Linked Finance - Peer to Peer Lending

Isn't that the lot of most intermediaries?

Do you have a better way for businesses to get finance other than through intermediaries who match savers and borrowers?

Also, the risk of total capital wipeout is quite low as long as you do not put all your eggs in one basket. The default rate is about 2%, the average lent by anyone to a loan is less than 500 euro or less, so total risk of wipeout is not as dramatic as you indicate (!)
 
A net return of 1.65% with the risk of total capital wipeout!

A bit like the pickaxe makers during the Californian gold rush, I think LinkedFinance are the ones making the real money here.
With Linked Finance you can re-invest the monthly repayments, so it's most likely that a lot less than €5.5k was put on the line in real terms.

If @Powderfinger only started 3 years ago, it's likely they still have loans repaying and that return increasing as most seem to be on 3 year terms.

I dabbled with Linked Finance for a few years before the auto-bid system meant you could no longer vet potentials in advance. Average interest rate on the 64 loans I chose was 11.64%.
 
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This all sounds like nonsense to me.

It’s like I’ve set-up Ocean Finance here in Ireland and I’m lending money out to basket cases and should be charging 20%.

Except I can target the most risk adverse group on the planet, cash depositors, and promise them something better than cash deposit rates.

And I keep the difference.

It’s lending to subprime companies in a world of QE etc.

Some proverbial Granny will be carried out someday.
 
Given that the reported loan default rate is currently around 2%, where does the label "basket cases" come from?

Admittedly the businesses are choosing to borrow from Linked Finance and not the banks, and presumably pay a higher interest rate, but that does not make them basket cases - more riskier, yes but not basket cases
 
I don't think they are basket cases. A factor is that they are seeking loans that are probably too small for the pillar banks to make economic sense.
 
Given that the reported loan default rate is currently around 2%, where does the label "basket cases" come from?
Agreed, I'm no longer a fan but the adjusted return rate is running at 7.47%
 
I don't think they are basket cases. A factor is that they are seeking loans that are probably too small for the pillar banks to make economic sense.
the average loan is now € 100,000 - surely the banks can not be disinterested in those?

I suspect that the banks require for more paperwork, scrutiny and time than Linked Finance
 
I suspect that the banks require for more paperwork, scrutiny and time than Linked Finance

I think that's a fair comment, and probably explains why there's some better quality borrowers on the platform.

However:

- you don't see their credit records

- you don't get a full picture of other borrowings, or repayment terms

- you don't see their full tax position, to include details of taxes that have been "warehoused", and will have to be repaid

- the only financial info provided, is dated

- you don't see the financial profile of the party providing the unsecured personal guarantee, or know what other guarantees they might have signed


When all is said and done, you are relying on a personal guarantee to support each loan, when things go wrong, and there's no incentive for Linked Finance to put time and money into chasing defaulters.

Furthermore, guarantors have traditionally been slow to pay up (across all lending, not specially at LF), and typically negotiate very big discounts on the amount that they owe.

I've been in Linked Finance, as a lender, for a good few years, but I have been in exit mode, for over a year now. As my funds become available from repayments, I'm withdrawing them.

They got lucky, with the SBCI Guarantee, as it enabled them to look better than they really are... Imho.

While I like the concept of peer to peer lending, the lender is the one taking the risk, no one else, and the lender doesn't get enough in return.
 
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... the lender is the one taking the risk, no one else, and the lender doesn't get enough in return.
I think the risks are clearly stated and, obviously, some lenders are happy with the returns provided
 
I think the risks are clearly stated and, obviously, some lenders are happy with the returns provided

I honestly don't think that most people fully understand it, tbh.

Then there's the core group of lenders, many of whom participated in an equity raise for Linked Finance in 2017. Are they lending on the same terms as the rest of us, or getting preference on which borrowers they lend to, while the rest of us are left to hope that we get lucky on an auto-bid?

From what I've seen of them, they've had a fairly high turnover of staff, which concerns me.

It's also very odd how their average arrears are lower than any of the banks, who lend to SMEs. However, that said, most SMEs have been benefitting from state supports such as wage subsidy scheme and deferred tax, giving SMEs a notable boost to their cashflows. Having that cut off, and having to repay warehoused tax over the next couple of years, may well see a lot of SMEs come under pressure.
 
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the average loan is now € 100,000 - surely the banks can not be disinterested in those?

I suspect that the banks require for more paperwork, scrutiny and time than Linked Finance

The below is from BOI website, so I think an average loan of 100k is not worth it for them given the amount of paperwork. Why do 10 loans of 100k when they can do 1 for 1m. There's probably also a paperwork for factor from Linked Finance

Small and Medium enterprises are defined as businesses that employ fewer than 250 people and have an annual turnover not exceeding €50 million and/or an annual balance sheet total not exceeding €43 million.
 
The Banks are regulated, and must follow the likes of the SME Code / Consumer Protection Code - that places significant additional obligation on them, that isn't placed on the likes of Linked Finance. Thats one of the reasons why Banks take longer than non-bank lenders, to approve and draw loans. Sadly, there are also various other factors, including a certain amount of unnecessary admin.

Don't forget, Banks are responsible for protecting peoples deposits, which they lend out.... LF are not.
 
The Banks are regulated, and must follow the likes of the SME Code / Consumer Protection Code - that places significant additional obligation on them, that isn't placed on the likes of Linked Finance. Thats one of the reasons why Banks take longer than non-bank lenders, to approve and draw loans. Sadly, there are also various other factors, including a certain amount of unnecessary admin.

Don't forget, Banks are responsible for protecting peoples deposits, which they lend out.... LF are not.
That is changing.
 
That is changing.

Its not, really... because they aren't banks, and don't offer savers protection under the deposit guarantee scheme, for example.

The introduction of any sort of regulation over crowd funding, has taken the Irish Central Bank almost a decade to roll out, and even now, will be little more than a few rules about marketing and selling.
 
Just a follow on from this regarding another PtoP Flender. Last week they attempted to introduce a flat rate monthly charge of €12.50 per month on each lender's account in lieu of not charging a % of the loan as Linked Finance have been doing. They then had the additional audacity to deduct the first monthly installment from the lender accounts within 2 hours of sending out the notification e-mail.

Obviously this caused outrage and a huge backlash from small lenders so much so that Flender were back within 24 hours to say they have taken the protests on board and are reviewing their charging structures (and they did refund the €12.50)

Pretty good returns available in this P to P area, but as others posters have noted, it's not without risk in a largely unregulated field, while the Central bank adopt a watching brief and have done so for the past few years - caveat emptor indeed!
 
Does anyone know how Linked Finance works from a borrower's point of view?

I had a look at their website and could not find the interest rate. I emailed them but they did not reply.

Ideally, I would like to see the contract that a borrower signs and how the interest is calculated.

Brendan
 
Interest rates vary according to how the rank the borrower, the higher they perceive the risk of the borrower, the higher the rate charged but they seem to run from around 6.5% upwards. 12.5% is the highest I've seen on there.

As to the logic behind their rating, that I can't answer
 
Does anyone know how Linked Finance works from a borrower's point of view?

I had a look at their website and could not find the interest rate. I emailed them but they did not reply.

Ideally, I would like to see the contract that a borrower signs and how the interest is calculated.

Brendan
I took out a LF loan back in 2014. Contract was fairly simple and the agreed rate was stated.

Very similar to bank agreements and a payment schedule was given showing each payment, interest applied and balance for each month.

I applied, sent in financial details and they gave a rating after perusing them combined with the reason for the loan. A 'B' rating was given and honestly I thought it was generous. Back then it was an auction process and they encouraged you to get friends and family to lend quickly and set a target rate. I ended up at 8.6%

I know another business that used them at the same time and their average was 6.5%

They also had a facility fee of 2% of the loan value (it might have been higher) which brought the real rate higher.

Rate was probably 2% - 3% above what the banks offered, but the whole process from start to finish took less than a week and funds were in the account within 10 days.

Whilst the funding model has changed, I doubt if much has changed on the lending model.
 
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Hello Peemac,

If you don't mind me asking, what security, if any, was sought?

I've been told by others that they don't take security over business assets (ie commercial mortgages, debentures, cattle mortgages etc.), but they do obtain a personal guarantee from the director-shareholder(s).

Thank you.
 
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