proplend peer-to-peer lending guide 2016

For more information about lending, please call +44 (0)203 397 8290 or email us at [email protected]

Peer-to-Peer Lending Guide Learn how to invest in secured Peer-to-Peer Loans

This short guide provides you with an introduction to how you can earn attractive returns of between 5-12% pa* by investing in Peer-to-Peer Loans secured against UK income producing Commercial Property. *After fees, but before bad debts & taxes. Capital at risk

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Proplend 2016

For more information about lending, please call +44 (0)203 397 8290 or email us at [email protected]

P2P Lending Core Principals

1.  Circumvents the traditional financial institutions

2.  Multiple investors lending to a single borrower

3.  Direct Loan Agreements between Investor and Borrower

1

Peer to Peer Lending

Peer-to-Peer Lending (P2P Lending), also known as Loan or Debt Crowdfunding, is the process of connecting investors directly to borrowers, circumventing traditional banks and financial institutions. This new asset class offers diversification and attractive yields to investors, especially in this current long-term low interest rate environment.

P2P Lending History & Figures

1.  Started 10 years ago with Zopa, consumer loans

2.  April 2014, P2P came under regulatory legislation of Financial Conduct Authority (FCA)

3.  Over £5bn lent to date (December 2015)* * Liberum AltFi Volume Index

For more information about lending, please call +44 (0)203 397 8290 or email us at [email protected] 2

P2P Commercial Property Lending

PROPLEND IS A PEER-TO-PEER LENDING PLATFORM THAT CONNECTS INVESTORS DIRECTLY TO BORROWERS WITH LOANS SECURED AGAINST INCOME PRODUCING UK COMMERCIAL PROPERTY Commercial Property Borrowers are typically property investors who already own a commercial property, and need to refinance an existing loan that has come to the end of its term. There is approximately £200 billion of outstanding Commercial Real Estate debt in the UK. 25% of which is in the sub £5m sector and requires refinancing within the next 2-5 years. Lending for commercial property, in the UK, has traditionally been dominated by banks, which accounted for c.90% of the market. At the height of the market, in the run up to 2007, there were 55-60 banks, building societies and financial institutions actively servicing this market. Today there are only around 10 - 12. There is a clear dislocation in the supply and demand of funding available and required. The effect of this funding shortfall is an increase in the premiums that commercial property owners are prepared to pay for commercial property loans, which leads to an opportunity for p2p lending investors. By effectively crowdfunding the commercial property loan requirement, borrowers gain access to funding otherwise not currently available, and investors gain access to low risk, fixed income producing opportunities.


Proplend

SECURED PEER-TO-PEER COMMERCIAL PROPERTY LENDING Proplend offers investors the ability to earn reliable and attractive fixed income returns of between 5-12% pa* by lending directly to the owners of income producing commercial property with every loan being supported by a 1st legal charge over the property.

*After fees, before bad debts and taxes

LOAN CAPITAL PROTECTION AND SECURITY Each loan is secured by a 1st legal charge against the Commercial Property offered by the Borrower as collateral which is registered with the Land Registry. If appropriate, additional security might be taken in the form of personal guarantees and debentures.

A 1st legal charge is the most traditional form of loan security.

A clear legal framework in the UK means that commercial property debt offers a high recovery rate, if the Borrower fails to repay the loan; the Property can be sold and its proceeds used to pay back Lenders.


The Proplend Loan Tranche

*Before fees, bad debts and taxes

Proplend understands that not every investor has the same return requirement or appetite for risk. In recognition of this, Proplend created the Proplend Loan Tranche, which splits the whole loan into 3 parts or ‘Loan to Value (LTV) based tranches’, allowing investors to choose which tranche best suits their risk profile. •  The tranches are split based on

the LTV, the amount (%) the borrower requires vs. the value of the property.

•  Investors can choose which tranche, or a combination of tranches to invest in, and how much to invest

•  The higher the LTV the greater the risk, but also the greater the return.

•  Tranche A offers 200% capital protection, meaning the property would have to fall in value by over 50% before the investment is at risk. Tranche B offers 154% and Tranche C 133%.

•  In the example shown, the borrower is paying a blended rate of 6.5% pa (average of the three tranches) and the investors are offered fixed income returns of 5.5%, 7,5% and 10% pa*


How to Invest


Risks

How Proplend Mitigates Risk Fall in property income •  Loan amounts and terms will be determined by the quality of the tenants and occupancy terms, with resulting income protection features such as lower initial loan amounts and interest cover covenants. •  Proplend retains 6 months worth of interest to cover vacancies or borrower default.

Fall in property value •  In a 75% LTV loan, investors in Tranche C have a minimum cushion of a 25% fall in property value. Tranches A and B offer a greater cushion. •  Post crisis drops in property values of 30-40%, without a full recovery, make a further significant drop less likely. •  Significant drops in value increase the percentage of income relative to value, this then provides attractive yield returns for distressed asset managers.

Lack of suitable investment opportunities •  Given the size of the outstanding funding gap, especially in the sub £5m loan sector and the lack of market participants, investors should be able to benefit from current market conditions.

Illiquidity •  Investors should expect that any loan they enter into will remain outstanding for the term of that loan. •  Investors are being paid a illiquidity premium. •  The Proplend Loan Exchange offers a secondary market for investors who wish to sell a loan part prior to the end of the loan term. It cannot, however, guarantee a buyer for that loan part will be found or the price that the loan part may sell for.

Prepayment •  Loan terms will include prepayment protection in the form of penalties, these will be agreed on a loan by loan basis and be transparent to investors.

Loan default •  In the case of a Loan default, Proplend Security Limited, who enters into the Security Documentation with the Borrower, will commence recovery of the debt due under that Security package.


Statistics

Proplend Timeline Jan 2014: Concept born & completed first loans pre-platform Apr 2014: GLI Finance (Institutional investor) equity investment Oct 2014: Platform goes live Apr 2015: Secondary platform goes live

TrancheA(0-50%LTV)

TrancheB(51-65%LTV)

TrancheC(66-75%LTV)

WholeLoan

GrossInvestorsReturnspa

* After fees, but before bad debt and taxes

Loanreviewed £110,000,000

PropertyFunded £11,856,800

Loansfunded £7,620,500

DealPipeline £8,600,000

AverageLTV 62.24%

AverageICR 1.65x

AverageLoan £846,722

StaKsKcs

LatePayments NIL

LoanDefaults NIL

InvestorLosses NIL

LoanBookStatus

Grossreturns 6.98% 8.30% 10.44% 7.39%

Netreturns* 6.28% 7.47% 9.39% 6.65%

Statistics and Loan book as of December 4th, 2015


Properties Funded


Contact

Contact us today to learn more about Proplend and how to invest and earn 5-12% pa* Visit us online at www.proplend.com Register as a Lender Email us at [email protected] Contact a Proplend Representative at: 0203 327 8290 *After fees, but before bad debts and taxes

Proplend Ltd is authorised and regulated by the Financial Conduct Authority, and entered on the Financial Services Register under firm registration number 662661. Proplend Ltd registered office is 145-157 St John St, London, EC1V 4PW (Company Number: 08315922). Copyright © Proplend 2014-2015. All rights reserved.

Proplend operates a peer to peer lending platform specialising in commercial property loans supported by first charge mortgages. Whilst loan investments are secured against property, capital is still at risk and therefore Proplend lenders face the possibility of losing money. Investments in commercial loans are long term in nature and may not readily be realisable. Proplend is authorised and regulated by the Financial Conduct Authority (FCA) no 662661. Proplend does not offer advice or make recommendations. All Peer-to-Peer Lending platforms fall outside the scope of the Financial Services Compensation Scheme (FSCS).

proplend peer-to-peer lending guide 2016

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