Meeting our Regulatory Requirements

Outcomes Statement

The following information is intended to aid your understanding about the overall performance of Invest & Fund (I&F) loans and to provide a better understanding of Default.

The tables below provide information on loan performance for each financial year since I&F undertook its first residential property development loan.

The tables below use figures which refer to past performance and please be aware that these do not provide a reliable indicator of future results.

Outcomes Statement for Risk Classification: Senior Loans

Outcomes Statement: current default rates and projected and actual capital bad debts	Risk Classification: Senior Loan Financial year ending 31st March
	2016	2017	2018	2019	2020	2021	2022	2023
Loan Facilities with initial draw in the year to 31/3 (£) (Note 1)	2,173,669	14,494,712	13,922,106	28,817,585	25,778,678	21,283,325	62,901,174	69,936,733
Cumulative value of total facilities (£) (Note 2)	2,173,669	16,668,381	30,590,487	61,879,458	87,658,136	108,941,461	171,842,635	241,779,368
Live Loan total facilities (£) (Note 3)	724,556	13,976,316	16,856,635	27,987,140	23,630,779	21,408,201	57,471,908	60,905,096
Value of Loans in default as a percentage of Live Loans (%) (Note 4)	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Value of Loans in default as a percentage of cumulative loans (%) (Note 5)	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Projected capital bad debt write-off as a percentage of Live Loans (%) (Note 6)	0.00%	0.24%	0.29%	0.34%	0.49%	0.10%	0.10%	0.10%
Actual capital bad debt written off cumulatively (%) (Note 7)	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%

Risk Classification: Senior Loan
Financial year ending 31st March

Outcomes Statement: current default rates and projected and actual capital bad debts

Loan Facilities with initial draw in the year to 31/3 (£) (Note 1)
2016	2,173,669
2017	14,494,712
2018	13,922,106
2019	28,817,585
2020	25,778,678
2021	21,283,325
2022	62,901,174
2023	69,936,733

Cumulative value of total facilities (£) (Note 2)
2016	2,173,669
2017	16,668,381
2018	30,590,487
2019	61,879,458
2020	87,658,136
2021	108,941,461
2022	171,842,635
2023	241,779,368

Live Loan total facilities (£) (Note 3)
2016	724,556
2017	13,976,316
2018	16,856,635
2019	27,987,140
2020	23,630,779
2021	21,408,201
2022	57,471,908
2023	60,905,096

Value of Loans in default as a percentage of Live Loans (%) (Note 4)
2016	0.00%
2017	0.00%
2018	0.00%
2019	0.00%
2020	0.00%
2021	0.00%
2022	0.00%
2023	0.00%

Value of Loans in default as a percentage of cumalative loans (%) (Note 5)
2016	0.00%
2017	0.00%
2018	0.00%
2019	0.00%
2020	0.00%
2021	0.00%
2022	0.00%
2023	0.00%

Projected capital bad debt write-off as a percentage of Live Loans (%) (Note 6)
2016	0.00%
2017	0.24%
2018	0.29%
2019	0.34%
2020	0.49%
2021	0.10%
2022	0.10%
2023	0.10%

Actual capital bad debt written off cumulatively (%) (Note 7)
2016	0.00%
2017	0.00%
2018	0.00%
2019	0.00%
2020	0.00%
2021	0.00%
2022	0.00%
2023	0.00%

Outcomes Statement for Risk Classification: Junior Loans

Notes & Terms used

Capital bad debt write off/written off refers to loans where security is being/ has been realised and there is an expected/ actual shortfall between the amount to be realised and the loan capital which is owed. Any loan interest accrued is not accounted for in the above figures.

1. Total sum of Lending (i.e. loan facilities approved) in the year where at least the initial drawdown has been undertaken

2. Total sum of Cumulative Lending (i.e. total value of loan facilities approved) where at least the initial drawdown has been undertaken

3. The total sum of the 'Live' Loan Facilities

4. Total sum of loans in Default, as defined by the FCA for loans secured on property (i.e. where repayment >180 days past due) shown as a percentage of Live Loans (See Note 3)

5. Total sum of loans in Default as defined by the FCA for loans secured on Property (i.e. where repayment > 180 days past due) shown as a percentage of cumulative lending (See Note 2)

6. Projected capital bad debts to be written off shown as a percentage of Live Loans (Note 3). This includes both a generic projection and any loan specific forecast capital bad debts. The generic projection follows prudent modelling/assumptions and represents a projection of the expected capital loss after the recovery of security as a percentage of total loans made in a financial year and, apart from loans forecast to become bad debts, does not reflect any loan by loan assessment. The generic projections have been made on a weighted average basis using possible default scenarios which may give rise to a loss to capital following the realisation of security but do not provide a reliable indicator of future results. Assumptions used for Senior Loans are the mix of facilities between property development loans and bridging loans; an expected probability attributed to given events of default occurring and the likely level of capital loss resulting. Assumptions used for Junior Loans are that all loans relate to development funding; an expected probability attributed to given events of default occurring and the likely level of capital loss resulting.

7. Total sum of all capital bad debts actually written off as a percentage of Cumulative Lending (Note 2)

Default

The tables above uses the FCA definition of ‘Default’ being a loan secured on property which is 180 days (or more) past it's due repayment date but there are other uses of the word ‘Default’ which carry a different meaning which can sometimes appear confusing.

A Borrower’s loan facility agreement includes clauses describing a range of potential events which may constitute a default and these are known as ‘Events of Default’. These can range from ‘technical defaults’ such as annual accounts not being provided within stipulated timescales, to ‘payment default’ (late partial payment) or, more seriously for example, the facility not being repaid by the expiry date which could potentially result in a bad debt.

Should there be an Event of Default on a loan, the severity, including the coverage of the loan against the security, will be considered when deciding upon the most appropriate course of action. Available actions may include;

• issuing a permanent waiver (e.g. Invest & Fund accepting that whilst a breach of the original terms has taken place it is appropriate in the circumstances to waive that term);
• issuing a temporary waiver (e.g. allowing the borrower more time to resolve an issue);
• formal default being called which could ultimately lead to a demand for repayment and recovery action being taken, should the event of default not be satisfactorily addressed following an appropriate period of forbearance.

An Event of Default will not always lead to a bad debt or recovery action being taken.

Before making a decision to lend, Lenders should ensure they have reviewed sufficient information to ascertain the legal, financial and tax implications of a loan, and understand the potential risks to enable them to make an informed decision.

To aid this we publish in our Credit Summaries a ‘Description and Illustrated Net Return’ which describes a fair description of the net return and points out that lenders should take into account the potential for capital losses, Invest & Fund facility fees and any income tax which may be payable when calculating their net return.

For further information on our default procedures please see our Lender FAQ section.

I&F’s Role in Facilitating Loan Agreements

What role does I&F perform in Originating and Reviewing potential loans for our Platform?

I&F seeks to originate loans through a regionally dispersed team of Business Development Managers both directly from borrowers and through suitably screened intermediaries. Invest & Fund has an expert team of credit specialists who review individual loan applications aided by detailed monitoring of all loan applications supported by independent surveyors, valuers and specialist lawyers.

For more information on this see the section How Risk Is Assessed

How do I&F agree pricing for loans it originates?

We set the pricing on our loans by reference to the relevant market conditions, the individual characteristics of the loan and to reflect the competitive environment of the market in which we operate. The terms of the loan are set in the agreement with the borrower and are not varied via the marketplace.

Do we advertise target rates on loans we originate?

I&F does not advertise target interest rates for portfolios of loans. We make lenders aware of the coupon rate of the loan (i.e. the rate of interest to be paid by the borrower) and in the credit summaries for new loans provide a fair description of the likely actual return taking into account fees, default rates and taxation.

Do lenders or I&F select which loans you buy?

I&F never selects loans on behalf of our lenders. We encourage all our lenders to review and consider each loan on its merits and assess which are right for them. We do also offer an “Auto-Lend” product (see below) which allows for the acquisition of loans according to criteria determined by the lender.

Do we ever select P2P agreements for our lenders?

No, we do not provide advice or exercise any discretion on behalf of lenders.

We do however operate a non-discretionary Auto-Lend Service.

Do we ever offer portfolios of P2P loans to our lenders?

No, unlike many other platforms we do not trade in funds or portfolios of loans. Our lenders make their own decisions on a loan by loan basis as to which loans they want to lend to.

How does our “Resale Marketplace” operate?

Any lender, through the website can place for sale any loan position from their holdings. This is then available for all lenders to view and purchase. We charge a 0.25% fee for all successful transactions execute this way. No sale Is guaranteed by us and you should not consider that your loan holdings are “liquid” and readily realisable because the ability to sell via the Resale Marketplace depends entirely upon the willingness of other lenders to buy.
Loans which are in formal default are generally prevented from being traded on the Resale Marketplace.

What tax liability arises for lender purchasing loans through I&F?

I&F credits lender accounts with the gross interest (after deduction of facility fees) paid by the borrower. It is then the lenders responsibility to declare this income (unless your holdings are within our IFISA wrapper product) with your annual tax return. We are required by HMRC to declare all interest payments we make to individual lenders. I&F does not provide tax advice so if you are unsure about the tax position then you should seek advice from a suitably qualified professional.

How does I&F deal with a loan in late payment or default?

I&F seeks to work constructively with borrowers in circumstances where developments fall behind schedule or sales of finished units are slower than anticipated. This may lead to a restructuring of the loan. In many circumstances facilitating the completion of a project or the sale of completed units results in the best outcome for all.

Where a borrower is unresponsive or in certain other circumstances, we then apply an enhanced rate of interest to the loan. This is typically 9% above the prevailing rate.
Loans which are in default are generally prevented from being traded on the Resale Marketplace.

What assumptions are used to calculate expected future default rates?

The Finance Director has used a probabilistic model to generate default rates and recovery rates for both development and bridge loans based on worst case experience for residential property in the UK including the period of the financial crisis in 2007-09. These are aggregated statistics and do not take into account the regional composition of the I&F portfolio nor experiences of other alternative finance lenders operating in the same market as I&F. They are necessarily therefore only a proxy for what could be the realised performance of loans we originate.

See Outcomes Statement for further information.