CapitalStackers Limited is authorised and regulated by the Financial Conduct Authority (FRN 722549). Registered in England (Co. No. 7361691). Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other crowdfunding platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.

Tag: <span>p2p</span>

“The reports of my death are greatly exaggerated,” Mark Twain once remarked when an overexcited journalist transmuted the illness of a friend Twain was visiting into the fanciful poverty-stricken death of the author.

Many in the P2P industry will know how he feels after the insolvency specialist Damian Webb reheated some leftovers from his AltFi 2019 “State of the Market” article at a recent NARA (Association of Property and Fixed Charge Receivers) conference. As the man charged with recovering funds from the Lendy wreckage, Webb, a crocodile tear welling up in his eye, pronounced that “P2P lending, from my perspective, is dead”.

For his “perspective” read, “from the point of view of one whose main professional interaction is with patients who are dead, or nearly dead”. It’s like asking an undertaker who will win a marathon. We called Mr. Webb out on the same material nearly two years ago [1], and yet the record hasn’t changed.

Yes, Lendy was an appalling car crash which should never have been allowed to happen. But we (along with other informed commentators on P2P, such as 4thWay) were calling out Lendy’s bad practices long before they came to Mr. Webb’s professional attention.

In fact, long before they appeared on the administrator’s slab, 4thWay actually refused to list Lendy among the P2P institutions they commented on, citing “lack of access and little information about its processes, performance, people and legal structure. Its publicly provided information left a lot to be desired and serves as a warning to prospective lenders attracted by high interest rates and vague concepts of property security” [2].

Mr Webb’s pronouncements at the Insolvency Practitioners’ jamboree were reported in an article entitled ‘The downfall of P2P lending: self-valuation, excess capital and no experience’ [3] and described “the shocking details of how the once booming P2P property lending market collapsed”.

By “collapsed”, he of course means that, of the scores [4] of regulated P2P lenders, 26 have withdrawn from the market and only 8 of those actually went down owing money to investors. Of the remaining 18, three switched to institutional only lending, three changed to a new business model, four were sold and their new owners discontinued P2P operations and 8 decided voluntarily to close down. But only 8 actually went bust [5].

Of course, that’s eight more than anyone would like – and we truly feel for those who lost money to these bad platforms – but to suggest this represents a “collapse” of the industry is playing fast and loose with the facts. We would expect better of a financial professional.

And in his cataloguing of this “collapse” he somehow neglects to mention the many thousands of homes that would never have been built if P2P hadn’t stepped into the breach to help fund the building industry after the banks stopped lending in 2008. CapitalStackers has been instrumental in raising the money to build 118 houses and 433 apartments.

Webb cites the platforms’ withdrawal as “natural selection for the benefit of the market because the poor players are effectively being killed off because they are not competitive”, as if such a process is a unique feature of P2P. It’s not, of course.

Banks have gone bust, institutional lending operations have gone bust. So have newspapers, supermarkets, lawyers, accountants and even insolvency practitioners [6]. Badly-run, uncompetitive or ill-prepared companies in every industry have gone bust owing money – yet no one is writing about the death of supermarkets or accountants. Or even, dare we say it, insolvency practitioners.

So clearly Mr. Webb has an agenda, and to this Damian, all omens are bad. A man with the gift of hindsight is presuming to tell us the future.

He wipes a few smudges and finger marks off his crystal ball and pontificates that, “I think there will be more failures in that P2P space, but it has largely been fixed or closed down by the Financial Conduct Authority” [7].

Again, this is ill-informed. The tweak to the regulations imposed an obligation that retail investors must pass an “appropriateness test” and, in the absence of taking independent advice, limit their lending to 10% of their investments until sufficiently experienced (which equates to lending on two deals within the last two years) at which point they could change their status from “Restricted” to “Sophisticated”, for P2P purposes. Those platforms that voluntarily left the regulated space did so because the regulations were too much of a faff – but they weren’t “regulated out”. They simply weren’t committed enough to go the extra mile and left the business to those that were.

At this point of his speech, Dr. Hindsight may have managed the kind of frosty smile that killed off all the houseplants in the building and mustered an attempt at cheeriness – “There are a number of operators in that space that will do well. They are well run, they’ve got a good client base and they will continue” – Gee, thanks Damian – “but the market is moving very much towards alternative lending out of institutional funds” – Oh.

So then the man who has no professional knowledge of healthy P2P companies went on to proclaim that, “The future is alternative lending – P2P may be an aspect of that but it’s going to be a very small aspect”.

What exactly does this endgame specialist know about institutional funds? Or lending in general, for that matter (apart from the kind that’s ossified into terminal debt). Does he follow the view of some investors that the mere presence of an institution in a deal gives them comfort because people who deal in finance must ipse facto understand all forms of finance? Does he think the institutional lenders have some sort of expertise in property lending that would have prevented the Lendy bellyflop?

Well, they might have done, not because they understand property debt, but because they can smell the stench of bad practice.

But why on earth Webb feels institutional lenders are “the future” is an unsolved mystery. True, a few platforms have found them to be a useful source of funding fast growth, but at CapitalStackers we’ve only proceeded down that route (as indeed we do all routes) with caution, because our retail investors are so important to us. And since stability outweighs speed of growth in our book, we haven’t been in a hurry to secure a large institution’s funds. We’re not against an institutional tie up. Far from it – just as long as it doesn’t cut across our highly valued relationship with our existing investors who, after all, have been with us from the get-go.

On the other hand, we do work hand in hand with banks on almost every deal, which is an institutional partnership of a different kind. While we’re regulated by the FCA, banks, for their part, are subject to very high standards of regulatory control through the Bank of England’s Prudential Regulation Authority, which tightened controls further after 2008. In effect, this means banks can only lend up to around 60% Loan-to-Value ratio, otherwise they require more regulatory capital and business becomes less economical.

Which is the basis of our business model – funding the gap between a property developer’s equity and the amount it’s economical for the banks to lend – which is a sensible position for crowdfunding. Small investors who prefer not to tie their capital up in REITS or unit trusts can get involved in the kind of regulated, transparent deals that banks normally fund. This gives them more choice and flexibility. Not to mention the confidence generated by a deal fully funded from the outset.

And yes, this means we take a junior position in the “stack” to our bank partners, but this is a calculated and painstakingly assessed risk. Whilst in the repayment cascade the bank would be out first, it’s worth pointing out that they would never enter into a deal with a junior lender where they expected that junior lender to go into default, since this would also cause issues with their own deal.

Anyway, continuing to paint a portrait of the entire industry through his keyhole, Dr. Hindsight goes on to explain that the “historic failures in P2P lending over the last decade” (all eight of them) were all down to “shareholder greed, too much capital, using technology to cut out credit risk processes, and lack of experience in lending”. Furthermore, he states that “many of the people involved in fintech were more technology than finance-based, they had no financial background,” tarring the entire seagoing fleet with the same brush he used to damn the few that sank.

“There was no grey hair”, he goes on (boy does he go on!), “there was no experience, people just jumped into the sector, worked out there was an ability to deploy money and did so with minimal review of credit or understanding of lending.

“And they went into areas I think they deemed to be simplistic, i.e. property lending, but they didn’t really understand the issues involved.”

Which, to be honest, sounds a bit like, dare we say it, an insolvency practitioner predicting the future of an entire industry when he doesn’t understand the issues involved.

The above litany is nothing like our experience. In fact, it pretty much describes the opposite of the CapitalStackers business model. As catalogued by 4thWay, our shareholders’ demands are modest. Where there is still hair, it is grey. The experience of our directors’ spans decades of specialist property lending in major banks. Our credit processes are not automated, but still go through the time-proven process of staring into the borrower’s eyes and seeing his very soul (plus a lot of exhaustive financial modelling, independent surveys and information sharing with banks). And while we’ve had no difficulty raising funds for the kind of deal we publish (we recently broke our own record, raising half a million pounds in under a minute), deep due diligence into the quality of the deals is more important to us than the need to deploy vast amounts of capital quickly.

In other words, it doesn’t matter how much capital we have – if the deal doesn’t get through our narrow gates, that capital ain’t getting deployed.

So the suggestion that the kind of serious property lenders who form the backbone of this industry would “run roughshod over credit processes and standard banking processes that had been in place for years, creating significant value for themselves in the business but at significant expense of the retail investors investing into the platforms” would be libellous if they weren’t clearly the words of someone suffering from insolvency practitioner’s myopia.

The future of property-based P2P, Mr, Webb, cannot be borne on the broad shoulders of institutions alone. Yes, they bring a source of capital (in return for a steady income) – but if they had lending expertise, they would do it themselves. This is why they come to the P2P platforms in the first place. No, the future, as ever, is partnership – a marriage of resources and skills, with each team member bringing their best game.

As the interlopers and charlatans get weeded out, the field will be left to experienced property lenders, well-versed in banking best practices, lending on high quality deals with appropriate LTV ratios and maintaining complete transparency in all areas and at all stages with their investors. They will happily work with regulators, banks and investment institutions to create the best of all possible worlds for all investors, borrowers and, of course, the many happy people who benefit from the homes they help to build.

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CapitalStackers Limited is authorised and regulated by the Financial Conduct Authority (FRN 722549). Registered in England (Co. No. 7361691). Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other crowdfunding platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.

Of course nobody saw this COVID-19 situation coming. We certainly didn’t, and it would be pretty despicable to claim we did. However, that’s not what this is about.

What it’s about is the fact that, as a platform, we’ve always taken our duty to our investors seriously. Not just to roll up the cash for them in the good times, but to keep doing so in the bad times. Even when the less circumspect were pulling out.

To do that, you don’t need a crystal ball. Nor do you need a clear vision of what might happen. But what you do need is a clear vision of what you’d do in case anything bad happens.

That’s why the directors of CapitalStackers – seasoned property lenders through more upticks and downturns than any journalist would care to remember – used their hard-fought experience to build as much certainty as possible into their business model from the outset.

Specifically, they always ensured that every penny of the capital required to finish any of our borrowers’ developments was screwed down before the first trowel was lifted.

In other words – our investors are never asked to part with a single penny until the entire project is fully funded – end to end.

Along with the developer, we’ll fund the site acquisition (and sometimes some early stage building work).

From that point on, all the money required to pay the contractor – through to the laying of the last roofing slate and final lick of paint – is in place before the first bag of nails is ordered. These funds usually come from a bank (which we often help organise through our own contacts).

In brutal terms – this means that the development is never dependent on us hunting around for new investors to meet future construction costs. Even when the world is facing unheard of uncertainties, the contractors on all our sites are still certain they’re going to get paid, whether they’re just knocking in the last nails or just turning the first sod.

All of the sites we’re funding are still working (albeit slightly hamstrung by their supply chain). Of course, some of them may be forced to down tools for a while, but we’ve already gone in and remodelled the deals to take this eventuality into account.

Some of our sites are nearing completion – and here again, we’ve already planned for the potential of sales being delayed before we even heard of COVID-19. Experience told us to plan for the worst happening, and so if it doesn’t everyone still wins.

As it happens, this actually isn’t turning out as badly as one might expect. Of our new developments up for sale, the proportion of buyers who’ve pulled out is extremely low (we’ve had just one – and this is a buyer who is unable to progress the sale of their current home due to the lockdown). Most buyers are still buying, and at the price agreed beforehand – so there’s actually been no drop in value.

This is the story across every site we’re dealing with, and purchasers are ready to go when the lockdown lifts.

Unfortunately, even though we’ve warned repeatedly about it, the necessity of fully funding projects from the outset is still pretty much ignored across the rest of the industry.

Many projects funded by other lenders (some of them well-known names) will be finding themselves in difficulties because those responsible simply trusted in the Finance Fairy – believing, as many do, that new investors could always be found to keep topping up their buckets.

However, while many senior lenders are now substantially lowering the LTV ratios at which they’re prepared to lend to the point they might as well not be there at all, the banks we deal with remain active and still have an appetite for new deals.

And we’re the same.

Ironically, and despite us tightening our criteria in response to the climate, the situation is actually increasing our own pipeline – because it’s where the strength of our model shines through. It might make it a little slower to get our deals up and running in the first place, but it’s actually what keeps us strong at times when other lenders are forced to fall away.

Deals are now being brought to us that have fallen out of bed elsewhere – due to senior or junior lenders pulling out. And it’s not because of the risk – it’s because the platforms are struggling to fund their own loan book.  Their blind faith that the money tap would keep dripping has left them high and dry.

So although only a lunatic would say they were happy with the state of the world right now, at least we can say we’re fairly happy with what we’ve done to prepare our investors for it.

Of course, we sincerely wish our brothers in the P2P market well, and hope they do come through it unscathed. At the very least, if they do have funding shortfalls, we hope the Government can step in to plug any gaps, given that it will be secured on the properties being built, and redeemed on the sale of them.

And far from revel in our current USP, we nurse a fervent hope that, having come through this and out the other side, our P2P brethren will adopt the practice of ensuring that all building finances are locked down from the outset.

The construction industry and the housing market are too important to the UK economy for them not to learn this lesson.

It’s incumbent on all of us to keep it going.

Blog COVID-19

CapitalStackers Limited is authorised and regulated by the Financial Conduct Authority (FRN 722549). Registered in England (Co. No. 7361691). Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other crowdfunding platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.

If the recent, much publicised collapse of Lendy and FundingSecure has horrified you – and if it hasn’t, please don’t bother with our Investor Appropriateness Test – then spare a thought for the hapless investors of Estonia. The regulatory landscape in the former Soviet territory makes the Wild West look like Disneyland.

Increased scrutiny in the latter half of 2019 seems to have accelerated investors’ woes, with particular attention being drawn to two platforms – Kuetzal and Envestio.

Kuetzal’s management appears to be so bad it’s almost a parody. In December, Explore P2P reported that Kuetzal seemed to have lent €850,000 to a “fake” petroleum company with one employee and no trading history, most of whose website text seemed to have been copied and pasted from that of a Russian petrogiant.

It doesn’t take a particularly sophisticated investor to ask the question, “Where was the due diligence?” But that of course depends on whether there’s anyone to ask. The CEO, Maksims Reutovs, is a 24 year old former semi-pro tennis player and junior bank employee, who appears to have learned what he knows about the Estonian finance industry from his residence in Barcelona.

Those concerned about his commute, or how often Mr Reutovs is seen in the office, will not be reassured to learn that the answer is never. Because there isn’t one. The “office” photos are CGI images lifted from stock sites.

Fortunately, Mr. Reutovs’ staff don’t miss him, because there aren’t any of those either. Neither does his boss seem to be too concerned about his whereabouts, since he doesn’t actually have a contract of employment. Nor does he even appear to know who his boss is. Mr. Reutovs recently admitted he didn’t even know the full name of the owner, and had only had contact with the latter’s 29 year old wife. To whom he is not actually married.

And anyway, the CEO might be advised not to ask too many questions, since he only got the job after his predecessor and most of his family mysteriously disappeared.

Investigations by a vigilante group of investors have unearthed suspicions that the owner may be the convicted money launderer, Andrei Korobeiko, who coincidentally lives at the registered address of the company. Or it may be Eugene Koshakov, who apparently became the CEO of AA Development, the company that received Kuetzal’s biggest loan the day before the loan went live. Or it could be 24 year old Alberts Cevers, the previous CEO, who is, by coincidence, married to Evelina Cevers, who is listed as the official founder of AA Development…

Anyway, having almost found the owner, the question “where is the due diligence?” can be answered. There isn’t any. The company recently issued new terms and conditions to investors saying, ‘The Portal operator does not perform any due diligence of the borrower or project’.

So you’ll be getting the impression that transparency at Kuetzal is on the murky side of opaque. This state of affairs has led a particularly sharp-eyed official at their bank to freeze their accounts, citing money laundering issues. Not much gets past those Estonian bankers. Well, okay, a lot gets past them, but show them a made-up company with no offices, no staff, no contracts, no due diligence and no links to the owner and they’ll rumble the whole thing within…er…months.

For the last few months of 2019, Kuetzal maintained that it was still paying its investors out. However, how it was doing this without a bank account is yet another Estonian mystery.

Nevertheless, this charmed existence finally had to come to an end and on 12th January, Kuetzal closed its doors, owing millions to investors – citing “attacks” on its reputation, its bank accounts, and whatever else it could think of.

So the question must be asked – how can a P2P site have liquidity problems? In the UK, Investor funds are held in trust in a separate, protected bank account. If you want your money back, you simply request it, or if it’s already invested your loans at least have a value and you can seek to sell them on the secondary market.

But that’s not how Kuetzal and others conducted their business. They promised that for a small fee, you could cash out at any time. Which would be wonderful if they had any cash reserves, which they didn’t. And so faced with a situation when all the investors smelt a rat at the same time and headed for the exit, the company was found without its trousers.

The day Kuetzal claimed to be the victim of those “attacks” happened to be the day after they’d defaulted on a commitment to return funds to investors within 5 working days. The last lucky investor to get his money out of the tombola did so on 12th January 2020. So we’d suggest, although we can’t be sure, that these “attacks” were a smokescreen.

We’d like to say this is an isolated case, but we can’t. Another Estonian P2P scam platform, Envestio, shut down last week, having only launched in 2018 and holding €33m (£27.9m) of lender funds which would appear to have disappeared into thin air. Those with a strong stomach can google the details. A good place to start is here.

Now, while horror stories like this make the likes of Lendy and FundingSecure seem like angels, they in no way excuse their practices. But they serve, we hope, as a reminder to us all as investors to do our homework. We should all, before pledging a penny, be checking those vital questions: Who are the management? Where are they? What’s their area of expertise? What’s their track record? And most important of all – how transparent are they? Do you get regular, in-depth and consistent reporting, with independent corroboration? If the answer is no to any of these, sit on your hands.

And it’s also one good reason why Brexit is a good thing, for P2P at least. The EU has, in its schizophrenic wisdom, left financial regulation to its individual member states, in general allowed cross-border platforms to “opt-in” to licensing under European Crowdfunding Service Provider (ECSP) regulation, or to simply register in the country of their choice.

Given that roughly eleven countries have shown any application in this matter at all (Britain, France, Belgium and Germany proving the strictest, the Nordics wavering between very strict and “light touch” approaches and the rest of the member states on a sliding scale from partial regulation to absolute chaos), this opens the door to those operating across borders to pick their country in the way that pirate ships used to operate under flags of convenience (and I use the former term advisedly). They can effectively hurdle entry barriers and sidestep any form of governance, credit assessment, money handling, disclosure and complaints handling standards.

So whereas UK platforms seeking an FCA licence must subject themselves to the rubber glove treatment for many months – and rightly so – countries like Lithuania promise “fast, easy licensing” with a view to being up and running “within 30 days”. It beggars belief.

This is what leads to horror stories like those above. Without strict regulation, we invite unsavoury types to use P2P as a magnet industry for developing scams. If the EU allows platforms to solicit investments without appropriate regulation, who knows how many Kuetzals and Envestios there are? Until it’s too late.

We continue to support the FCA in weeding out the bad actors in the UK. However, we’re also confident that as the Lendys and FundingSecures fall by the wayside – and the new, tighter regulations squeeze out others – the FCA is getting it right.

And as long as we do get it right, P2P is a valuable and powerful cog in the world’s financial engine. So we hope the UK can continue to lead the way in financial product innovation and regulation, and carry a torch and set the standards for the rest of Europe to adopt.

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CapitalStackers Limited is authorised and regulated by the Financial Conduct Authority (FRN 722549). Registered in England (Co. No. 7361691). Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other crowdfunding platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.

Before the rotten practices of FundingSecure (and prior to that, Lendy) stink out the entire P2P barrel, allow us to offer a free professional opinion: we could have told you so. 

The FCA’s new, tighter regulations (https://www.thetimes.co.uk/article/peer-to-peer-lenders-given-last-warning-32tc32h2rwill certainly help clean out some of the bad crowdfund operators, but will clearly come too late for some investors.  

Of course, well-run P2P industry is a crucial cog in the post-modern economic machine. It gives good businesses access to funds that banks can no longer supply, and it gives investors access to opportunities that have erstwhile been closed to them.  

Stuart Law, the Chief Executive of Assetz Capital, made this point in the Financial Times recentlywelcoming the fact that “it is a fact of life now that these businesses have much tighter prudential standards and regulations to live up to.”  

We agree, of course. However, when he goes on to speculate that “smaller platforms” may struggle with consolidation in the sector, we take issue with him. 

“P2P lending is…now a highly regulated market”, he says, “which is good for investors with larger, well-funded platforms such as ourselves but makes things very difficult for under-resourced businesses,’ adding that “The smaller players are clearly struggling to keep up and the badly-run businesses are being scrutinised by the regulator.” 

This is clearly an over-generalisation – and the uncharitable amongst us might suggest it is made with mischievous intent. The phrase equating “larger” platforms with well-funded” ones is a non-sequitur. As is the suggestion that smaller ones are “badly-run”Anyone who knows their investment onions will be aware that size is no guarantee of good operation, or of sufficiency of funding. In fact, a major part of FundingSecure’s problem was its appetite for growth even in areas outside its experience. 

A report in The Daily Telegraph as recently as June 2019 pointed to spiralling defaults and repeated extension of loan terms. The platform, having been forced to sell a majority stake and address investors’ concerns by “reassessing” the entire loan book and promising “timely and meaningful updates” on loans, clearly saw no reason to ease off on growth and wait until its house was back in order, but issued a further 36 loans in May alone, adding £2.2 million to the mounting bonfire, and attracted 134 new investors. 

These investors joined despite the fact that anyone with a couple of idle fingers could have Googled reports like that on profitwarning.co.uk back in December 2018, which flagged, among other things: 

Increased defaults: Many property-facing platforms have suffered problems, particularly those whose loans rely on further development. The site seems to have shifted over the years to become more property focused, which explains this.
Poor Management: The nature of some of the defaults give rise to the doubts of the quality of monitoring given to loans by FundingSecure – perhaps they might be stretched too thinly staff-wise.
Poor Communication: There are no fixed times for updates to be given to investors. Often updates are not given at all, or when promised, missed out altogether. 

Or numerous Trustpilot reviews, such as this one from May 2018: 

Their recklessness with lenders’ money is criminal. Their valuations defy credulity and the resulting defaults end in catastrophic losses for investors with the company denying all responsibility for their dangerous lack of due diligence.  

And this one from November 2018: 

After lending now for over 9 months it is very clear that they are misleading investors…out of 40 investments that are due to be paid back with interest, 85% have not been??!! Updates are very poor and they are not making any attempts to…get back money for investors….They are taking on way too many loans and making their turn out of it to care about the lenders…avoid! 

This growth-at-all-costs attitude betrays a contempt for the fundamental obligations of handling other people’s money. FundingSecure moved away from what they knew – funding not-always-secure pawnbroking loans (in one notorious case loaning money secured on valuable paintings, and not realising the paintings had been sold partway through the loan term) – to (some equally dicey) bridging loans (which we’ve discussed before, in reference to Lendy). 

It’s not hard to see why it stopped giving full disclosure to its investors some time around April last year according to the investor complaints on Trustpilot 

It should be an irrefutable requirement of holding another individuals investments that before investors part with a single penny, you:  

  1. Rigorously scrutinise every fine detail of the deal;  
  2. Undertake a forensic examination of the borrower’s background (which FundingSecure publicly did not);
  3. Take clear, detailed soundings of the wider market; and,
  4. You continue to do all the above regularly, thoroughly and consistently throughout the whole of the loan term. 

And it is no less crucial that you give frequent, comprehensive and transparent information to the people whose money you’re holding. At CapitalStackers, these are fundamental principles – we have no interest in growth for growth’s sake. 

CapitalStackers is not a big organisation. Growth, we know, will come naturally if we maintain our diligence, choose our deals wisely and safeguard the trust of our investors. This is how we came to be named “the safest 20% returns in Peer-to-Peer lending” (https://www.4thway.co.uk/candid-opinion/the-safest-20-returns-in-p2p-lending). 

We’re not suggesting we’ve eliminated risk, but we do all we can to ensure that we, the platform, don’t become part of it. Of course there is risk involved in property lending  that’s what the interest calculations are based on (or should be) – but we take a huge amount of care to ensure our investors have all the information they need to clearly understand those risks and get good value for them. 

We also ensure investors’ understanding is predicated on full and clear disclosure of the facts – that is, the risk is priced into every deal. Over the years, our 120+ active investors have come to trust our risk assessment, which has produced not a single loss in £55 million raised since we first opened the doors. 

Now, that’s not to suggest we haven’t unearthed problems from time to time – but with our directors’ extensive banking backgrounds in specialist property lending teams, we have in place established procedures for tackling those problems promptly and efficiently, while all the time keeping our investors informed of how or whether the risk is changing. We’re experienced debt advisors – our lending skills having been fine-honed in our former lives. We know when to turn the screw, and how to help borrowers out of whatever hole they might find themselves in, and turn it into the foundations of something better.  

What’s more, our investors are not cast alone on the choppy waters of risk – the unique positioning of CapitalStackers is that we work in close partnership with banks on most projects. Allowing the banks to absorb the ongoing liquidity risk and ensuring all the funding is in place to complete the project before any CapitalStackers investor parts with a penny. This means we’ll never be dependent on bringing new investors down the line (a big no-no in our book), because every project is fully-funded from the start 

Consider the alternative. If a platform takes money from investors to start (and continue to build) a project on the expectation that further funding can be attracted from new investors as it progresses, then it’s taking a huge gamble with the initial investors’ money. There’s no guarantee that new investors will be found, and there is no lender of last resort. So if something goes wrong, it will be virtually impossible to finish the build, or to sell a part-built property. And imagine how easy – irrespective of the size of the platform – it would be for investors to get spooked by some unforeseen event, throwing the entire loan book into jeopardy. 

This is why we don’t take our investors into any deal unless we can see a clear, profitable exit. 

Furthermore, the point about partnering with banks is a fundamental point of reassurance to our investors. Not because we rely on their due diligence. We don’t. If anything, our own due diligence is stricter, not least because our own money is often involved. But because we analyse the deal together, price the risk together, raise money together and monitor the investment together – but then we take up different investing positions, complementing each other.  

And perhaps on a basic level, it’s reassuring for our investors to consider that banks only get involved in deals that they feel will return their investment. 

In fact, not only are we growing a steady reputation for funding deals that the banks like the look of – some banks have even started bringing deals to us to help get them off the ground.  

This sort of belt-and-braces risk management goes far beyond the proposed new regulations. But we don’t do it for compliance, we do it to protect our investors.  

So we don’t fully accept Stuart Law’s assertion that P2P is “now a highly regulated market which is good for investors – it’s not. It igetting there, but there’s still a long way to go.  

However, we do believe that the more astute investors are starting to be able to tell the good nuggets from the fool’s gold.  

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CapitalStackers Limited is authorised and regulated by the Financial Conduct Authority (FRN 722549). Registered in England (Co. No. 7361691). Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other crowdfunding platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.

CapitalStackers investors can look forward to a return of up to 14% from a development of nine luxury flats in an established and popular residential road in Solihull.Front Elevation

The project is the latest scheme by Avalanche Capital – the successful team that some will remember repaid investors early when their spacious Chessets Wood dwellings were built and sold ahead of schedule in December last year, paying annualised returns of between 9.8% and 13.8% after just 7 months.

This latest scheme is to be built on the site of a large, unoccupied dwelling which will be demolished to make way for spacious, well appointed 2 & 3 bedroom apartments ranged over three floors.

The construction finance of £2,025, 000 is being provided by NatWest and the developers are contributing £900,000 of their own funds, leaving a crowdfunding opportunity for CapitalStackers investors to raise £930,000. Investment bids are invited from as little as £5,000.

“Excellent” levels of profit are expected – the site has already seen a substantial rise in value following planning permission, and confidence is further enhanced by the appointment of John Shepherd Estate Agents (who have previously sold Avalanche developments at better than appraised values) as the selling agents.

Deal Infogram - St. Bernards Road by Avalanche CapitaWe have adopted a conservative figure of £5.8m pending formal valuation, which results in a respectable Loan-to-Value ratio of 55%. It’s worth noting the agent anticipates selling for around £6.3m.

Given the above factors, investor demand will be extremely high when bidding opens at noon on Tuesday 10th April – so if this sounds like the right sort of investment for you, please don’t miss out.

So that you’re ready to invest when the auction goes live, if you’re an existing member, you can familiarise yourself with the details of the deal now by clicking here. If you don’t yet have an account, you can sign up here.

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CapitalStackers Limited is authorised and regulated by the Financial Conduct Authority (FRN 722549). Registered in England (Co. No. 7361691). Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other crowdfunding platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.

Building begins this month on a sympathetic development of 2, 3 & 4 bedroom stone houses in the Nidderdale Area of Outstanding Natural Beauty.

Gregory Property Group – who have an excellent track record of successful developments over the last 30 years – have completed the drawdown of £504,000 funding for the first 11 houses, which is the first phase of 22 dwellings in the sought-after, picture-postcard village of Dacre Banks.

The development augments the area by adopting former vacant commercial land – and when completed will have a value of £5.8m. This will furnish annualised returns for CapitalStackers investors of 12.6% to 17.1% over 18 months – at Loan to Value ratios of 65% and 74% respectively – depending on which risk layer they have chosen.

As well as arranging the crowdfunded segment of the loan, CapitalStackers also negotiated the construction facility of £2m with Hampshire Trust Bank, one of its senior debt relationship lenders.

Sylvia Bowden of CapitalStackers said “it’s encouraging to find that we’re attracting new investors with each new deal published. The list of registered members continues to grow, with an average investment size of around £67,000 – although it is possible to invest as little as £5,000 with CapitalStackers. To meet the growing demand for investment, we are trialling a new policy where CapitalStackers invests in developments itself and then releases loans onto our secondary market, to make opportunities available for recently joined members”.

Not only does this exceptional development further adorn one of Yorkshire’s foremost areas of outstanding beauty – it will enrich and diversify the local population. It will attract a mix of young professionals, families and downsizers lured by rural village life, and commuters to Leeds and Harrogate, it also offers further proof of the escalating popularity of loan-based property crowdfunding as a consistent route to double-digit returns.

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CapitalStackers Limited is authorised and regulated by the Financial Conduct Authority (FRN 722549). Registered in England (Co. No. 7361691). Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other crowdfunding platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.

P2P lending platform CapitalStackers has been awarded full FCA authorisation, following a detailed assessment by the FCA.

CapitalStackers is a direct peer to peer lender, matching developers seeking finance with investors. The company aims to plug the funding gap between typical bank debt and the developer’s equity. Investors typically receive double digit returns up to 20%.

Steve Robson, Managing Director of CapitalStackers comments, “We have always had a strong commitment to compliance, abiding by strict codes of conduct and giving our investors total transparency on every deal. Becoming an FCA approved lender is a lengthy and rigorous process and gives investors that extra comfort – it is the icing on the cake. We understand that a number of other P2P lenders withdrew their applications when they realised what was involved, which makes our approval status even more significant.

“At CapitalStackers, we only arrange loans to experienced developers, many of whom have already raised part of the funding requirement through a major high street bank and gone through their independent due diligence process, as well as our own stringent checks. No investment is without risk, but ours are carefully assessed, managed, and transparent.

“Compared to pooled lending, the beauty of direct lending is that investors are fully in control of what level of risk and return they are comfortable with. They choose the deal, loan amount, layer and return and have access to detailed information on which to judge the risks. They like to invest in secured lending against bricks and mortar and the information we provide leaves no room for questions or doubt. They have everything they need to make an informed decision. This transparency and conduct is why our investors are re-investing again and again.”

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CapitalStackers Limited is authorised and regulated by the Financial Conduct Authority (FRN 722549). Registered in England (Co. No. 7361691). Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other crowdfunding platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.

CapitalStackers – the P2P property development lending platform – has raised a £2.25m loan to fund the purchase and development of a 24-unit residential block in York.

The entire funding was completed in just 14 days from engagement to the full loan being raised, and the development by Norstar Limited is projected to have a Gross Development Value of £3.2m.  Investor returns are pegged at between 8.5% and 23% p.a.

Steve Robson of CapitalStackers commented:

“This is a huge milestone in our development and singles us out from the competition as being able to perform swiftly and professionally when circumstances dictate.  Working closely with our investors and professional advisers to deliver the whole package within an incredibly tight timescale is a fantastic achievement.”

CapitalStackers allows a wide range of investors to get involved with large commercial building projects, from housing to offices– schemes that would otherwise be out of their reach except through REITs or unit trusts. The idea is to plug the funding gap between typical bank debt and the developer’s equity. CapitalStackers invites P2P investors to take a stake at a risk and reward level they choose, with typical returns of between 5% and 20% p.a. on completion of the project, around 12-24 months later. With the minimum investment being just £5,000 fully secured on the property being funded and on the back of high quality due diligence, this is proving to be a very popular investment vehicle.

This is the latest in a string of new projects funded by CapitalStackers, who are currently inviting investment in an exciting new residential development in Birmingham. The loan sought is £1.9m and returns will be between 7.7% and 17.2% p.a. over a 15 month term.

The development address is: Foss Place, Foss Islands Road, York, YO31 7UJ.

Blog Deals Press Releases

CapitalStackers Limited is authorised and regulated by the Financial Conduct Authority (FRN 722549). Registered in England (Co. No. 7361691). Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other crowdfunding platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.