Surplus cash

[northernladuk]

Thanks. Wow. I wasn’t aware of those losses. Looks like I better do a bit more due diligence and re-evaluate.

Research on these P2P things is essential. It's good when it works but you need to be absolutely sure you understand what happens when it doesn't. The number they quote is an average taking in to account historical losses.

I've just checked FC as they used to have some very clear graphs showing historical bad debt but guess what. It's all hidden in the members section so you can't find it.

It projects bad debt at around 3-3.5% and up to 6% of loans defaulting (less for shorter loans) so it's not quite as plain sailing as it first appears.

That said the rest of the stats do prove that the returns they quote are possible and have been achieved over the years. It's just the fact it's projected worries me.

So do your own research, get a log in and hunt around their pages for the info they don't want to tell you before you are in and then make your own mind up. If you believe their stats then go for it. I'm personally just getting cold feet at the moment but that's not to say it's still a viable investment platform.

[gizzmo]

That said the rest of the stats do prove that the returns they quote are possible and have been achieved over the years. It's just the fact it's projected worries me.

So do your own research, get a log in and hunt around their pages for the info they don't want to tell you before you are in and then make your own mind up. If you believe their stats then go for it. I'm personally just getting cold feet at the moment but that's not to say it's still a viable investment platform.

I’ve been invested since April 2018, so far it’s been great. Funds have been invested constantly. Some loans are tiny...eg £5 or £11. Some a few £1,000s. But interest is mounting up and rolls into the next investment when each principal is repaid. I did a lot of research at the time, and primarily went in based on the 4th way reviews which are still very positive. Have to say it’s been great so far, but then as you say, you never know until it goes wrong.

Where did you get that info about defaults? They have a provision fund so are claiming no investor has ever lost money yet.

[northernladuk]

Thanks. Wow. I wasn’t aware of those losses. Looks like I better do a bit more due diligence and re-evaluate.

There is a page on their loss protection here.
Default Shield Protection | Growth Street

Now I've read it it's actually different to FC. They don't have a protection pot.

Default rates are here
Investing statistics | Growth Street

If you scroll to the bottom it talks about the loss provision pot. I don't have the time to look though it but where is the 1/2 million a year the founders put in coming from? The losses last year exceeded the pot by quite a bit so you'd imagine it's going to grow inline with the growth in lending and percentage default expected. Someone must be losing out if it needs topping up by half a mill a year.

But on the whole you are right, no lender has lost out yet. FC works by your gross interest being up in the 9-10% but you shoulder the losses so returns are around 5%.

[gizzmo]

There is a page on their loss protection here.
Default Shield Protection | Growth Street

Now I've read it it's actually different to FC. They don't have a protection pot.

Default rates are here
Investing statistics | Growth Street

If you scroll to the bottom it talks about the loss provision pot. I don't have the time to look though it but where is the 1/2 million a year the founders put in coming from? The losses last year exceeded the pot by quite a bit so you'd imagine it's going to grow inline with the growth in lending and percentage default expected. Someone must be losing out if it needs topping up by half a mill a year.

But on the whole you are right, no lender has lost out yet. FC works by your gross interest being up in the 9-10% but you shoulder the losses so returns are around 5%.

Thanks, will do. Appreciate you taking the time and pointing me in the right direction.

[ubuntu83]

Loan to individual

Great post, and equally fitting responses and info here! so, thank you all!

I did like to know if it would be possible to loan some of the surplus cash to an unrelated individual? By unrelated I mean, friend known for a few years and trustworthy but nothing to do with the Ltd Co. The cash is reserves from previous years, after corporation tax paid etc - essentially being eaten away by inflation practically and fixed savings rates for anything under 3 years seems pretty lame.

Amount probably be in 5 digits.. so not tiny in terms of risk. I did like some feedback on:-
1. Firstly, is it possible to do this at all for Ltd Co IT contractor.
If Yes,
2. Are there any regulatory requirements, permissions, authorization, types hoops to get through? Any other restrictions to be mindful of, e.g. amount, terms of repayments etc?
3. Accounts & Tax - What does it mean in terms of the accounts and tax treatment? Long term creditor?
4. Documents - If there are contracts, t & c's to agreed or paperwork should be put in place before lending the cash?
5. Business justification - Should interest be charged to justify benefit? although, the loan is towards helping a friend
6. Worst case - what if doesn't get repaid?

Thank you in advance!

[pr1]

Great post, and equally fitting responses and info here! so, thank you all!

I did like to know if it would be possible to loan some of the surplus cash to an unrelated individual? By unrelated I mean, friend known for a few years and trustworthy but nothing to do with the Ltd Co. The cash is reserves from previous years, after corporation tax paid etc - essentially being eaten away by inflation practically and fixed savings rates for anything under 3 years seems pretty lame.

Amount probably be in 5 digits.. so not tiny in terms of risk. I did like some feedback on:-
1. Firstly, is it possible to do this at all for Ltd Co IT contractor.
If Yes,
2. Are there any regulatory requirements, permissions, authorization, types hoops to get through? Any other restrictions to be mindful of, e.g. amount, terms of repayments etc?
3. Accounts & Tax - What does it mean in terms of the accounts and tax treatment? Long term creditor?
4. Documents - If there are contracts, t & c's to agreed or paperwork should be put in place before lending the cash?
5. Business justification - Should interest be charged to justify benefit? although, the loan is towards helping a friend
6. Worst case - what if doesn't get repaid?

Thank you in advance!

Sound plan, can't see anything going wrong with that...


...don't do it

[northernladuk]

Great post, and equally fitting responses and info here! so, thank you all!

I did like to know if it would be possible to loan some of the surplus cash to an unrelated individual? By unrelated I mean, friend known for a few years and trustworthy but nothing to do with the Ltd Co. The cash is reserves from previous years, after corporation tax paid etc - essentially being eaten away by inflation practically and fixed savings rates for anything under 3 years seems pretty lame.

Amount probably be in 5 digits.. so not tiny in terms of risk. I did like some feedback on:-
1. Firstly, is it possible to do this at all for Ltd Co IT contractor.
If Yes,
2. Are there any regulatory requirements, permissions, authorization, types hoops to get through? Any other restrictions to be mindful of, e.g. amount, terms of repayments etc?
3. Accounts & Tax - What does it mean in terms of the accounts and tax treatment? Long term creditor?
4. Documents - If there are contracts, t & c's to agreed or paperwork should be put in place before lending the cash?
5. Business justification - Should interest be charged to justify benefit? although, the loan is towards helping a friend
6. Worst case - what if doesn't get repaid?

Thank you in advance!

Just the fact you know so little about it means you should stay away. Also money and friends don't mix. You might think you trust someone but when 5 figure sums are flying around you'd be surprised how quickly that trust disappears.

Truly awful idea.

[WTFH]

A wise man once said: If you lend a friend £20 and never see them again, it was worth it.

[ubuntu83]

Thanks - genuine advice truly..
The person in question here has helped me out in past multiple times and with similar amounts of money when I needed to purchase my house. So we have had dealings in past at a personal level. Sure, that doesn't guarantee anything - I totally get it. I just don't have enough savings at the moment due to expected expenses... and I have maxed out my dividends. Extracting any more will put me into a higher tax bracket and therefore very expensive...
So, aside from trust issues - I am keen to understand the legal and accounting consequences. My accountant is unsure around regulatory side of lending through Ltd co.

Thanks again

Sent from my SM-G935F using Contractor UK Forum mobile app

[northernladuk]

Thanks - genuine advice truly..
The person in question here has helped me out in past multiple times and with similar amounts of money when I needed to purchase my house. So we have had dealings in past at a personal level. Sure, that doesn't guarantee anything - I totally get it. I just don't have enough savings at the moment due to expected expenses... and I have maxed out my dividends. Extracting any more will put me into a higher tax bracket and therefore very expensive...
So, aside from trust issues - I am keen to understand the legal and accounting consequences. My accountant is unsure around regulatory side of lending through Ltd co.

Thanks again

Sent from my SM-G935F using Contractor UK Forum mobile app

And you think a bunch of contractors will know? You might want to try accoutingweb instead.