4th Way says CapitalRise “continues to impress”
4th Way has heralded CapitalRise’s “high quality” lending and said it expects its risk profile to improve over time as its loan book matures.
The peer-to-peer lending ratings and research firm said that the Prime property lender maintains very high standards and has approved less than one per cent of borrower applicants.
“This is remarkably tight standards,” 4th Way said. “It could likely approve a considerably higher proportion of deals before you would notice any substantial change in loan quality, arrears or bad debts.”
Read more: CapitalRise crowdfunds £1m to convert future fund finance
4th Way noted the property lending experience of the management team and the high quality of its loans.
“As of mid-2023, just two loan facilities are noticeably behind schedule, which is a very small number for this type of borrowing,” the analyst said.
“CapitalRise forecasts no losses to lenders due to its strict criteria, even before taking interest into account. I find that forecast plausible for most lenders, if not every lender all the time.”
However, 4th Way noted that CapitalRise funds its loans in tranches – which is typical for P2P development lenders – and said this is “sub-optimal”, as there is always a chance that not enough money can be raised to fund later tranches, and the project collapses.
Read more: CapitalRise chief commended on annual Women in FinTech Powerlist
“That said, the high quality it offers means lenders are likely to continue supporting it through downturns, and CapitalRise has arrangements with institutions that can pre-fund loans and tranches that aren’t filled through its online lending platform,” it added.
4th Way gave CapitalRise a risk score of 6/10, meaning it is below stock-market risk, despite its stable, decent returns.
It noted that CapitalRise’s history in terms of the number and status of loans has not fully matured yet. It said that as its history deepens, 4th Way expect the risk score to improve to 5/10.
Read more: CapitalRise live loanbook up 125pc
“Ultimately, it could also eventually hit 4/10, which is held by a very small number of providers,” 4th Way said.
4th Way said 1/10 is equivalent to the risk of sudden loss with savings accounts, while 8/10 to 10/10 is equivalent to the range of risk in the stock market.
4th Way has given CapitalRise an overall 3/3 PLUS rating – its highest rating.