From our analysis of the market we anticipate lower average loan rates, along with an increase in loan quality. These linked trends are a confluence of events in the wider alternative finance SME loan market – indeed, debt markets generally – and ThinCats’ own due diligence.
ThinCats Newsletter February 2017
Funding JFK, Marilyn Monroe and Frank Sinatra – the company that tells the stories of the stars.
It doesn’t get much more exciting than the opportunity to help with making television programmes, and that is just what ThinCats lenders did when they invested in TV production company 3DD Entertainment. Involved in making a raft of programmes for Netflix, Sky and UKTV amongst others, from live music TV to documentaries on film stars and history series, 3DD was looking to expand its production and editing business.
Diminished bank lending made traditional borrowing difficult, so it started searching for alternative avenues and found F&P Sponsors Limited, peer to peer loan experts, in early 2014.
Deborah Conway, director at F&P explains: “We specialise in organising loans for SMEs, and TV production is one of our areas of expertise. Once we have assessed the business and determined the validity of the proposal, we can provide loans quickly and efficiently, usually getting to drawdown before a bank committee can deliberate.” This was certainly the case when F&P recommended ThinCats, and 3DD has received a total of 10 loans through the platform since the first loan three years ago.
The latest auction, in November, was for £300,000 to fund a new production slate, which has already been bought by Netflix and other broadcasters under deferred payment terms, plus general working capital. It pays 12% over three years, secured against the assets of the business. Total outstanding loans to 3DD through ThinCats stand at about £1.6m against security of about £5m.
3DD’s CEO, Dominic Saville, describes how the loans have helped drive the business forward: “They enabled us to maintain our capital expenditure on new production strands, as well as rely less on outside post production services at their higher rates. Our catalogue of programmes has grown by 300% over the three years and this has allowed the business to widen its buyer base.”
Its global business, dealing with such names as Sky and Netflix, needs a particular contract style with extended payment terms and long term commitments. “ThinCats and F&P understood our business, and the strength of these business relationships, and have been able to see a successful initial three years of working together,” explains Dominic.
And what does the future hold? Dominic is very optimistic for the long term: “We want to keep growing the core series and adding further series each year. As with all production outfits, whether large Hollywood studios or small enterprises, you need funding to keep the business growth moving and the core brands strong.” ThinCats lenders may well be able to continue their links to the stars of stage and screen long into the future.
ThinCats’ takes the custody of client money seriously. If our lenders do not trust us to look after their money, we have no business – and rightly so.
Our own measures are situated within the UK’s regulatory framework, upheld in this case by the Financial Conduct Authority (FCA). This holds that protection of client money is fundamental to the integrity of the UK financial system. To this end, regulators established a set of rules that aim to protect client money. These rules were tightened significantly following the collapse of Lehman Brothers in 2008 and are set out in the FCA’s Client Assets Sourcebook (CASS). The application of the CASS rules ensures that client money is segregated from that of the firm.
The key steps we take to ensure client money is segregated from that of our own and therefore protected are:
Client Money bank account: all client money is held in a designated client money bank account, which must be completely separate to ThinCats’ own money and bank account. Any client money that we receive is paid directly into the client money bank account which is the normal approach to segregating client money. This has always been the case: we have never mixed client and ThinCats money.
CASS Resolution Pack (CRP): one of the key aspects in regard to protecting client money and adherence to the CASS rules is that ThinCats must have and maintain a CASS Resolution Pack. This provides relevant practical information, such as a list of custodians where custody assets are held, and ensures records are readily accessible to an insolvency practitioner, facilitating a prompt return of client money if the platform were to fail.
Other core practices and processes: for example, the CASS rules ensure that companies undergo full CASS audits, carry out daily reconciliations and have stringent record keeping practices.
The above are the fundamental steps taken to ensure our clients’ money is protected. The intention for this article is to provide lenders with the peace of mind, along with some clarification, what is in place to ensure that client money is segregated and protected.
The past year has very much been one of growth and investment in ThinCats. Below, we pick out some of the major milestones:
ThinCats is in the final stages of consultation as concerns authorisation by the Financial Conduct Authority.
The FCA is the body responsible for regulating the peer-to-peer lending industry, and has been engaged in an intensive process of scrutiny of, and dialogue with, the industry since the transition from regulation by the Office of Fair Trading to the new, stricter, regime began in April 2014, when the FCA took over.
Platforms seeking regulation such as ourselves have to demonstrate to the regulator’s satisfaction that – among many other things – they conduct their business with integrity, skill, care and prudence, treating clients fairly and protecting their interests.
Clients should see no difference in terms of systems and controls when full authorisation is attained.
Our discussions with the regulator have been productive and detailed. While it isn’t possible to say how long it will be before ThinCats receives full authorisation, we are pleased with the progress so far.