Don't invest unless you're prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. Take 2 minutes to learn more.

The Assetz Capital platform is no longer open to investment from individual investors. No new investments into peer-to-peer loans are possible and, as a result, no new funds should be deposited. The existing loan book relating to the Retail platform is now in run-off and this will, over time, deliver the return of capital to investors. Full information can be found here . Existing Retail lenders can still log in, view information regarding their account and loan holdings and operate their account in accordance with the information regarding the run-off provided on the link above. Please see this important message regarding the currency of the information on the pages on this website.

Security on your peer-to-peer lending investments

Security on your peer-to-peer lending investments

As with any type of loan from any financial institution, from banks to lending £20 to a friend, where money is lent, there is a risk of not receiving it back. It’s a fact of life and the risk of losing money through P2P lending is a reality.

Managing risk

Managing risk is what investors need to be aware of, and understand. Each peer-to-peer platform has its own interpretation of what makes for a robust underwriting process to mitigate risk but we, as Assetz Capital, firmly believe that holding tangible asset security as part of a loan agreement needs to be the foundation of an agreement to lend to a business.

In doing so, if the loan defaults, we have the potential to recoup any potential lost capital and interest by selling on a building, stock or machinery that we took a charge over. All assets have a conservative value put on them first and then a further ‘discount’ is applied according to the type of asset, for example we never take the value of stock at cost price on face value as stock levels can rise and fall over time so we take just a small percentage of the stock value into account as security.

Of course, there are many other factors alongside holding such asset security within an agreement, so here’s a quick look at some of the security elements we consider when putting a loan agreement together.

Peer-to-peer secured lending

Of course, we assess:

  • Historic and current finances
  • Affordability of the proposed loan
  • History and the background of founders and key people within the business

We also ‘kick the tyres’ of every business by:

  • Visiting them personally and checking out how they work and if they are running a good quality business
  • Assessing the state of their current business sales activity
  • Understanding the specific demands and pressures that a particular business may face in the future
  • Having a quick look to see if their windows are clean and entrance is kept tidy

We’re not joking either. Whether the windows are clean or left to collect dust is one of many small indicators of a good business.

Getting to know a business is an essential part of our underwriting process, but we also take additional security measures. Tangible assets are a must, but other terms are regularly applied to our loans:

Personal Guarantee

This is a way to tie a commitment to repay by a certain individual through their own wealth capacity. They step in and make a payment if the borrower can't do so, therefore ensuring the account always stays up to date and repayments are met. It also keeps borrowers focussed on helping achieve a good outcome for all in the case of a default.

Senior Debenture

Debentures are effectively a charge over a business and its assets and can be relatively weak unless specific assets are also charged such as plant and machinery, stock, property, vehicles etc.

They can also be used as a senior debenture agreements, which we would always prefer, which mean that if a business was to fold for one reason or another, the senior agreement would have to be fulfilled first, above other agreements that may be in place.

Measures to avoid losses

The above are just two of our measures to avoid losses. By applying a number of these, we are able to lessen the chance of an absolute loss of capital on a loan. Defaults are inevitable, but losses can usually be avoided, that’s why reliable security is so important to back up lending.

Since we launched in 2013, Assetz Capital has suffered defaults but the ability to regain funds through the tangible security taken has meant that our loss rate remains less than 1% per annum.

This is something we are proud of, and underlines the ability of our senior board and underwriting team in helping to reduce the risk associated with lending money.

Our existing strategy will be retained as the backbone of our business so that lenders are safely protected along the way.

Having said that, following FCA guidelines and being a regulated organisation, we must make it clear that any money invested via a peer-to-peer lending platform is at risk and may not be paid back in part or in full.

As for the £20 you lent to your friend, I’m afraid that it’s up to you as to how you guarantee getting it back. I guess they might be unwilling to put their house on it!

- May 22, 2015

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