Type Limited Products Peer-to-peer lending Founded 2012 | Headquarters Leeds, England, UK Founder Daniel Rajkumar | |
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Key people David Powell, Nick Moules, Julian Wells | ||
rebuildingsociety.com is a Leeds-based peer-to-peer lending platform focusing on finance for small and medium businesses. The company was launched in 2012 by Daniel Rajkumar. The first loans were completed in February 2013.
Contents
Operation
The rebuildingsociety.com website operates as a lending platform by allowing approved businesses to publish a loan application. Investors can subscribe to parts of the loan after assessing the business's information, committing an amount of their choice, with an interest rate of their choice.
rebuildingsociety.com was one of the first platforms globally to have gained market traction for peer to business lending. Research by rebuildingsociety.com in late 2013 found SME owners were still largely unaware of peer-to-business lending and rely on personal borrowing to support their businesses. According to the study, about 290,000 SME owners would use their personal credit cards to raise money, similar numbers will borrow from friends and family, and about 500,000 SME owners will be remortgaging their own home.
Potential returns
Because investors choose which businesses and at what rate they lend, returns can vary considerably.
As of January 12, 2014, the average interest rate payable to lenders from 25 loans completed was 15.57% gross. Earnings are reduced by any defaults which are forecast to be up to 7% depending on the risk appetite of the lender.
27th September 2016: From a former lenders perspective I have found that actual default rates on this P2B Platform to be greater than 15% of current loan book value yet this headline figure has been artificially lowered during 2016 through the introduction of a mathematical equation which re-bases the actual default figure to slightly under 10% there are now hypothetical recovery figures presented on the individual lender dashboards and these are presented default specific to a lenders own portfolio.
Lender terms and conditions were also revised and instituted during 2016, the two changes were met by lender disapproval.
These changes were enacted at a time when Platform default rates were rising steeply.
rebuildingsociety.com also advocates the lending of money between businesses to create a sustainable economy for businesses with the opportunity for lenders to potentially earn high returns. In December 2013 it researched the business savings rates market to further illustrate the point
Risk and regulation
As with other lending sites, including Funding Circle, if a borrower fails to fully repay the loan the lender risks losing money invested. Defaults can be expected and lenders should understand that any recovery process may be lengthy and even then there is no guarantee of success.
Rebuilding Society's borrowing criteria and acceptable security offering up to and including £50,000 is less onerous than that of other P2B lending sites.
To mitigate this, investors are encouraged to give very careful consideration to each lending prospect by accessing and properly assessing both free and pay to view data sources external to the Rebuilding Society lending site itself. Given the higher risk nature inherent to P2B lending fund allocations will take time and should be made with a view to diversity.
Owing to the essential requirement to perform detailed background research into the viability of lending prospects this site may be best suited to sophisticated investors and not ordinary retail investors with limited financial analytical skills.
The Financial Conduct Authority (successor to the Financial Services Authority) is to regulate the peer-to-peer lending industry from April 2014.
Pensions and ISAs
In 2014, the UK government announced it was considering setting up a separate tax free individual savings account (ISA) for people who want to lend out money. The new ISA would be for people who lend money via Peer-to-Peer (P2P) borrowing sites (such as rebuildingsociety.com).
In January 2015, rebuildingsociety.com announced a new partnership with SIPPclub, which will allow qualifying rebuildingsociety investors to invest through a specially-designed self-invested personal pension (SIPP). The platform’s investors will be able to invest via an EvolutionSIPP. All investments made through a SIPP are tax-free – meaning participating investors will stand to recoup higher rates of interest through the rebuildingsociety platform.
Growth Prospects
The UK industry is set for rapid growth as one in four savers is ready to invest according to industry research undertaken by rebuildingsociety.com.
Non-bank lending grew at its fastest rate since 2008 in the year to October 2013, with over £10.5bn of credit arranged through peer-to-peer lending, invoice discounting, asset finance and leasing. rebuildingsociety.com passed the £1m of lending mark in October 2013
rebuildingsociety.com also offers a licensed version of its technology to other businesses looking to break into the peer-to-peer lending industry through White Label Crowdfunding. In August 2013 it announced its first three clients.
It has since signed a contract to provide a new platform for ThinCats in the UK and in Australia
As of 14 August 2014, total advances stood at around £3.5m, while in January 2015 it passed £5m of loans completed.