Proplend Investment Review

By Jordan Stodart | On November 2nd, 2016

Founded in 2014, Proplend is a manual-loan-selection peer-to-peer lending UK platform, focused on marrying retail & institutional investors and borrowers seeking commercial mortgage loans. All loans listed on the Proplend platform are secured on income-producing, tenanted commercial properties with loan-to-value (LTV) ranges from 0-50% to 66-75%. Proplend caters to the risk averse as well as those looking for exposure to fairly secure, high-yielding investments.

With this peer-to-peer lender, you can achieve rates in the region 5-12% per annum according to the Proplend website. Arguably some of the best interest rates on the market, but is this an alternative investment for you? Evaluate by reading more.

Proplend Review Statistics

(*statistics and information correct at time of publication Oct 2016)

Proplend offers three peer-to-peer investment products for you to invest in. These products, or tranches, are weighted by riskiness. Tranche A is least risky, as it has greater security provision. Tranche C is riskiest, but delivers the highest interest rate.

 

Estimated returns/rates (after fees but before tax and bad debt)

Tranche A: 6.47% p.a
Tranche B: 7.73% p.a
Tranche C: 9.39% p.a

 

Performance

Since launching in 2014, Proplend has recorded no arrears (late payments over 45 days), defaults or loss of investor capital.

 

*Despite this stellar record, historic performance is not a reliable indicator of future performance.

 

Historic loss rate

0%

 

Estimated loss rate 2016

Tranche A:  0%

Tranche B:  0.3%

Tranche C:  3%

 

Liquidity

Proplend doesn’t have the liquidity levels of some mainstream platforms, but does maintain an active secondary market, known as the Proplend Loan Exchange, where you can buy and sell loan parts. 20% of the Proplend loan book has gone through the PLE.

Total lent funds to-date

£8.9million

 

Loan Purpose

If you choose to lend across Proplend, you will be investing in mortgages secured on commercial investment property, something which was hit hard off the back of the 2008 financial crisis. However, Proplend specialises in the sub £5m loan sector and applies strict lending criteria on loan to value (LTV) and income cover.

Loan value

The value is determined on a loan-by-loan basis, but is usually in the region £100,000 – £5million.

Loan term

Loan term is decided on a deal-by-deal basis but will typically be six months to four years.

 

Security

Proplend offers two layers of risk mitigation in order to reduce the likelihood of a default impacting your investment portfolio – this could be a portfolio of multiple loans on Proplend, or simply exposure to a Proplend loan amongst other investments outside of P2P lending.

Capital protection and asset security protect investors, where the asset securing the loan is an income-producing commercial property owned by the borrower.

Capital protection

  • All un-lent monies are held in a segregated client account with Barclays Bank.
  • Loans are a max. LTV of 75%, but the ultimate LTV will be determined by Interest Rate Cover affordability:
    • 6 months’ interest cover will be deducted from the gross loan proceeds and retained by Proplend in the borrower interest reserve account. This will be available should the borrower miss an interest payment. The deducted interest is specific to each loan.
  • Each property is professionally value and Certificates of Title must be produced by the borrower’s solicitor.

Asset security

  • Proplend Security Limited (PSL), a separate wholly owned subsidiary of Proplend Ltd, holds the security documentation on trust on behalf of each group of investors.
  • Each loan is backed by the following security:
    • a 1st charge legal mortgage over the property which will be registered with the Land Registry;
    • a debenture or share charge may also be taken and registered at Companies House;
    • additionally, the borrower may provide a Personal Guarantee.
  • Security is determined on a loan-by-loan basis and is not co-mingled with any other loans or investors.
If insolvency worries you, Proplend has procedures laid out which will ensure your loan parts and all security will continue to be administered if the platform ceases trading.

Proplend Investment Process

Getting set up with Proplend couldn’t be easier or quicker.
The AML checks are automatic, and providing there’s no discrepancies, you can have your account set up with funds transferred in a few minutes.
*Be conscious, the minimum investment amount is £1,000.
Here is a screenshot of the ‘Lender Dashboard’:
Figure 1.0: Proplend Lender Dashboard

Understanding Products & Returns

(*statistics and information correct at time of publication Oct 2016)
There are three products you can invest in/across on Proplend. They have the following criteria:

Note: LTV stands for loan-to-value, referring to the amount a borrower can be lent in correspodence with the value of their asset securing the loan.

Tranche A

Interest rate:  6.47% p.a

LTV rate:  0-50%

Tranche B

Interest rate:  7.73% p.a

LTV rate:  51-65%

Tranche C

Interest rate:  9.39% p.a

LTV rate:  66-75%

Figure 2.0: Proplend Products Interest Rate and LTV max. Rate
There are two investment opportunities currently available to be funded on the Proplend Loan Exchange. There are no full loans available to be funded, currently.

 

Create Account

 

Tranche A

Birmingham – Mixed Use

Interest rate:  8.75% p.a

Target fundraise:  £49,036

Term:  14 of 18 months

LTV rate:  62.69%

Tranche A

Essex – Rainham Industrial Estate

Interest rate:  7.5% p.a

Target fundraise:  £52,033

Term:  21 of 24 months

LTV rate:  37.74%

 

Visit Proplend

 

Benefits Investing

When investing across Proplend, you are exposed to commercial mortgage loans. You will have robust security measures underwriting the loan and have the added confidence of an exemplary track record, to-date.

Secure lending

Proplend’s track record speaks for itself. With strong credit-writing capabilities and a team with over 80 years of property finance experience, you can be assured that the Proplend team vet borrowers rigorously and put up strong security packages – as illustrated above – to mitigate the risk of you losing money.

Balanced portfolio

If you are an experienced investor with a portfolio of equities and bonds (for example) then a little exposure to one of the best alternative investments going on the market could be a good move to maximise returns from your portfolio.

High-yield returns

Peer-to-peer lending offers some of the most attractive risk-adjusted returns currently available on the market. If you’re new to investing, then Proplend could be a good move to put money away for a rainy day with its 50% max LTV product. Equally, if you’re looking for high-yield exposure in the region 10%+ and can actively manage your investments, then Proplend’s higher rate, higher risk product could be for you.

Risks Investing

With all investing comes risk. It’s part and parcel. Peer-to-peer lending is no different, there is a risk you could lose some or all of your capital with no coverage from the Financial Services Compensation Scheme. What’s comforting about P2P lending is that these risks are upfront and the platforms, like Proplend, are transparent about them and how they mitigate them.

NB: Peer-to-peer lending is not covered by the FSCS, this is not a savings product.

Diversification

With Proplend you are obliged to select your own investments. You can scan the available loans, either on the platform or through the Proplend Loan Exchange (secondary market) and construct your own portfolio of loans. This means you need to take the time and have a reasonable degree of skill when conducting due diligence on loans you want to invest in.

Economic downturn

Proplend loans are secured on tangible assets, which can be liquidated to cover any payment defaults. If the property market drops, then the value of the property underwriting the loan could drop in value, meaning it may sell for under the original market valuation. This is why Proplend ensures its highest LTV rate is 75%. Should the market drop 25%, then the property securing the loan should still cover any debt owed when it is sold.

Liquidity

Proplend is a fairly niche platform. It has a great track record, but it has only lent c£9m. This is great for those who want to invest in a platform that takes care of its investors and devotes extra time to credit-writing. But, liquidity is hard to come by as there’s currently few loans on the platform and liquidity may be insufficient to guarantee a quick sell-out from a loan. However, Proplend reports that no lender has ever waited more than 5 days to sell a loan part on the PLE and, at the time of writing, there are still loan parts to be bought on the PLE.

Conclusion

Proplend’s track record in preserving investor’ capital and interest is faultless. Their credit-writing seems robust and has ensured retail investors can gain returns in the region 5-12% p.a depending on their risk profile. This niche platform caters to the risk averse investor looking for a low LTV rate (sub 50%). It also appeals to the more active investor keen to maximise returns by offering a product with a rate north of 10% p.a. All in all, Proplend does well to produce strong yields in an unforgivingly low-yield environment. It does so with strong security coverage, but you’ll need to be confident in your abilities to select your own investments – all your eggs in one basket springs to mind.

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