses has declined sharply, leaving many viable and developing businesses starved of the funding they need to grow.

ThinCats has been linking dynamic, quality UK businesses with individual lenders since 2011. Over the period, our lenders have provided more than £140 million to UK businesses.

You can support the businesses of your choice, with a wide variety of companies represented on our platform.

ThinCats facilitates funding for businesses and great rates of return for our lenders. With no fees for our lenders we take very little of the cream, that’s why we’re ThinCats.