Lenders General Frequently Asked Questions
1. How can I become a lender?
Answer: Simply register online. We will promptly perform a few checks on your details and then, once approved, you can credit funds to your online balance. These funds can then be bid on new lending opportunities on the marketplace or used to purchase microloans on the secondary market.
2. Can I lend as a business?
Answer: Yes, you will need to create a lender account with your own name, address and date of birth, but with the name of your business as a username. Be sure to add the full name of your business to your account settings. Like our other users, you will take full responsibility for your tax requirements. Please be aware that tax treatment depends on the individual circumstances of each client and may be subject to change in future. Please seek professional advice if necessary.
3. How do I add funds to my account?
Answer: Visit your Dashboard by clicking the Dashboard in the navigation, then click the Add Funds button. This will give you the account details and your unique reference ID, which you can use to make a bank transfer. Thanks to faster-payments, most credits are received within a few hours. Before your first transfer into the platform, you will need to provide your address details.
4. Where is my money held?
Answer: When you transfer funds to your online account, they are held in a segregated Barclays client bank account, protected by the same regulations that apply to lawyers or accountants who hold client money for the execution of financial transactions. You may access your available funds at any time by clicking the withdraw tab on your dashboard. Your funds will normally clear with your bank account within a few hours, but may take up to two working days.
5. What is my rate of return?
Answer: Your Dashboard shows you an average Gross Return, which is the average rate at which you are lending across all loans, as well as a Net Return Calculation which is a calculation of the interest/capital employed for each period.
6. What are bids and capital employed on the dashboard?
Answer: Your bids are recorded on the Dashboard. A breakdown is available under the My Bids tab at the bottom of the Dashboard page. Once a bid has been made, it is binding. Should the borrower reject the loan offer, your bid will be cancelled and returned to your Available Balance. Bids become capital employed once bids are accepted or when microloans are purchased. These can be held until the loan matures, or you can list them for sale on the Secondary Marketplace.
7. What are your bad debts and default rates?
Answer: Please see our lending statistics for up-to-date information on bad debts and defaults. Lenders may spread their risk by building a diverse portfolio to minimise the impact of bad debt on their overall return. Our first loan was completed in 2013, so we may have more defaults data than some newer platforms, whose performance may appear better than ours.
8. What fees apply to lenders?
Answer: 0.5% microloan sale fee When you sell a microloan on the secondary market, there is a 0.5% commission fee based on the outstanding capital, which is payable once your loan part is sold. For example, if you sell a loan part with £100 principal remaining, the sale fee would be £0.50 once the loan part sells. No charges apply if a loan part is not sold. 0.1% IF ISA account management fees We charge a monthly account management fee on the first working day of each month. This balance will be debited from your available balance. These are the main fees that lenders should know about, other fees also apply.
9. What is the risk associated with lending?
Answer: We cannot guarantee that a business will repay its debt. However, we credit check potential borrowers and make sure they supply statutory accounts and supporting documentation. The discussion tab allows you to put questions directly to borrowers. We highly recommend that if you have any questions about the business you are thinking of lending to, that you put these to the borrowers in the forums.
10. How can I monitor my loans?
Answer: All your information is available on one screen at a click of a button. Whenever you log in to your account at severnfundingninvestment.com, you will be directed to your Dashboard. This will present you with all the information about your funds and loans, from the funds you have available and the funds you have committed by bidding, to information about the status of your loans.
11. When will I start getting my repayments?
Answer: Once the loan has been accepted by the borrower, a standing order will be set up to coincide with the repayment schedule, according to which all payments will be made. Once a loan that you have bids on has been accepted by the borrower you can view the repayment schedule on the borrowers profile page, so you know when to expect repayments.
12. Can I get my money back early?
Answer: Yes. If you need to access your money, you can sell your microloan to other lenders in the secondary marketplace. After a microloan is sold, the proceeds are returned to your balance. If you want to access this cash, you need to submit a withdraw request from the Dashboard. If you choose to sell microloans individually, you can select and sell microloans at a premium or discount of up to 5%. If you sell at a premium, you can earn a profit, but if you sell at a discount, it is likely that you will be able to access your money sooner.
13. What is the secondary market?
Answer: The secondary market is a marketplace via which lenders can sell microloans to other lenders. This offers lenders the chance to gain quick access to their cash.
14. How do I sell microloans?
Answer: Selling your microloans is easy and a great way for you to be able to realise a quick profit and gain access to your cash. You can sell your microloans by visiting your Dashboard and selecting Action. You will then be able to select the rate at which you want to sell your microloan. You can choose to sell your microloans at up to 5% mark-up or mark-down. Once you have selected your sale preferences, your microloans will be listed in the secondary market. Interest on microloans is accrued on an incumbency basis, meaning that should you sell a microloan, you will waive the right to the interest due on the next repayment date.
15. What is the buyer’s rate?
Answer: Imagine a loan of £100 at 13% won in an auction. When some months later the lender sells this loan, they sell the loan of the outstanding capital (e.g. £93.27), which continues to earn the new owner, the buyer, the same rate of interest (i.e. 13%). The buyer pays more or less than £93.27, depending upon whether the original lender, the seller, applies a premium or a discount. If the seller applies a premium of say 3%, then the buyer will pay £96.07 for this loan of £93.27. The new owner, the buyer, will continue to receive monthly interest payments equivalent to an annual rate of 13% of the outstanding capital each month (i.e. £93.27 at outset). Although the interest will equate to 13% of £93.27, it will equate to a lower % of the amount paid (£96.07) for the outstanding capital (93.27). This lower % is listed as the Buyers Rate and gives a more realistic indication of the interest which will be earned after the sellers premium has been taken into account. If the seller had offered this loan for sale at a discount, then the Buyers Rate would have been higher than 13%. The value of the Buyers Rate depends upon the value of the premium or discount, and also the remaining term of the loan.
16. When a borrower is late repaying, what do I do?
Answer: In the event that a business is late in a repaying an instalment, we’ll be the first to know. As soon as we become aware that a borrower has fallen behind on their payments, we will contact them on your behalf to find out the reasons for missing a repayment and when we can expect it to come in. If the business has run into financial difficulty, we will negotiate with them to find a way by which the balance can be repaid on different terms. In the event that the borrower is not able to repay the loan, you will be given the option to take a repayment holiday which allows the business to pay the interest and not the capital. Should the borrower continue to under-perform, we will get a debt recovery company involved in order to recover the debt. For more information on our debt collection policy and process please see our Terms and Conditions.
17. What happens when a loan is refactored?
Answer: Refactoring a loan refers to the process where we take an existing loan with the original loan agreement and structure and create a new loan with the same borrower but with new requirements. We work hard to ensure that there is no change to the security in place as well as no extra barriers to enforcement should the borrower default on the new loan. Legally speaking, the refactoring takes place through the signing and execution of an amended loan agreement which sits alongside the original loan agreement and works to amend the terms of the original loan agreement. The penalties for non-compliance and our enforcement powers remain unchanged, and our legal security documentation contains the requisite clauses to enable them to remain in effect for any loan amendment until the total arrears are repaid. In most scenarios, the only thing that changes when a loan is refactored will be the repayment amounts, loan term and on some occasions, the repayment dates. When a loan is refactored, a new listing page for the new loan is created which will display the new repayment timetable, new term and any other changed features of the loan. There will always be a link to the old listing so that lenders can see the borrowers previous repayment history and the previous details of the loan. Usually, the reason for the refactoring will be made clear on the Loan Updates tab. In most cases, loan refactoring takes place because of repayment difficulties which have led to a borrower being unable to maintain regular repayment. Some borrowers may propose an alternate repayment plan to either request a repayment holiday or to extend the loan term. We seek on all occasions to put the decision of whether to accept the new repayment proposal or continue with our legal enforcement action to the lenders who have capital in the loan. We do this through lender polls, which you should be notified of by email should you hold capital in a distressed loan which will be refactored. Should the majority of lenders vote to accept the new repayment proposal, the amended loan agreement is drafted and sent to the borrower, and once signed and returned, the new refactored loan page is created.