Briefing note

Ludgate Briefing Note - May 2017
Basics
  • Different types of P2P - Debt / Equity / Gift-based.  This paper deals only with debt
  • P2P lending bypasses banks - allows investors to make loans directly to established businesses via web-based lending platform
  • Loans from £5K up to several million: also Revolving Capital Facilities
  • Different platforms now pre-fund deals so there is no 'auction jeopardy'
  • Can find a home for most proposals if they are reasonable.  Wide variations between platforms in level of due diligence and security required
  • Interest rates 8-15%.  Arrangement fees 4-8%.  P2P is not about being cheap, it's about being flexible and available.  
  • Typical turnaround time is 4-6 weeks
  • Not a replacement for equity
  • Start-ups are difficult, as are challenging turnarounds
Current Developments
  • The sector is still expanding rapidly.  £8.5bn of loans now written across all platforms; further £4.2bn forecast for 2017
  • Deal sizes are increasing - facilities in £1m-£2m range now commonplace.  Larger deals up to £10m and above can be placed
  • Still new platforms launching regularly.  Many have different credit/risk appetites
  • Institutional money continues to back the sector, meaning many platforms underwrite/fund their own deals
  • Revolving credit facilities (virtual overdrafts) up to £1m are available.  These can be drawn and repaid at will subject to an overall limit
  • P2P is sector-agnostic; it all depends on the sense of each individual deal
  • However, preferred sectors at the moment are:
Cashflow lending against EBITDA for MBO/MBI/Acquisition
Working Capital Facilities - overdraft or loan
Property Development
  • Some platforms prefer to take out any existing bank debt; others can sit alongside
The Future
  • FCA regulation currently being given to platforms: complete by mid-2017
  • Low BoE interest rates for savers will keep funds flowing in to the Sector
  • Borrowing rates will fall as more funds chase the same amount of deals, but will remain above bank rates.  Interest rates are around 7% for the best deals
  • Banks will continue with conservative credit policies for the foreseeable future which will make P2P more attractive for business borrowers
  • There will be consolidation in the Sector.  We will also see at least two stockmarket listings of P2P platforms in the next 2 years
  • P2P will continue to become more mainstream and a viable alternative to traditional banks, especially for specific sectors.
Ludgate's Credentials
  • Been writing P2P loans since 2011; very experienced in the Sector
  • Director/founder level relationships with all major platforms.  Our reputation means we can walk deals into Heads of Credit.  We provide platforms with deals that are structured and packaged to enable a swift journey through the credit process
  • Specialise in deals that require some thinking through - not plain vanilla
  • Operate 'packager' model; built strategic relationships with platforms - now chasing us for deals
  • We have advised on pre-launch of platforms
  • Know where to place the proposals depending on business performance, sector and requirement
  • In 2015 we placed 60 deals totalling £12.2m  
  • In 2016 we placed 66 deals totalling £30.7m



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