Company Focus: Proplend
In out latest Company Focus, we put Proplend under the microscope
Peer-to-peer lending platform Proplend has built a loan book worth almost £200m, backing commercial mortgages and bridging loans and building a track record that continues to appeal to retail investors seeking a reliable return.
It offers interest rates of five to 12 per cent annually and the loans can be held in an Innovative Finance ISA (IFISA) wrapper so returns can be earned tax-free.
Out of 201 loans worth £185m funded since 2014, just one has defaulted, based on the Financial Conduct Authority’s official definition.
But the way that Proplend structures its loans means not everyone loses out even if a loan falls into arrears or default.
Here is what investors need to know.
How Proplend structures its loans
Proplend specialises in sub-£5m commercial investment property loans, which it describes as “a massively underbanked sector of the market.”
The idea is that commercial investment property creates an income stream that pays the lenders interest.
Proplend prices risk on a loan-by-loan basis but each one is then split across up to three loan-to-value (LTV) based tranches or credit bands.
Read more: Proplend’s six initial VAT loans have been repaid in full
The platform splits each loan into £1,000 loan parts, enabling up to 5,000 different investors to all participate in a single loan.
Lenders within each tranche will earn a different rate of interest that reflects their risk appetite and the return they are targeting.
Tranche A is the lowest risk, offering the lowest interest rate and an LTV of 50 per cent.
This is followed by tranche B, with a LTV of 51 to 65 per cent, followed by the highest risk and highest return tranche C, which represents 66 per cent to 75 per cent LTV.
In a loan default scenario, tranche A is paid in priority to tranche B and tranche C, then tranche B is paid in priority to tranche C.
Read more: Proplend hails November as record month
Proplend also operates an interest reserve that deducts a certain amount of interest payments on all loans to cover what is describes as “unknown situations.”
It retains a minimum of three months interest at origination for commercial mortgage loans and bridging and one month for VAT bridge loans.
Choice
As well as an IFISA, investors can also back the loans through a classic P2P account and a pension product.
Loans can be chosen manually or there is also an AutoLend option that invests in the tranche A element of all available loans to build a diversified portfolio.
Lenders need a minimum of £1,000 to invest.
Experienced team
The platform also prides itself on its team of “seasoned commercial property financial professionals,” which has more than 80 years of industry experience combined.
This includes chief executive and founder Brian Bartaby (pictured), who previously ran real estate financier Longcross Capital.
Its chief operating officer is Matt Carson, who spent almost 15 years as head of European and Asian real estate loan operations at Morgan Stanley.
Read more: Everything you need to know about property-backed IFISAs
Proplend’s own stress testing suggests expected losses of two per cent in tranche B loans and five per cent in tranche C, based on property values falling a very drastic 30 per cent.
The platform is approaching a decade in business and has demonstrated a low level of defaults and high rates of return with risk management in mind.
It remains committed to retail investors, especially with a relatively low minimum investment.
The platform’s website is full of accessible information on its loan book, lending strategy and performance which should give investors extra assurance and help them decide if these types of loans meet their risk appetite.