One of our experts has updated this FundingSecure Review:
4thWay's Quick Expert FundingSecure Review
I still generally like what I can see, but I want more details and note the wide spread of risk in these higher-rate loans
FundingSecure's own total lending figures on its website overstate its size, but it has still done well over £100 million in lending since 2013.
FundingSecure demonstrates simple, sensible processes in approving loans: it approves loans up to a maximum of 70% of the value of the property or item, which is valued by third-party professionals, and items are stored in a secure location or a legal charge is taken on the property.
There is some evidence that FundingSecure lets lenders down when it comes to taking substantial and rapid action when a loan falls late. Acting swiftly can reduce the risks of losing money.
A great many outstanding loans have been rolled over into new loans. While this is not concerning given FundingSecure's specific deal structure, it does mean that we are not fully able to assess how many loans will become troublesome.
Confirmed losses have been low, but I am not entirely satisfied with FundingSecure's published statistics and wish for more information about outstanding loans that have not repaid on the expected date or that have turned bad.
As FundingSecure's loans have progressed, it has revealed it needs to do a lot more to show late loans and to acknowledge loans that are in trouble, or provide evidence to show that it is truly open about such loans.
It needs to do more to explain to lenders that the sorts of loans it offers tend to have a high proportion that fall late or go bad, even if bad-debt recovery for these kinds of loans is usually high and includes penalty interest paid to lenders. In addition, recovery times for bad debts can be very long, so lenders should know that.
I think FundingSecure should do more to explain to lenders that these sorts of loans will lead to a wide range of results, with potentially as much as 20% of lenders having to wait for around one-third to half of their loans to be repaid, after they go late or turn bad.
FundingSecure also needs to demonstrate more clearly that it is on the ball in chasing non-payers rapidly, which is best practice for these kinds of loans and it can greatly improve results.
FundingSecure also doesn't provide enough information for us to use our full risk modelling and investment analyses. There is also little that we know about the three key decision makers, except we're told they collectively have approaching 100 years' experience in these sorts of loans.
The secondary market (where you can buy and sell existing loans from other lenders) has some quirks that mean you can lose money from a tax loss even if the borrower repays successfully and on time, unless you lend through FundingSecure's IFISA. Read about this modest risk here.
All of that said, I still think committed lenders should expect to make a profit. Combined with fair and sometimes excellent interest rates on individual loans, I believe the risk of losing money with FundingSecure, provided you spread your money across enough loans, is low. Consider capping the amount you lend to an individual borrower at 0.5% of your entire lending pot and especially look for “first-charge” loans that haven't been rolled over, and that are for considerably less than the property valuation.
Recently, FundingSecure made a six-figure profit.
Independent opinion: the opinions expressed are those of the author and not held by 4thWay. 4thWay is not regulated by the ESMA or the FCA, and does not provide personalised advice. The material is for general information and education purposes only and not intended to incite you to lend.
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