LinkedFinance - new website

lcwill · 28-11-2015 11:16pm #1

Any LinkedFinance users out there? Any thoughts on the new website - https://beta.linkedfinance.com/

Definitely a big improvement on the old one, and I like having the extra information on my portfolio upfront - number of loans, average interest rate etc. - and the "recent activity" box showing repayments is a nice touch.

Still not as open with their data as others like Bondora though. Hopefully this will come with time. I am a bit suspicious that of the 48 loans I have made so far not one has had a single late payment.....

Cute Hoor · 29-11-2015 4:21pm

lcwill wrote: »

Any LinkedFinance users out there? Any thoughts on the new website - https://beta.linkedfinance.com/

Definitely a big improvement on the old one, and I like having the extra information on my portfolio upfront - number of loans, average interest rate etc. - and the "recent activity" box showing repayments is a nice touch.

Still not as open with their data as others like Bondora though. Hopefully this will come with time. I am a bit suspicious that of the 48 loans I have made so far not one has had a single late payment.....

New site is an improvement alright although it takes a bit of getting used to.

Don't be suspicious, be thankful, over 150 loans made, 2 late payments (but both made).

lcwill · 29-11-2015 7:24pm

Cute Hoor wrote: »

New site is an improvement alright although it takes a bit of getting used to.

Don't be suspicious, be thankful, over 150 loans made, 2 late payments (but both made).

Glad to hear someone with experience of late payments - how did you find out? does linkedfinance notify you when a payment is late?

Do you know if there have been any cases of actual defaults or bankruptcy of linked finance borrowers? I also use Bondora and they give access to their whole database of information on loan performance. Linkedfinance is more of a black box.

Brussels Sprout · 29-11-2015 11:58pm

lcwill wrote: »

Do you know if there have been any cases of actual defaults or bankruptcy of linked finance borrowers?

A company I loaned money to on the site went into liquidation after only 3 repayments. Linked Finance have said that they're trying to sort out a deal but I haven't received any payments from that account since August.

Cute Hoor · 30-11-2015 1:00am

lcwill wrote: »

Glad to hear someone with experience of late payments - how did you find out? does linkedfinance notify you when a payment is late?

They emailed me about the first one (not sure if it was before or after I had contacted them), no correspondence on the second one and it was only a few days late.

Cute Hoor · 30-11-2015 1:04am

Brussels Sprout wrote: »

A company I loaned money to on the site went into liquidation after only 3 repayments. Linked Finance have said that they're trying to sort out a deal but I haven't received any payments from that account since August.

Unlucky BS, wouldn't like to hear that a business goes into liquidation so soon after being vetted by LF. Some failures of course are unfortunately virtually inevitable over a 3 year loan lifespan. When was this loan completed - looks like I dodged a bullet on it.

Duckett · 30-11-2015 1:38pm

have had a similar experience to Brussels Sprout above - the company was placed into voluntary liquidation - I am not very confident that the PG's will result in any late repayment - remains to be seen!! the borrower is beyond a default as no longer trading ...........

strettie · 01-12-2015 12:43pm

Icwill,
Have to agree the new website is a vast improvement especially on the portfolio side.

I would like to see a lenders forum on the website where we could bring issues to Linkedfinance and allow us to communicate together rather than each investor sending messages individually and to stop general issues taking over business Q&A's and then disappearing from from the site once the loan is finished.

Some examples of this over the last few months were
- businesses being approved for large loans and lenders not being notified the initial loan this is one of a sequence of loans. Peter O'Mahony (founder) made an apology for this and a commitment on how this will be addressed in future on a lendee Q&A which would not nesessarily be seen by all lenders
- initial loan requested decreasing as Linkedfinance become aware loan will not be funded
- would be good to see a listing businesses who have withdrawn loans, seeing an increasing number of these in recent months
- general communication of businesses gone into liquidation

I would be interested in a lenders forum being set up on boards.ie or elsewhere if people think there is a better online forum. I would be interested to hear peoples thoughts
Strettie

strettie · 01-12-2015 12:45pm

Brussels Sprout & Duckett

Which business you lent to went into liquidation?

Strettie

lcwill · 01-12-2015 1:49pm

strettie wrote: »

Icwill,
Have to agree the new website is a vast improvement especially on the portfolio side.

I would like to see a lenders forum on the website where we could bring issues to Linkedfinance and allow us to communicate together rather than each investor sending messages individually and to stop general issues taking over business Q&A's and then disappearing from from the site once the loan is finished.

Some examples of this over the last few months were
- businesses being approved for large loans and lenders not being notified the initial loan this is one of a sequence of loans. Peter O'Mahony (founder) made an apology for this and a commitment on how this will be addressed in future on a lendee Q&A which would not nesessarily be seen by all lenders
- initial loan requested decreasing as Linkedfinance become aware loan will not be funded
- would be good to see a listing businesses who have withdrawn loans, seeing an increasing number of these in recent months
- general communication of businesses gone into liquidation

I would be interested in a lenders forum being set up on boards.ie or elsewhere if people think there is a better online forum. I would be interested to hear peoples thoughts
Strettie

I definitely agree that we need a forum somewhere. I was quite surprised there hasn't been more discussion on here before actually - that was the main reason I decided to start this thread. For now I guess boards is this best option. Maybe someone from LF will see this thread and respond.

I have also accidentally lent to the same business twice in 2 different loans, going against my principles of diversification. Both loans are still paying back though so its OK so far.

PaulM1977 · 02-12-2015 4:05pm

Anyone have any experience of Grid Finance? Similar to LinkedFinance as far as I can see.

manonboard · 04-12-2015 3:20am

strettie wrote: »

I would be interested in a lenders forum being set up on boards.ie or elsewhere if people think there is a better online forum. I would be interested to hear peoples thoughts
Strettie

That sounds like a great idea.

I'd feel more comfortable with the linkedfinance platform with more information on how many liquidations, or failed loan repayments have happened. The information can be a bit scarce and it certainly makes me more apprehensive about investing more in the platform.

Other than that, I've had nothing but good experiences so far. Enjoyed it alot.
The new website is a great improvement and i love the extra graphs.

Delighted most of all they fixed that damn pie chart. It was such a glaring obvious design flaw that the chart did not show the principal invested..
Instead it had this "total invested" number which is next to useless for a lender.
If i lend you 100, and you pay me back 12 (10 principal + 2 interest), and i lend out that 12 euro..
I have 102 lent out.. not 112. (uses the returned principal again without deducting from the outstanding loans). I reckon this is the number they use when their site claims "14" million.

Its a big flaw, probably intentional to inflate numbers. My account was off by more than 12% because of that.

The new pie chart clears it right up and i feel much better about it. I know exactly what is out on loan now.

daheff · 04-12-2015 12:43pm

Brussels Sprout wrote: »

A company I loaned money to on the site went into liquidation after only 3 repayments. Linked Finance have said that they're trying to sort out a deal but I haven't received any payments from that account since August.

Out of interest, who was the company that went into liquidation.

I looked at linked finance, and thought it was too good to be true...they had nobody fail to make repayments (or even mention of late payments)...and the headline rates looked attractive....but when you worked them out...you were really only getting a return of around 3-4%...which to me wasn't attractive enough considering the risk.

manonboard · 04-12-2015 6:15pm

daheff wrote: »

Out of interest, who was the company that went into liquidation.

I looked at linked finance, and thought it was too good to be true...they had nobody fail to make repayments (or even mention of late payments)...and the headline rates looked attractive....but when you worked them out...you were really only getting a return of around 3-4%...which to me wasn't attractive enough considering the risk.

How do you think the return is only 3-4%?
I could be grossly miscalculating my returns, but im under the impression im getting 10-12% net?

I usually get a 14% loan rate, minus fee = about 10-12% net return?

gordongekko · 04-12-2015 6:20pm

manonboard wrote: »

How do you think the return is only 3-4%?
I could be grossly miscalculating my returns, but im under the impression im getting 10-12% net?

I usually get a 14% loan rate, minus fee = about 10-12% net return?

Isnt that over the 3 yr term of the loan?

Level 5 Vegan · 04-12-2015 8:54pm

gordongekko wrote: »

Isnt that over the 3 yr term of the loan?

Yes. But the monthly repayment becomes available immediately for you to withdraw or lend out again. So if you keep lending out your repayments every couple of weeks, you can maintain your average %.

If you were letting it pile up for the 3 years or so intending to withdraw it, sure you'll lose out cause you wouldn't be making much in the last 12 months of the loan.

gordongekko · 04-12-2015 9:17pm

Level 5 Vegan wrote: »

Yes. But the monthly repayment becomes available immediately for you to withdraw or lend out again. So if you keep lending out your repayments every couple of weeks, you can maintain your average %.

If you were letting it pile up for the 3 years or so intending to withdraw it, sure you'll lose out cause you wouldn't be making much in the last 12 months of the loan.

I was only answering the question asked.

Level 5 Vegan · 04-12-2015 10:34pm

As was I!

It's a valid point and you're right the % should be taken with a pinch of salt because you're going to have to let your cash pile up for a few months at a time whenever you do choose to begin withdrawing it.

lcwill · 05-12-2015 6:36am

manonboard wrote: »

How do you think the return is only 3-4%?
I could be grossly miscalculating my returns, but im under the impression im getting 10-12% net?

I usually get a 14% loan rate, minus fee = about 10-12% net return?

14% is pretty high, I average about 11.5% but on new loans I am going for 13%.

Cute Hoor · 05-12-2015 3:05pm

I have been signed up to Linked Finance just about a year now and this has been my experience.
I have invested in 160 businesses approx over the course of the year, relatively small amounts (there are some fairly serious investors on the site) in each loan, at interest rates from 6 to 15%.

All repayments have been met, although 2 repayments from the same business have been late.
I have re-invested each repayment (capital + interest) as I have received it.
By re-investing I now have 15.3% more invested than the funding I have provided.
I have received 4.15% interest (that is on the funding I have provided)

I will probably be providing very little extra funding from now on, I will just be re-investing the repayments received, and I should shortly be receiving sufficient daily repayments to fund projects on an ongoing basis.

I have no plans for the moment to either stop investing or to take out any money.
Doing a very rough calculation I should have 65% approx more invested than I've funded by the end of 2016, and 140% approx by the end of 2017. This is allowing of course for the utopian situation of LF staying in business (I see no obvious reason why they wouldn't) and no loan defaulting (an unlikely scenario). Getting access to your money of course is the real difficulty - you will have to wait for 3 years to get it all out.

Generally speaking happy enough how the business is being operated, although there was one situation where a company successfully sought funding (€40k), and were back within a couple of weeks looking for a second tranche. The fact that there was no mention of the second tranche requirement when the first one was being sought smacked of sharp practice to me. The second tranche wasn't funded.

Brussels Sprout · 05-12-2015 5:20pm

daheff wrote: »

Out of interest, who was the company that went into liquidation.

It was a roofing company based in Laois. On the old site they had a rating system for the businesses. I didn't even realise that the companies balance sheets and profit/loss statements were available so I just went by the ratings. Lesson learned.

I still think it's a great idea though and have since added to my funds on there (but I'm far more rigorous and selective now)

daheff wrote: »

...but when you worked them out...you were really only getting a return of around 3-4%...which to me wasn't attractive enough considering the risk.

I initially thought this as well but I wasn't factoring in the fact that every month you get back some of your principal which enables you to reinvest it.

manonboard · 05-12-2015 10:22pm

gordongekko wrote: »

Isnt that over the 3 yr term of the loan?

It's APR so its a per year if im not mistaken on how that works?
Now in year two, the APR is based on the remaining principal, but every month i log back in and relend the returned principal to a new loan. So its effectively a Effective annual growth number, minus the fee of course.

I have 10k in it, im about 8 months in. About 600 interest earned.
Ill hit 1000 euro profit by 12 month i suspect. I would be more but i drip fed my account with funds so it wasnt 10k from the start.

manonboard · 05-12-2015 10:23pm

I do make more in share trading.. quite a bit more.. but i like to try different things and keep my money very diverse in different platforms.

irish_goat · 07-12-2015 11:22am

Is anyone using this with the plan of sticking in long term i.e. 20 years?

daheff · 07-12-2015 11:34am

manonboard wrote: »

How do you think the return is only 3-4%?
I could be grossly miscalculating my returns, but im under the impression im getting 10-12% net?

I usually get a 14% loan rate, minus fee = about 10-12% net return?

The headline rate of 14% is on the full principal. You wont get interest on this full amount every month due to capital repayments. Over the 3 year period your principal is reducing every month (like a mortgage), so the interest received over time is less & less.

Level 5 Vegan wrote: »

Yes. But the monthly repayment becomes available immediately for you to withdraw or lend out again. So if you keep lending out your repayments every couple of weeks, you can maintain your average %.

If you were letting it pile up for the 3 years or so intending to withdraw it, sure you'll lose out cause you wouldn't be making much in the last 12 months of the loan.

Brussels Sprout wrote: »

I initially thought this as well but I wasn't factoring in the fact that every month you get back some of your principal which enables you to reinvest it.

Even if you intend on reinvesting monthly...can you be sure that you will always find enough 'quality' investments?

Now dont get me wrong, I'm not saying that there isnt a place for P2P lending, but I think people are getting dragged in by headline rates that arent quite what people think they are.

taking a worked example (and please somebody point out if i'm wrong):

Interest rate 12%
Loan amount 1000
Term 36 months

I work out that the monthly repayment is approx 33.21 EUR (principal & int). This then means that a total of 195.75 EUR interest is received over the life of the loan.
Quick cal means at 19.5% overall return, but per annum its more like 6.5% (dirty calc). Then once you pay your CGT tax its more like 4.35% (appreciate you have to pay tax on any gains)

Personally, for the risk involved I'd expect a better return

Cute Hoor · 07-12-2015 2:23pm

daheff wrote: »

taking a worked example (and please somebody point out if i'm wrong):

Interest rate 12%
Loan amount 1000
Term 36 months

I work out that the monthly repayment is approx 33.21 EUR (principal & int). This then means that a total of 195.75 EUR interest is received over the life of the loan.
Quick cal means at 19.5% overall return, but per annum its more like 6.5% (dirty calc). Then once you pay your CGT tax its more like 4.35% (appreciate you have to pay tax on any gains)

You are pretty much spot on here daheff, although I don't have a specific example of 12% to back up your estimate. The closest I can give is 12.2%, where the interest repayable on €1k over the 36 months would be €199.20, however when you take out LF's cut it brings it down to €179.50

manonboard · 07-12-2015 2:26pm

irish_goat wrote: »

Is anyone using this with the plan of sticking in long term i.e. 20 years?

I could only say i am in it until it no longer becomes profitable and safe to an extent offered by other options. If the rate fell, or the risks go up (due to bad businesses being approved), I'd stop lending and just remove my principal as its returned to me.
I guess i'd treat any option like that.

daheff wrote: »

Even if you intend on reinvesting monthly...can you be sure that you will always find enough 'quality' investments?
--
Personally, for the risk involved I'd expect a better return

So far, certainly not even a blink not finding quality investments. Of course, the market could get saturated and lower it, but if that turns out to be the case, I'd just move my money to somewhere else.

Luckily i've had no miss payments in the year i've been in it, with about 50+ loans on my books.

Cute Hoor · 07-12-2015 2:30pm

irish_goat wrote: »

Is anyone using this with the plan of sticking in long term i.e. 20 years?

I haven't thought about any particular lifespan for this, don't need this money at the moment so happy enough to leave it in there, earning a few bob and hopefully helping out a few businesses along the way. It would be silly of course not anticipating future financial needs and positioning yourself to get your money back in a reasonably timely manner as those needs arise.

Nody · 07-12-2015 3:35pm

manonboard wrote: »

I could only say i am in it until it no longer becomes profitable and safe to an extent offered by other options. If the rate fell, or the risks go up (due to bad businesses being approved), I'd stop lending and just remove my principal as its returned to me.
I guess i'd treat any option like that.

Be more concerned about the part you can't see; TrustBuddy is likely to turn into a more common occurrence over time (not talking about Linked Finance specifically but P2P lending in general). In essence TB used the money people got returned to do their own lending (it's only paper value as long as no one asks for it after all) and then started to use it to cover up losses made on their own lending rendering it a ponzi scheme.

manonboard · 07-12-2015 3:41pm

Nody wrote: »

Be more concerned about the part you can't see; TrustBuddy is likely to turn into a more common occurrence over time (not talking about Linked Finance specifically but P2P lending in general). In essence TB used the money people got returned to do their own lending (it's only paper value as long as no one asks for it after all) and then started to use it to cover up losses made on their own lending rendering it a ponzi scheme.

Appreciate the link and info, ill do my best to keep an eye on it. Cheers for highlighting the risk

lcwill · 08-12-2015 1:24pm

Just received notice of my first non-payment, a borrower has gone into liquidation. One of the Directors personally guaranteed the loan though so let's see what happens.

About 75% of the loan is still outstanding - I only make minimum loans (e50) so only e37 at risk but that is a fairly sizeable chunk of the interest I have received so far, and I understand we cannot write losses off against tax.

I have made 50 loans of e50 but maybe not diversified enough yet.

strettie · 10-12-2015 5:10pm

Icwill,

Which borrower has gone into liquidation ?

when you say 75% still outstanding does this mean loan was less than 9 months old ?

Strettie

lcwill · 10-12-2015 6:42pm

strettie wrote: »

Icwill,

Which borrower has gone into liquidation ?

when you say 75% still outstanding does this mean loan was less than 9 months old ?

Strettie

Hi Strettie,

It's Manor Brands (also known as Blacksheep). It was about nine months old. There were about 27 repayments left. The email said we wouldn't be getting the next repayment but that they would be trying to recover the loan from the Directors.

benjamin d · 10-12-2015 9:29pm

Hey guys I've just started a little test account on Linked Finance with a very small amount. From reading about it, am I right in thinking that in order to make it work I'd need to keep repayments received rolling onto other loans as they're coming in, yes? So with the €50 minimum loan amount I'd need to start with, for example, roughly €600 or so at around 10% average to get a monthly repayment total over €50 and reinvest?

Nody · 10-12-2015 10:33pm

benjamin d wrote: »

Hey guys I've just started a little test account on Linked Finance with a very small amount. From reading about it, am I right in thinking that in order to make it work I'd need to keep repayments received rolling onto other loans as they're coming in, yes? So with the €50 minimum loan amount I'd need to start with, for example, roughly €600 or so at around 10% average to get a monthly repayment total over €50 and reinvest?

About 1500 EUR would be required because you don't get 10% for three years which means your starting capital has to be higher.

benjamin d · 10-12-2015 10:41pm

Nody wrote: »

About 1500 EUR would be required because you don't get 10% for three years which means your starting capital has to be higher.

Why 1500? Wouldn't I be keeping the interest rate rolling by having exactly enough (after the fee) to reinvest?

lcwill · 10-12-2015 11:04pm

Hi benjamin,

You are right in that the interest rate is what you get on your whole portfolio, and that you have to keep it lent out. No one is paying you for the repaid money sitting in your account.

To be able to make a new E50 loan every month from repayments (capital + interest) you would need about E1,200 investment at a bit over 10% interest. You would probably want at least that much invested in order to get enough diversification too.

I have E2000 of investments at around 11.7% average interest rate. In December I am supposed to get E62.54 of capital paid back, and E19.53 of interest = total repayments of E82.07 (minus 2.16 in fees). Everything gets lent out again as soon as I have E50 of repayments in the account (every 3 weeks or so).

benjamin d · 10-12-2015 11:25pm

lcwill wrote: »

Hi benjamin,

You are right in that the interest rate is what you get on your whole portfolio, and that you have to keep it lent out. No one is paying you for the repaid money sitting in your account.

To be able to make a new E50 loan every month from repayments (capital + interest) you would need about E1,200 investment at a bit over 10% interest. You would probably want at least that much invested in order to get enough diversification too.

I have E2000 of investments at around 11.7% average interest rate. In December I am supposed to get E62.54 of capital paid back, and E19.53 of interest = total repayments of E82.07 (minus 2.16 in fees). Everything gets lent out again as soon as I have E50 of repayments in the account (every 3 weeks or so).

Great thanks, I guess I hadn't done my sums properly!
Would the safe bet be to keep all the loans at the lower end near €50?

lcwill · 11-12-2015 12:04am

benjamin d wrote: »

Great thanks, I guess I hadn't done my sums properly!
Would the safe bet be to keep all the loans at the lower end near €50?

Yes definitely keep all your loans at E50, for now at least.

In this kind of investment diversification is essential so you want to spread your money across as many loans as possible to minimise risk.

Once you start getting up to 100 loans in your portfolio you could increase the loan amounts but I wouldn't increase before then.

Don't be in a rush to lend - decide the interest rate you want and stick to it. It will take you at least a month to lend out your first E600 in 12 different E50 loans, maybe even 2 months, but that is ok, don't go throwing it out E100 or E200 at a time at 8% just to get it lent. That is a recipe for disaster.

Brussels Sprout · 11-12-2015 8:30pm

daheff wrote: »

Even if you intend on reinvesting monthly...can you be sure that you will always find enough 'quality' investments?

They usually have about 20 new companies per month so if you're looking to reinvest your repayments then you should be able to find a few in here that'll meet whatever your criteria is.

Alternatively you could withdraw your repayments each month and invest them elsewhere.

daheff wrote: »

taking a worked example (and please somebody point out if i'm wrong):

Interest rate 12%
Loan amount 1000
Term 36 months

I work out that the monthly repayment is approx 33.21 EUR (principal & int). This then means that a total of 195.75 EUR interest is received over the life of the loan.
Quick cal means at 19.5% overall return, but per annum its more like 6.5%

Again, this is only true if you're leaving your money sit there. The beauty of it is that from the very first month your capital is being returned to you so you can reinvest it, meaning your real rate of return will be higher than this.

Nody · 11-12-2015 9:14pm

Brussels Sprout wrote: »

Again, this is only true if you're leaving your money sit there. The beauty of it is that from the very first month your capital is being returned to you so you can reinvest it, meaning your real rate of return will be higher than this.

There are a few problems with your though process here; first of all you assume that there will always be companies to invest in that are good enough quality; secondly you assume you can't do the same with any other type of investment and third you're not calculating how ROI works.

The reality is you get 6.5% return on the investment, that you reinvest the money into another company does not change the basic fact that your investment is paying out 6.5% interest and that you're putting money into something else. It does not matter if you take the 6.5% and buy a lotto ticket winning the euro lotto because your investment is still only giving you 6.5% still; the money you're investing back is a new investment (you've been given cash to your account, you decide to invest that somewhere else) and what you're trying to count as increased dividend is simply not true.

This also ties in with the second effect of increased risk (take the example above of 100 companies, how many read the financial reports, the cash flow, evaluated the future of the company etc.?) as you keep on having to increase the amount you borrow out and the chance that you get lazy (human nature, as they been vetted they should be ok so no need to check them personally or keeping track on a secondary loan, notices etc.).

lcwill · 12-12-2015 9:28am

Nody wrote: »

There are a few problems with your though process here; first of all you assume that there will always be companies to invest in that are good enough quality; secondly you assume you can't do the same with any other type of investment and third you're not calculating how ROI works.

The reality is you get 6.5% return on the investment, that you reinvest the money into another company does not change the basic fact that your investment is paying out 6.5% interest and that you're putting money into something else. It does not matter if you take the 6.5% and buy a lotto ticket winning the euro lotto because your investment is still only giving you 6.5% still; the money you're investing back is a new investment (you've been given cash to your account, you decide to invest that somewhere else) and what you're trying to count as increased dividend is simply not true.

This also ties in with the second effect of increased risk (take the example above of 100 companies, how many read the financial reports, the cash flow, evaluated the future of the company etc.?) as you keep on having to increase the amount you borrow out and the chance that you get lazy (human nature, as they been vetted they should be ok so no need to check them personally or keeping track on a secondary loan, notices etc.).

It think it is valid to look at your returns at portfolio level rather than individual loans.

And in most cases the key to peer to peer lending is just trusting the systems the platform has in place to vet borrowers and put the Autobid on. That way, with enough diversification, you returns will equal the average returns of all investors in the platform.

Picking winners is a losers game. Diversify and aim for average returns.

Cute Hoor · 12-12-2015 2:23pm

You have to trust the due diligence that LF are carrying out on these businesses to a great extent, how can an ordinary investor properly financially evaluate a business other than by reading the financial summary and asking questions. Evaluating the future of the business is a finger in the air at best, looking at how long a business has been in operation, how well they have survived the recession, the need for the products they are manufacturing/selling etc are probably the most you can do. How can an ordinary punter do a proper evaluation of a butchers in Kilrush?

Any business who looks for a loan from LF are doing so to help their business develop, not repaying that loan will mean they are gone out of business or they will be doing significant reputational damage to their business. LF have a vested interest in ensuring that the businesses they feature can and will repay the loan - any failure of a business to meet repayments will result in reputational damage to LF, multiple failures will put them out of business. And of course every lender wants every business on LF to succeed. So all three stakeholders have a vested interest in this process succeeding.

Of course all businesses will not succeed and all loans will not be fully repaid, to expect otherwise would be naive in the extreme. Over the last year LF, at a guess, have funded 250 businesses, of those 250 it appears one has failed (if there were more it is likely that one of us would have come across it), and that was after 3 repayments had been made. That is roughly a 0.4% failure rate. I would expect this failure rate to be higher, and it will I suspect over the course of the 3 year loans. Anybody who is lending on LF has to expect a certain level of failure.

I don't see any reason why the failure rate should increase though as the P2P model matures, there are literally thousands of very good businesses out there, good businesses who will need financial support from time to time to develop their business. Once LF continue doing their due diligence on potential businesses then everything should be reasonably OK.

I had a look at the autobid facility and shied away from it, I prefer to have a look at each loan offer on its merits, and decide based on what I see whether or not to invest, also means I am investing at varying rates of return. As you say Icwill, diversifying is the key, investing in a larger number of businesses will make the odd (very odd hopefully) failure easier to bear. Investing roughly the same amount (whether that be €50 or €1000) in each business you invest in will also help average out any failures.

Nody · 12-12-2015 4:32pm

Cute Hoor wrote: »

I don't see any reason why the failure rate should increase though as the P2P model matures, there are literally thousands of very good businesses out there, good businesses who will need financial support from time to time to develop their business. Once LF continue doing their due diligence on potential businesses then everything should be reasonably OK.

That only works as long as LF is competitive for the businesses though; how long do you think it will remain so? Banks are currently restrictive due to legislative requirements on core capital in the years to come (basically need to keep more cash in hand) and are currently stocking up but once there do you believe offering a 12% loan will be competitive (keeping in mind this is 12% on today's basically 1% base interest rates, so ~10 percent units above base as a rough estimate)?

What I expect will happen is the companies that can go to the bank/state investment quango will go down that route (better rates, lower repayments and longer terms); the once that can not (or the loans are to small) will keep doing P2P but that's going to decrease the quality of such companies as a whole (banks cherry picking the good companies leaving the rest). The second part I'd worry about is things are pointing in the right direction but what happens in another 2008 style recession? How many companies will simply then have to start giving up (after taking out one or two loans to try to keep the business running before failing; company liability after all)? This is why I'd be wary about thinking of it as a 30 year investment plan; I simply don't see the model having been properly tested in a difficult environment.

Brussels Sprout · 12-12-2015 5:06pm

Nody wrote: »

...

I think the heart of the disagreement here is that you're focusing entirely on the particular loan in one company whereas I'm looking at using the website as an investment tool overall.

If people invest all of their money initially and then leave the repayments pile up in the form of cash, then yes, they'll get a return of ~6% per annum.

That would be a poor way of using the website though.

Nody wrote: »

first of all you assume that there will always be companies to invest in that are good enough quality;

If there aren't companies that you wish to invest in then you can withdraw your cash repayments each month and invest them elsewhere. The key point is that you have the money back to do with it what you wish.

Nody wrote: »

secondly you assume you can't do the same with any other type of investment

Well you can't if you wish to get the stated annual rate of return.

If you have your money in, for example, a bank account that pays 2% per annum but you withdraw portions of the money throughout the year then at the end of the year overall your money will not have increased by 2%.

You can't have it both ways. If you want to receive the APR rate of the loan (12% in the example) then you have to be prepared to have your money tied up for the full amount of time. That's not how the individual loans work though.

Cute Hoor · 12-12-2015 5:24pm

Nody wrote: »

That only works as long as LF is competitive for the businesses though

Of course!

Nody wrote: »

how long do you think it will remain so?

Absolutely no idea, and when LF is no longer competitive and cannot get reasonable businesses requiring finance it will be time for me to leg it taking my money out as it is being repaid.

Duckett · 13-12-2015 12:30am

Pearse Roofing and Cladding went into vol liquidation with 32 repayments outstanding.

badzae · 13-12-2015 1:48am

Duckett wrote: »

Pearse Roofing and Cladding went into vol liquidation with 32 repayments outstanding.

Pearse Cladding received a loan for €30,000 on 5th February 2015. 4 payments were made on - Mar 5th, Apr 5th, May 5th and June 5th. They also had a 2nd loan for €35,000 which bidding ended on May 25th but the loan amount was never transferred to the borrower.

On June 11th lenders received an email from Linkedfinance:

"The loan auction for Pearse Roofing and Cladding Ltd finished on Monday 25th of May 2015. Our credit control team required a number of documents from Pearse Roofing and Cladding Ltd before we were prepared to advance their loan amount of €35,000. Despite numerous requests these documents are not forth coming so we have made a decision to not proceed with this loan and have returned the funds to all the lenders."

Then on July 8th we received this email to say they were in liquidation:

"On July 5th you were to have received a payment of €X to your account from Borrower Pearse Roofing. Unfortunately, we did not receive that payment from the Borrower so we contacted their bank with another Direct Debit request. Disappointingly, we still have not received the expected repayment. We have also contacted Pearse O'Connor directly to understand why this situation has arisen and have been informed that the company is now in to voluntary liquidation."

I think its worrying that there was such a short time between the second loan date and the liquidation date.

Loan 1:
linkedfinance.com/business-loans/investment/borrower/loan?id=2144

Loan 2: (this was fully funded but was cancelled by linkedfinance)
linkedfinance.com/business-loans/investment/borrower/loan?id=2485

Cute Hoor · 13-12-2015 1:47pm

badzae wrote: »

I think its worrying that there was such a short time between the second loan date and the liquidation date.

That certainly is worrying. It is also disappointing that a business would look for money so soon after getting the first loan and knowing they were in financial difficulties. It would be good to be able to see the Business Profile, Financial Summary, Validation and Q&A after the loan has closed, might give you some insight.

You can expect businesses to fail but the disappointing element here is that these 2 loans (and another one almost certainly on the way) have failed so quickly, second or third year maybe, but so early in the life of the loan, disappointing.

lcwill · 13-12-2015 2:28pm

Cute Hoor wrote: »

That certainly is worrying. It is also disappointing that a business would look for money so soon after getting the first loan and knowing they were in financial difficulties. It would be good to be able to see the Business Profile, Financial Summary, Validation and Q&A after the loan has closed, might give you some insight.

You can expect businesses to fail but the disappointing element here is that these 2 loans (and another one almost certainly on the way) have failed so quickly, second or third year maybe, but so early in the life of the loan, disappointing.

Actually on more transparent sites like Bondora the statistics show that defaults are likely early in the life of a loan and once they have made 5 or 6 payments the likelihood of default becomes very low. Could be the same here if only we had the full data.

Nody · 13-12-2015 4:26pm

Cute Hoor wrote: »

You can expect businesses to fail but the disappointing element here is that these 2 loans (and another one almost certainly on the way) have failed so quickly, second or third year maybe, but so early in the life of the loan, disappointing.

Actually I'd say it's quite normal; the company is failing but the owners think they can turn it around but need bridge money for <insert big deal/resolution/turn around/hail marry solution> so take out a loan with intention to pay it back when/if things work out. As it takes longer than expected they request another loan to keep them going and if it fails; well they have no liability anyway so why not go out on a limb and chance it?

It's the same with companies on the stock exchange who're regularly requesting cash injections except you get better transparency over the numbers.

LinkedFinance - new website

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