What is peer to peer lending?
Peer to peer (P2P) lending is a relatively new form of investment that has really grown in popularity in recent years. The idea is simple: individuals lend their money directly to others, via an online system, in exchange for a potentially better return on their investment. By cutting out the middle man (bank, building society) and their overheads, lenders can earn higher rates of interest and borrowers can get a better deal; however, capital is at risk.
What makes us different
Here at ThinCats we do things slightly differently. We specialise in loans backed by security, meaning that if the borrower fails to pay, we are in a stronger position to recover your funds. We have a network of professional Sponsors who evaluate each prospective borrower, and provide a comprehensive evaluation for lenders to assess. Our borrowers are strictly UK businesses, ensuring that your investment is helping to support the British economy.
Please note that the minimum investment per loan is £1,000.
*Estimated weighted average annual interest after all costs and provisions for losses of actual defaulted loans after forecasted recovery of security but before income tax (2012 to date). Past performance is not indicative of future results. Capital is at risk. For more detail see our statistics and default rates.
What are the benefits of lending through ThinCats?
- Interest of 7-8.5%* depending on the portfolio you build for yourself
- No membership fees
- We specialise in loans backed by security, helping protect your investment in case the borrower runs into problems
- Only invest in businesses you want to. You choose who you want to support and you will know exactly who your money is being lent to
- Informed decision making. We prepare comprehensive information packs for every loan and provide credit and security grades to help you make investment decisions
- Ability to potentially access invested money by selling your loans to others
- Lend directly to UK businesses, helping grow the economy
- Discuss loans with ThinCats members on our forum and Q&As to find out others’ views before investing
- Ability to spread investments over a broad range of businesses, from manufacturing to healthcare to renewable energy, reducing your exposure to any one type of industry
- All our loans have been vetted by our internal credit team as well as our professional loan Sponsors
*Estimated weighted average annual interest after all costs and provisions for losses of actual defaulted loans after forecasted recovery of security but before income tax (2012 to date). Past performance is not indicative of future results. Capital is at risk.
The process is simple
- Step 1Register as a ThinCats member. It only takes 5 minutes and is free of charge
- Step 2Receive your account details and transfer funds in
- Step 3Browse our market for loans. Read and evaluate each offering before making a decision
- Step 4Invest your money in loans you want to support (minimum per loan is £1,000)
- Step 5Receive interest and capital payments that can be re-invested or withdrawn
Investing through auctions
All investments on ThinCats are made through an auction process. Each loan that appears on the platform has an auction attached to it which allows lenders to bid their funds (in multiples of £1,000). We offer two types of auctions:
Fixed rate auction – The interest rate of the auction is set in advance. Bids that are placed are accepted on a ‘first come first served’ basis. Once the loan amount has been reached, no more bids can be placed
Variable rate auction – Lenders bid at the interest rate they wish to receive, however once the auction ends the platform will allocate the loan to the bids at the lowest rate which make up the loan total. Therefore, if a variable rate loan has reached its total amount, a lender can still bid, as long as they are willing to accept a lower rate than those already in the auction.
A variable rate auction allows a user to place what we call a “dynamic bid”, this allows a lender to set a starting rate and a floor rate. If they were to be knocked out of the auction, the system will keep adjusting their rate down until their floor rate has been reached.
What are the risks?
It is important to understand that by investing through ThinCats your capital is at risk. You are making direct loans to businesses, and if for some reason they fail to repay, there is a chance your money will be lost. Additionally your money is not covered for compensation in the event of a loss by the Financial Services Compensation Scheme.
We try and minimise the possibility of the borrower not repaying, which is why we individually scrutinise every application, use the professional evaluation services of our loan Sponsors, monitor borrowers throughout the loan term and take out security which can be called upon should the need arise.
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’s 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.
The importance of diversification
Diversifying is a way in which you can help control the risk of peer to peer lending. The greater number of loans you hold in your portfolio, the less will be the impact of any one potential loss. If you only invest in one business, and that business fails to pay, you have potentially lost 100% of your invested capital. If you were to spread your money over a number of different businesses, and one fails to pay, you have potentially lost only a portion of your total invested capital.
It is not simply the number of loans you have in your portfolio, but how varied they are. In order to build an extensive and diversified portfolio, ThinCats endeavours to bring you as broad a range of loans as possible. Below you can see the spread of loans per industry that we have historically offered. By holding a range of different loans you will potentially be less vulnerable to specific economic conditions in a sector.
How to register
If you are interested in becoming a member you can register for free. As a member you will have access to our platform and will be able to view loans in auction, download documentation on loans, join in on loan Q & As, and participate on our forum.
To start investing you will need to transfer funds, details on how to do so will be provided following registration.
It is important to note that following registration, we are required to conduct Anti Money Laundering checks to verify your identity. These checks won’t take long, but you will not be able to invest in any loans until they are complete.
Frequently Asked Questions
How do I know borrowers are trustworthy? How do you protect lenders?
ThinCats vet all businesses that apply for a loan. Before a borrower is considered, they first need to find support from one of our independent loan Sponsors. Sponsors are there as the initial gate keeper; assessing business proposals and vetting applications. They also prepare a comprehensive information pack for the proposal that is available for members to download.
To support the Sponsor’s appraisal, our own internal credit team thoroughly evaluate all proposals, and only once they have passed our checks will the borrower’s loan be listed on the platform.
As a further check, each loan is given a security grading, ranging from 1 to 5 padlocks. These padlocks represent the ratio of loan amount to the value of the secured assets, at the time of the valuation. A 5 padlock rating runs to considerably more than 100% security value, whilst one padlock is below 25%. The specific security taken over each loan is explained in the information pack for that loan. Find out more about loan grading.
However despite all these checks you are still making an investment and your capital is at risk.
What loan types (repayment methods) do you offer?
We predominantly offer three different loan repayment methods on our platform:
Amortising – Each month you will receive back a fixed value repayment containing a split of interest and capital.
Interest Only – Each month you will receive back a fixed value repayment consisting entirely of interest. At the end of the loan term you will receive back a final interest payment and your invested capital.
Interest Rollup – You do not receive monthly repayments. At the end of the loan term you will receive back your invested capital plus all of the compound interest you have accrued over the term.
We sometimes feature loans that offer a combination of these loan types or completely different repayment terms. We recommend that you read each information pack before investing to understand what the repayment method will be.
When do I start earning interest?
Interest is calculated from the date of loan drawdown and is paid into your account monthly (subject to the loan’s repayment terms and conditions). A loan is drawn down following the end of the loans auction and once all security is in place. The time taken to drawdown varies from loan to loan, but is typically around 10 days.
How long is my money tied up for? Can I access it early?
Each loan has a set amount of repayment periods, the details of which are available to lenders before any bids are made. Should you need access to your money before the end of the loan term, ThinCats offers the facility to sell your loans to others through the Secondary Market. If a loan is deemed suitable for sale members can list their loans (with a premium or discount if they so wish) and other members can bid on them just like they would on the Primary Market. There is a fee involved with selling on the Secondary Market, which is 1% of the capital outstanding (rounded to the nearest whole pound).
Not all loans are suitable for sale on the secondary market for a variety of reasons, including missed payments. Due to the nature of the Secondary Market, the price you would receive and the ability to sell the loan will depend on there being willing buyers in the market at that time.
For more frequently asked questions visit our dedicated lending FAQ page.
Want to know more?
Fill in the contact form below with your query and email address, and a member of our team will get back to you as soon as possible.