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
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
Estimated loss rate 2016
Tranche A: 0%
Tranche B: 0.3%
Tranche C: 3%
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
Orca have analysed other P2P Lenders, Check them out:
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 term is decided on a deal-by-deal basis but will typically be six months to four years.
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.
- 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.
- 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.
Proplend Investment Process
Understanding Products & Returns
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.
Interest rate: 6.47% p.a
LTV rate: 0-50%
Interest rate: 7.73% p.a
LTV rate: 51-65%
Interest rate: 9.39% p.a
LTV rate: 66-75%
Figure 2.0: Proplend Products Interest Rate and LTV max. Rate
Birmingham – Mixed Use
Interest rate: 8.75% p.a
Target fundraise: £49,036
Term: 14 of 18 months
LTV rate: 62.69%
Essex – Rainham Industrial Estate
Interest rate: 7.5% p.a
Target fundraise: £52,033
Term: 21 of 24 months
LTV rate: 37.74%
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.
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.
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.
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.
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.