Risk Summary

Estimated reading time: 2 min

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

1. You could lose the money you invest

Many peer-to-peer (P2P) loans are made to borrowers who can’t borrow money from traditional lenders such as banks. These borrowers have a higher risk of not paying you back.

Advertised rates of return aren’t guaranteed. If a borrower doesn’t pay you back as agreed, you could earn less money than expected. A higher advertised rate of return means a higher risk of losing your money.

These investments can be held in an Innovative Finance ISA (IFISA). An IFISA does not reduce the risk of the investment or protect you from losses, so you can still lose all your money. It only means that any potential gains from your investment will be tax free.

2. You are unlikely to get your money back quickly

Some P2P loans last for several years. You should be prepared to wait for your money to be returned even if the borrower repays on time.

Some platforms may give you the opportunity to sell your investment early through a ‘secondary market’, but there is no guarantee you will be able to find someone willing to buy.

Even if your agreement is advertised as affording early access to your money, you will only get your money early if someone else wants to buy your loan(s). If no one wants to buy, it could take longer to get your money back.

3. Don’t put all your eggs in one basket

Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.

A good rule of thumb is not to invest more than 10% of your money in high-risk investments.

4. The P2P platform could fail

If the platform fails, it may be impossible for you to collect money on your loan. It could take years to get your money back, or you may not get it back at all. Even if the platform has plans in place to prevent this, they may not work in a disorderly failure.

5. You are unlikely to be protected if something goes wrong

The Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover investments in P2P loans. You may be able to claim if you received regulated advice to invest in P2P, and the adviser has since failed. Try the FSCS investment protection checker here.

Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated platform, FOS may be able to consider it. Learn more about FOS protection here.

If you are interested in learning more about how to protect yourself, visit the FCA’s website here. For further information about peer-to-peer lending (loan-based crowdfunding), visit the FCA’s website here.

Increase Appetite for Private Debt

Market Reports 24 Aug 2022

Family offices have been increasing their appetite for private debt

A decade of low interest rates until recently and high volatility across equities and commodities has led to an increase in the number and variety of investors allocating capital to direct lending strategies, particularly to private real estate debt.

At Blend, one of the UK’s leading specialist development finance lender helping family offices and high net worth investors access direct real estate lending opportunities, this is a trend we have witnessed at close range. Now, in a new report titled ‘Family Offices and Direct Lending in Real Estate’ we analyse some of the reasons behind the trend and explore ways in which direct lending can help family offices achieve their investment goals.

Click below to download the full report.

Download the Family Offices and Direct Real Estate Investment report

Increased appetite for private debt

66%

Two thirds of family offices surveyed in the BlackRock Global Family Office survey of 185 family offices globally indicated that they intend to increase their exposure to private debt in the future, having been attracted by the potential returns from dislocated markets.

Blend is a specialist development finance lender providing investors with a full stack service from loan origination and underwriting to transaction execution and portfolio management.

For more information, please visit www.blendnetwork.com or email us at [email protected]

BLEND Loan Network Limited is authorised and regulated by the Financial Conduct Authority (Reg No: 913456).

BLEND Loan Network Limited is registered in England and Wales. Registered office: Evelyn House, 142 New Cavendish Street, London W1W 6YF.

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 mins to learn more.

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