Risk summary for P2P agreements or P2P portfolios

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.

FAQ

Who can apply for a BLEND loan?

Blend offers bridging and development finance. Our typical loan size is between £500,000 and £10,000,000. Borrowers must be based in the UK and provide sufficient collateral to secure the loan.

What information do I need to provide?

Initially you'll just need to complete BLEND's borrower registration. We will then contact you to set up a meeting where you'll be given a detailed requirement list.

What Security does BLEND accept?

BLEND loans are secured against property assets with a first charge. 
We also accept personal guarantees, but these are not enough to secure a loan on their own.

Details on the security provided can be viewed on the loan information page.
Blend is very transparent and does not deal with unsecured loans.

What type of loans does BLEND offer?

We offer property loans; bridging and development finance:

  • Acquisition

  • Auction

  • Light Refurbishment

  • Heavy Refurbishment

  • HMOs

  • Student Accommodation

  • Office Conversion to Residential

  • New build

  • Development Exit

What are the fees to the borrower?

The platform's Arrangement & listing fees.

An Exit fee, payable at maturity.

Can any representative of my company apply for a BLEND loan?

All loan applications must be made by an authorised officer of the business.

How do I repay my loan?

All loan repayments are made by bank transfers from your business current account.

When interest is serviced, it can be paid by Direct Debit.

What happens if I’m late or think I will be late in making a repayment?

If you think you may be late with the payment of an instalment or are experiencing financial difficulties then you should contact BLEND immediately.

Telephone: 0203 409 3300

Email: [email protected]

What information will be made available to lenders?

Lenders will have access to the borrower’s full information pack alongside any supporting documentation that is uploaded to the platform. This may include documents such as RICS valuation reports, marketing brochures, etc.

Do I have to deal with all the different lenders?

No. BLEND acts as the single point of contact for all the different lenders that loan you money.

Can I repay the loan early?

Yes. Unless agreed otherwise, there are normally no penalties or additional costs for early repayment of the loan. The exception to this being if your agreement stipulates that the loan will run for a minimum number of terms.

What is the platform’s role in pricing of loans and how is borrower eligibility assessed?

The platform sets the price of the loan to ensure that it is both fair and appropriate for both parties entering into the agreement, considering the level of risk that the lender is exposed to. The firm requires all borrowers to meet strict eligibility criteria based on an in-depth due diligence assessment of the risk that one or more repayments under the agreement with the lender/s may not be made. Specifically, the firm looks at various aspects of the applicant as well as those individuals who own and are in day to day control of it.

The assessment is, in all cases, based on sufficient information of which the firm is aware of at the time that the assessment is carried out and on information obtained from both the borrower and other external sources.

In addition, the firm undertakes ongoing assessments after the loan is drawn down on to proactively ensure that any indication of arrears or default is dealt with and mitigated where possible.

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