Is the peer-to-peer lending industry regulated?
ThinCats is regulated by the Financial Conduct Authority (FCA no. 660050) under the transitional arrangements for loan-based crowdfunding businesses. It is important to recognise that the Financial Services Compensation Scheme does NOT cover crowdfunding/P2P lending. ThinCats has a Consumer Credit Licence and is registered with the office of the Information Commissioner for data protection purposes.
What happens if ThinCats goes out of business?
ThinCats is a member of the Peer-to-Peer Finance Association (P2PFA), the industry association which represents debt-based alternative finance providers operating electronic platforms. P2PFA membership covers more than 95% of the peer-to-peer lending market. Whilst NOT covered by the Financial Services Compensation Scheme, P2P platforms are required by the FCA to hold a capital buffer and to have existing arrangements with another FCA regulated firm to take over the administration of the loan to ensure an orderly repayment of interest and capital should the platform fail.
What happens if Freedman Partners LLP goes out of business?
Nothing. Whether you are an investor or a borrower your relationship is with ThinCats BLN.
How does it work? How are the interest rates set?
ThinCats provides a means for experienced private investors, companies, pension funds, to achieve interest rates well above inflation while providing funding to creditworthy businesses. The platform links individuals with funds with companies that require funding.
Once registered, ThinCats lenders deposit their money into their unique designated account. They use this account to access the Lenders Forum and to bid on auctions. The minimum bid is £1,000. There is no maximum. There are two main types of auction:
- Fixed Rate, where the borrower offers a single fixed interest rate and the loan is filled on a first-come-first-served basis. There is no danger of early bidders being outbid by later lower bids.
- Variable Rate is the second and more common auction type. This allows lenders to make offers to borrowers. The platform software automatically selects the lowest interest bids to make up an auction syndicate. Successful lenders will get the rate for which they asked. Occasionally there are minor variations based around the above methodology.
What is a sponsor?
Sponsors are the first point of contact for potential borrowers. Borrowers cannot raise funds through the ThinCats platform without the support of a sponsor. We assess the business proposal and vet applications for loans. We help the borrower to prepare the loan information. Sponsors make no recommendations, nor do they offer investment advice. Sponsors play an important part in how the platform develops. We see the businesses we help to gain funding grow during this difficult economic climate.
What do F&P LLP and ThinCats do to prevent borrower fraud?
F&P LLP runs comprehensive background checks on the companies and management teams applying for secured loans. Accurate due diligence is vital for any business that has to comply with anti-money-laundering regulations and is an essential part of ‘know your customer’ (KYC) policies. We work closely with industry leading credit report provider CreditSafe, purchasing high-quality data-rich reports allowing us to make better decisions.
We verify full company details, including registered name, number, address and incorporation date, paying attention to ultimate and parent holding company information, where appropriate, including those overseas.
We research if a company is involved in any payment disputes, including County Court judgments, writs and mortgage charges.
We track company owner, director and secretary details and history including date of birth, nationality and all current and previous directorships.
We review up to five years financial accounts, allowing us to understand the direction of the business.
We review payment trends to understand how quickly a company pays its invoices and give due respect to current and previous credit limits and credit scores designated by CreditSafe.
We screen individuals against PEP and Sanction data, meeting all the standards outlined as per the JMLSG guidance. We verify residency and identity extensively.
We additionally review company prime books of entry, comparing them with company bank statements.
What fees do you charge investors?
Currently ThinCats does not charge a fee for registering as a lending member or for lending money.
What are the main risks?
Investments with ThinCats involve making secured loans to small and medium sized businesses and, like all investments, that involves risks. The principal reason you may not get all of your money back is if the borrower fails to repay as agreed.
Investing on the platform is for experienced private and corporate investors. ThinCats does not offer advice, nor recommendations. You should take independent financial advice before committing your funds to ensure you fully understand the risks and are satisfied that P2P lending is for you and meets your personal financial circumstances.
Where is my money held?
All investor/lender funds are held by an independent authorised body, Street UK Ltd, which is contracted to receive funds on behalf of the ThinCats platform, to disburse them as required to make loans and to collect repayments made by Direct Debit.
What are the estimated bad debt rates, and how are they calculated?
As at 30 November 2014 ThinCats has capital at risk of 2.21% but expects actual losses after recovery of 0.89%. These figures represent the weighted average over the whole ThinCats portfolio. Because lenders create their own unique portfolio every lender will experience a unique income profit and loss rate. These average figures cannot take into account your individual decisions related to risk and return.
Do my monthly repayments from a borrower vary?
They do not.
What happens if a borrower becomes insolvent before repaying a loan?
A company that fails to pay its debts has exhaustive procedures to reschedule or recover outstanding amounts. If it defaults it will enter a process to enable the investors to recover debt from the security in place.
Can I include ThinCats loan payments in an ISA?
It was announced in the Budget Statement, October 2014, that investors will soon have the opportunity to earn significantly more interest on their tax-free savings by utilising personal ISAs in P2P investments. We shall advise when this becomes possible.
What are the tax consequences of lending as an individual?
It is each individual lender’s own responsibility to declare any money earned through ThinCats to HMR&C.
Can I lend if I am resident in the Channel Islands or the Isle of Man?
Yes, so long as you are investing in Sterling (£) and your funds are being transferred from a bank that has acceptable anti-money laundering policies, which include all EU banks.
Do investors remain anonymous?
Yes. When investors register with ThinCats they are allocated a BLN Membership Number. Connections made to the website are secured by 256-Bit encryption.
At what stage of the process can I cancel?
Lenders may transfer uncommitted funds out of their client account at any time by sending an email request. As the loans are usually simple repayment with interest, the lender gets income from the second month. You can request a transfer of any uncommitted funds in your client account by sending a secure message from within the ThinCats system. Except under special circumstances and by prior arrangement we can only return your funds to the bank account they came from. Please note that during monthly loan repayments we do not process withdrawal requests.
What is the step-by-step process?
In assessing each loan proposition F&P invests a great deal of resource in understanding the borrower. We get to know their business, the key team and their potential. We need to assess the security on offer and to make sure that there is every chance that the business can repay the borrowed funds. We complete a detailed loan information pack for each proposal, run external credit checking, KYC and money laundering processes. All proposals pass through an internal peer review and we then answer questions from lenders during the auction. Once the auction is complete we work with appointed lawyers completing all legal documentation and security. Integral to the process is regular monitoring through the life of the loan. A mutuality of interest exists encouraging the borrower to be open to the sponsor throughout the loan cycle. We work to spot problems early, protecting lenders’ capital and security, resolving issues.
How long does the process take?
A close and transparent relationship with both lenders and borrowers enables F&P to untangle and streamline the lending process, delivering funding at the right price and in good time for the benefit of all stakeholders. The process typically takes four weeks.
What is a sponsor?
Sponsors are the first point of contact for potential borrowers. Borrowers cannot raise funds through the ThinCats platform without the support of a sponsor. We assess the business proposal and vet applications for loans. We help the borrower to prepare the loan information. Sponsors make no recommendations nor offer investment advice. Sponsors play an important part in how the platform develops. We see the businesses we help to gain funding grow during this difficult economic climate.
Are there any additional costs that apply to my loan?
There are normally no additional costs, nor penalties for early repayment of the loan.
Who can apply for a loan?
F&P has a reputation for high quality, low risk lending to established and profitable businesses with strong management teams which can demonstrate their ability to repay. We work with limited companies and LLPs, although there remains the potential to work with CICs. Security is always required. Personal guarantees may be required to secure funding.
Is there a maximum loan?
Business loans range from £100,000 to about £3million.
How are the loan repayments calculated?
Loans are repayable in fixed monthly instalments over periods ranging from one to five years, at competitive rates determined by the marketplace through the ThinCats auction process. The amount of the fixed monthly repayment depends on the amount borrowed, rate of interest and the loan period.
What are the assessment criteria?
When you are raising money for businesses as diverse as airlines and antiquarian booksellers through to restaurants and property developers, the criteria will always be borrower specific. Every member of our team, whether partner or consultant, has at least 30 years appropriate sector experience that will be applied to the borrower’s proposal.
How is the risk of my business determined?
By the market. That is essentially the nature of the interest rate acceptable to the lenders.
What information do I have to provide when I apply for a loan? How do I apply?
Through our website or by a phone call to our London office. We need:
- Company name
- Brief description of the business
- How much are you looking to borrow
- Purpose of the loan
- Principal contact details
What fees does Freedman Partners LLP charge?
We charge only for success. Typically our fees range from 6% to 3% on drawdown with a further 0.5%pa to cover monitoring fees, charged monthly on the outstanding balance. If we do not successfully raise your funding we do not charge you a fee.
What fees does ThinCats charge?
There are a few fees attributed to arranging a loan through ThinCats:
- £500 (plus VAT) listing fee
- 1% (plus VAT) of the value of the loan, on drawdown
- 0.5%pa administration fee, charged monthly on the outstanding loan balance
Again, fees are charged only on success.
Can I change the monthly repayment date for the loan?
We work with the borrower to select the preferred monthly date. Once it is chosen it is fixed for the life of the loan. The majority of loan repayments are due on the 12th of every month.
What information will be available to investors?
F&P prepares a comprehensive loan information report consisting of some 20 pages covering the loan proposal, supporting financials and security.