Crowdfunding has become an integral part of the financial sector with companies such as
BridgeCrowd, a provider of bridging loans, proving to be extremely popular. The company has such confidence in its service and ability to deliver that there is a referral scheme offering a £250 cashback reward for every referral made. In the crowdfunding industry confidence breeds confidence which attracts more investors and more borrowers creating ever greater liquidity.
Referral scheme
The referral scheme relates to new customers who invest a minimum of £5000 within 45 days of signing up. As property investors look for innovative and cost-effective means of raising capital, the opportunity to build a potentially large referral income stream is there for everyone to see. However, why should new investors sign up to BridgeCrowd and what can they expect?
Asset-backed lending
BridgeCrowd is targeted towards parties looking for short-term bridging loans and those who may have difficulty pursuing more traditional routes. They may have a chequered credit history, difficulty raising funds on an undeveloped property or simply require a speedy transaction. The average transaction is completed in 5-18 days ensuring that potentially lucrative deal does not slip through an investor’s fingers.
A maximum 70% loan to value ratio on UK based property assets used as security ensures there is significant headroom in light of any potential difficulties. When you also consider the average loan is only six months in duration, up to a maximum of 12 months, this relatively short time span strengthens the degree of security.
In it together
While many property funding platforms are happy to live off investor/borrower arrangement fees this is not the case with BridgeCrowd. The business originally started life as a family operation and all loans offered on the company’s crowdfunding platform will receive direct investment from the company. The fact that BridgeCrowd is investing its own capital into each and every transaction offered to existing and new customers says everything.
Interest and repayment
The average interest paid to investors is 1% per month which works out at an annual rate of 12.68% with capital repaid at the end of the loan term. As interest is paid monthly this ensures that the LTV rate remains constant throughout the term of the investment. All borrowers are obliged to confirm at least one exit strategy to ensure repayment of the original capital and interest. This may be a simple sale of the property after redevelopment or refinancing via more traditional long-term routes.
Rigid investment criteria
BridgeCrowd has a very rigid investment criteria ensuring as much headroom as possible between capital and interest repayments and the value of assets used as security. So far the company has lent in excess of £100 million with no capital losses to date. In the event of a borrower experiencing financial difficulties the charge over secured assets will be executed and the property sold on the open market. The fact that all secured assets are UK based ensures there is an extremely liquid secondary sales market by which to raise funds relatively quickly.
Conclusion
In many ways the BridgeCrowd platform sells itself, the investment criteria is rigid, there is ample headroom between secured assets and outstanding funds and the company invests in each and every transaction listed on the site. Confidence breeds confidence in the peer-to-peer market and there is potential to create a lucrative referral income stream. When you compare average annual investment returns in excess of 12% against the current low interest rate environment it is not difficult to see the attraction for investors.
Key Points:-
• All transactions are secured by a mortgage over UK property
• Maximum loan to value (LTV) ratio is 70%
• Properties used as security are valued by a RICS approved local surveyor
• Minimum loan amount is £5000 with no maximum
• Interest is paid monthly with capital repaid when borrower repays the loan
• In the event of default the security property is repossessed and sold as a last resort
• Average loan term is six months
• In excess of £100 million has been lent to customers with no capital losses
• Majority of bridging loans have retained interest and are not serviced
• As interest is paid monthly the LTV rate will remain constant
• Underwriting criteria takes into account a borrower’s ability to repay loan capital and interest
• At least one exit strategy is required (sale of property or refinancing)
• In the event of default the average loan is repaid in full (with interest) within three months of original term date