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

FAQs for Investors

What is BLEND?

BLEND is a property lending platform that lends to established mid-market property developers in the UK with loans secured against property. Operating since 2017, our investors now include some of the world’s most well-known private investors and leading family offices. We have been featured in the Financial Times and were recently named "FinTech Business of the Year".

What are the risks of investing on your platform?

When investing through our platform, you are lending to property developers, and there is a risk of losing the money that you have invested if the borrower defaults on their loan. As a result, you should not invest more than you can afford to lose. We minimise the risk of loss by securing all loans against property assets with a first charge and working only with experienced developers.

What is the minimum investment?

The minimum investment on our loans is £1,000.

When do I start earning interest?

Investors start to earn interest from the date of the borrower’s first drawdown. Please note, there is usually a short delay between you investing in a loan and the time where funds are released to the borrower.

Are there any fees for lending money?

There are no set up fees, no membership fees and no lending fees. The only fee you might pay as an investor is our Secondary Market fee which amounts to 0.60% (or £6 for every £1,000 of loan capital sold). We'll only charge this upon the successful resale of the loan portion you have listed in the Secondary Market.

What is AutoLend?

AutoLend is a feature of our platform that allows investors to make automatic investments according to the criteria that you select, such as interest rate and loan maturity.  This feature allows you to choose a fixed amount to lend, allowing you to spread your money across multiple loans.

How are your borrowers assessed?

Our experienced credit underwriters undertake detailed due diligence on each loan, including meeting the borrower, visiting the site, assessing the profitability of the scheme, understanding the borrower’s experience, reviewing the location of the property and the loan exit plan. Our credit committee will then review this due diligence and decide whether or not to proceed with the loan. Key information from this process is then made available to investors for download and review in a Credit Report found with each loan made available to investors on our platform.

Is my money (cash) held with an E-Money Service Provider protected or safe while held with the e-money service provider?

The third-party money services company handling funds on our behalf (the Lending platform) ensures that the funds from clients on the platform are held in designated “Segregated Client Bank Accounts”.

Is my money (cash) held with an E-Money Service Provider covered by the Financial Services Compensation Scheme?

No. Lending through an electronic platform is not covered by the Financial Services Compensation Scheme.

How can I get my money back if my circumstances change?

Investors who wish to sell their all or part of their loans may be able to use the Secondary Market. Please note that finding a buyer on the Secondary Market may take time and there is always a risk of no one wishing to buy your loan. Please visit the Secondary Market tab in your investor dashboard for more information.

Do you offer services to vulnerable customers?

Customer vulnerability is defined as any personal, social or other factor(s) that may impact your ability to exercise informed decision making, rendering you vulnerable to suggestion and/or impacting your confidence to lend or borrow.

Below we have outlined a broad range of vulnerable circumstances and situations including, but not limited to:

Illness/Sickness

This could be due to a short-term condition or something of a longer-term nature such as recuperating from medical conditions.

Age

Our ever-aging population means that elderly people are increasingly more inclined to invest for their future. However, with age also comes certain age-related conditions which may impact your ability to invest confidently and appropriately.

Physical Disability

The broad nature of disability encompasses a number of forms including but not limited to: deafness, blindness, and the restriction of limb use or mobility. All of which are factors which may impact your ability to lend or borrow through our platform.

Bereavement

Loss of a partner, relative or close friend may temporarily render you susceptible or vulnerable, something which may impact rational decision making.

Mental Capacity

This applies to customers who may suffer from any form of mental incapacity, which again may impact your ability to lend or borrow.

Due to the nature of our services it may not always be appropriate for vulnerable customers to borrow or lend through Blend Network. If you feel one of the above might be applicable, you can contact us ([email protected]) or call and a member of the team will be able to consider your circumstances.

What would happen if you dissolved?

Investors’ money that is not invested is held in a segregated Client Money Account with Barclays Bank plc. It is administered by MangoPay SA. All uninvested funds will be returned to you upon request.

Please note that it may be the case that most of the funds that you are owed will be from outstanding repayments of interest and initial capital from outstanding loans. Unlike your uninvested funds, these repayments will not be immediately available and will be repaid to you in line with the terms of our Wind Down plan. Your capital remains at risk and repayments cannot be guaranteed.

The Security agreed between each Borrower and Blend (Security Trustee) Limited is held in trust by Blend (Security Trustee) Limited for and on behalf of the Investors to the Borrower.

We have made arrangements with a third party, Resolution Compliance Limited, who is authorised and regulated by the FCA, whereby it will take over the administration of the outstanding loan contracts in the event that we are is insolvent or cease trading, to help ensure that the borrowers continue to make interest and capital payments as they fall due and the appropriate amounts are then distributed to our investors.

You can download our Wind Down plan or contact us for further information ([email protected]).

When does my account get activated?

Your account will be activated once your KYC (Know Your Customer) and AML (Anti Money Laundering) checks are cleared. These usually take 2 business days. We’ll send you an email notification once it’s done. Please note that the account you use must be in your own name and you may be required to provide additional documentation to help us complete the KYC and AML checks.

How do I deposit money?

  1. Login to your account.

  2. Navigate to "MANAGE MY ACCOUNT" and click on the “Deposit” tab.

  3. When on the "Deposit" tab, click on the “Amount in £” box and enter the exact amount you wish to transfer.

  4. Click "CREDIT MY ACCOUNT".

  5. You will then receive the bank details with the unique reference for that transaction on your screen and by email. This reference is unique and a new reference must be generated for each deposit you make.

  6. You can now go on your bank account and transfer money using those details, including the unique reference number.

  7. Any deposit made in the morning will show on your account by close of business. Any deposit made in the afternoon will show by midday on the next business day.

Is the interest rate on each loan fixed?

Yes. The interest rate is always fixed and per annum.

What types of repayment methods do you offer?

Our platform offers loans with either retained interest or rolled up interest payments. Capital amounts are paid at redemption. Retained interest loans make monthly interest payments to investors. Rolled up interest loans allow the borrower to not pay anything for a fixed period of time (for example, the first 12 months on an 18-month loan). Rolled up interest is accrued monthly and added to the capital of the loan. Investors still earn interest for the roll up period, but this interest is repaid at redemption.

Why is a loan listed for 24 hours before investors can start lending?

When a new loan gets listed, investors cannot lend on this loan in the first 24 hours. This is to give all investors time to review the loan details and decide if they are interest in lending on the scheme.

What does 'Committed' mean on my dashboard?

The ‘Committed’ account houses money that is waiting to be drawndown. This usually happens in the time between you investing in a loan and the time when funds are released to the borrower (called a drawdown). Once you have confirmed on the platform that you want to lend to a specific loan, you are committed to the investment, you will not be able to withdraw these funds.

How do I turn on AutoLend

You can activate AutoLend by:

1. Logging in to your account using your login credentials.

2. You will be taken to your DASHBOARD, and from here, click on AutoLend and enter the amount you wish to lend per loan, in multiples of £1,000.

3. Click on the ‘ON’ switch, where you will then be prompted to enter your password. This is the same as your login password.

You can deactivate AutoLend at any time. If you switch AutoLend OFF you will be removed from the queue. Your AutoLend will switch OFF automatically if your account balance falls below your AutoLend amount. If you switch AutoLend back ON, you will re-join at the foot of the queue. To find out more, please read our Blog article here

Can you give me an example of how AutoLend works?

If you input an amount of £2,000 on AutoLend, AutoLend will first check the new loan listed matches your selected criteria before lending. If the loan matches your criteria and the loan is not oversubscribed, AutoLend will lend £2,000 when a new loan is available on the platform. If there was a loan listed on the platform before you activated AutoLend, it will not lend on that loan.

Once I have switched on AutoLend for the first time how long will it be before I lend on my first loan?

This is determined by two key factors. These are: (1) the value of the loans we list; (2) how many people are ahead of you in the AutoLend queue; and (3) the amount those ahead in the queue are looking to invest on the platform. As AutoLend works on a first come first served queue, each time a loan is fully subscribed, it is likely that you will move up the AutoLend queue. It is worth highlighting that the amount in the AutoLend queue changes regularly as our lenders change their AutoLend criteria.

What happens if the loan is oversubscribed?

The AutoLend queue works on a ‘first come, first served basis’. Investors who have had AutoLend switched on for the longest time will lend first. All manual investors will be ranked behind those using AutoLend. If a loan is oversubscribed, then those using AutoLend will fill all of the loan ahead of the manual investors.

Are my loan repayments reinvested through AutoLend?

Once you have received any payment under a loan (including capital repayments), the money will be credited to your available cash balance. Where the cash available is above the amount you have recorded for AutoLend, then subject to loans being oversubscribed, AutoLend will automatically lend to the next available loan.

How do I withdraw money from my account?

To withdraw uncommitted cash, please visit the 'Withdraw' tab under the MANAGE MY ACCOUNT section of the investor dashboard.

What is the minimum amount I can withdraw?

The minimum withdrawal amount is £0.10.

When does a borrower repay their loan?

Loans are normally repaid at the end of the loan term when the property or development site is sold or refinanced. However, the borrower has the option to make an early repayment or a partial early repayment in the event the property has been sold or refinanced ahead of the loan maturity. This means you will receive interest for the length of time between when the loan starts and when the borrower repays.

When do repayments show up in my account?

Investor accounts are usually credited within two to three working days after funds have cleared our account following repayment by a borrower.

What happens if a borrower repayment date falls on a weekend or bank holiday?

If a borrower repayment date falls on a weekend or a bank holiday, payments will be processed on the following business day.

Who is responsible for taxes?

It is each investors own responsibility to declare any money earned through us to HMRC. Investors can download an individual tax statement at any time from the investor dashboard ("MANAGE MY ACCOUNT" > "Tax document"). Interest payments from loans made through us are paid gross and no tax is withheld by us. If you are unsure of your tax position, you should take independent professional advice.

Is the secondary market free?

The only fee you might pay as an investor is our secondary market fee which amounts to 0.60% (or £6 for every £1,000 of capital) on capital outstanding. We'll only charge this upon the successful resale of the loan portion you have listed in the secondary market. The secondary market is free for buyers.

Why do I see "Secondary market available soon" on 'My Loans' tab?

You can start selling a loan in multiples of £1,000 on the Secondary Market once the funds have been released to the borrower.

Why is the secondary market facility not available for my loan?

Where an event that has taken place regarding the loan (for example, it is non-performing owing to the borrower missing a payment, the loan is close to repayment, there have been partial early repayments, etc.) the platform can decide at its own discretion not to allow that loan to trade on the Secondary Market. This is to avoid any asymmetric information between a seller and a prospective buyer. This is also to make sure loans are trading at a fair and appropriate price on the Secondary Market.

Can I sell my loan at a premium or discount?

In accordance with industry regulation, sellers are not permitted to select their own price they sell their loan part for. Instead, sellers can sell their loan part at par value which is calculated by the platform automatically. This is to ensure all secondary market buyers are purchasing loans for a fair and appropriate price. Par value is calculated dependant on the type of loan repayment method offered on the loan in question.

Example of Par Value calculation for a rolled-up interest loan repayment:

  • A loan part of £1,000 sold on the secondary market after 12 months of accrued rolled up interest, where the interest on the loan is 10% per annum.

  • The platform will calculate 12 months of rolled and compounded interest at 10% which is £104.71, added to the capital investment to give a par value of £1,104.71.

  • The seller will receive £1,104.71 minus the £6 fee for a net amount of £1,098.71.

  • The buyer will pay £1,104.71 (no fees to the buyer).

Example of Par Value calculation for an interest only loan repayment:

  • A loan part of £1,000 sold on the secondary market after 12 months where the interest has been paid monthly, where the interest is 10% per annum.

  • The platform will calculate a par value of £1,000 as all interest due has already been paid.

  • The seller will receive £1,000 minus the £6 fee for a net amount of £994.00

The buyer will pay £1,000 (no fees to the buyer).

Why can a loan offered on the secondary market, only be accessed 24 hours after it gets listed?

This is to give all potential buyers time to view available information on the loan offering prior to it going live.

What happens if I sell a Rolled-up loan on the secondary market?

In the case of a loan which has rolled-up interest, interest is being accrued but is not paid until the final repayment date. Where an investor decides to sell a rolled-up loan on the Secondary Market and finds a buyer, the investor having not yet received any interest, will look to sell for their initial loan amount plus the accrued interest to date. The par value will be calculated for the investor automatically by our platform and will include any accrued rolled up interest to date.

I had a loan part listed on the Secondary market. Why did it get delisted?

The loan part you were offering could have come to the end of the offer period you had set up. It could also have been de-listed because the Secondary Market is not available anymore for that loan (please see the explanation of availability of a loan on the Secondary Market in the FAQs).

Is the borrower charged for late repayment?

In the event of a borrower being late to repay, the platform has discretion to charge penalty interest.  The penalty rate paid to the investor is 0.25% per month, above the interest rate.

What do you consider to be a loan failure?

In the event the borrower has insufficient funds to pay an instalment under their loan, the platform and the borrower would work together to find a solution to repay the loan. If no solution can be agreed, then the platform would appoint an administrator for the recovery.

If a borrower defaults, how do you recover the investor's money?

A requirement for listing a loan on our platform is security (including personal guarantees in most cases). In the event of a default, we would seek to re-possess the asset (and any additional security). Subsequently, we would liquidate the security in the open market on our investors' behalf. Please note that if a borrower does default, although it may take several months to recover the outstanding debt, our security position should make the recovery likely, but this may not be the full amount.

Will we ever request your security details?

We will never ask for your password or login details. If you receive any request for this information, kindly report it to us at [email protected]

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