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sceach16

"if you are a company, you must be registered with Companies Registration Office (the "CRO"), you must have filed accounts at the CRO for at least the two consecutive years immediately preceding your application to be a Borrower and at least 50% of your directors must be permanent residents of Ireland;"

this company was incorporated in Oct 2014. It is now on a 2nd loan form Linked.

Squall Leonhart

Detective Sceach doing the work for the masses again. Thanks Sceach.

It feels more and more lately that LF are flouting their own rules and being less than honest with their presentation of the financial facts. It's starting to make me feel a little uneasy and question things more.

spudwould

Squall Leonhart wrote: »

Detective Sceach doing the work for the masses again. Thanks Sceach.

It feels more and more lately that LF are flouting their own rules and being less than honest with their presentation of the financial facts. It's starting to make me feel a little uneasy and question things more.

You have to remember that Linked Finance have NOTHING to loose. :eek:
LF charge between 2.5% and 5% of the total loan which is deducted BEFORE the loan is released :eek:... meaning that LF are already paid IN FULL and it is only me and you the lenders that take the risk. :mad:
Of course they loose out on the 1.2% that they charge us!

newacc2015

spudwould wrote: »

You have to remember that Linked Finance have NOTHING to loose. :eek:
LF charge between 2.5% and 5% of the total loan which is deducted BEFORE the loan is released :eek:... meaning that LF are already paid IN FULL and it is only me and you the lenders that take the risk. :mad:
Of course they loose out on the 1.2% that they charge us!

What I like about Mintos is that the companies putting the loans on the market place have to put 10% down themselves. They have lent over 2.3million in invoice financing and they havent not had a single default. I havent wait more than 2/3 days for a full late payment on an invoice financing and even then I usually got about 80-90% of the loan on the day it was due

IMO if LF had to put 10% down on the loans, a fair amount would not end up on the site

benjamin d

I just got the email from LF about pretty sweeping changes to the whole system; all loans to be fixed rate and a new grading system.

Any expert want to give their verdict?

Would it be fair to say they'll underestimate the bad debt rate? Will a Y grade be complete junk? And how far would you trust an E or D, for example?

I think it's a decent step to provide certainty over rates, although it's a shame rates on 'safe' loans will be so low now.
I like the shorter terms too, because tbh I just want to roll over what I have until my longest loans are done and I bow out.

Squall Leonhart

Was just about to come on and post the announcement, Benjamin got there ahead of me.

It's a pretty massive change to the way things operate alright, we'll have to see how this goes. I wonder are LF going to take on riskier borrowers now, and if they default, "don't say we didn't warn you"

sceach16

Based on 3 year loans , using Linked default estimates , deducting Linked charge 1.2% and allowing for the average tax/usc rate for average earners (c50%), net returns for

A loans....2.7% B loans 2.2% C loans 1.7% D loans 1.0% E and Y loans MINUS 1.1%...:rolleyes::(:eek I reckon Galway races are a better investment.

( Can I ask that one or more check my figures, please)

For 1 year loans...A 2.2% B 1.7% C 1.1% D 0.4% And E/Y MINUS 1.1%.

Squall Leonhart

Sceach I'd love to check over your calcs, but I'm a little bit mathematically challenged when it comes to this stuff, I always get muddled

m320325

sceach16 wrote: »

Based on 3 year loans , using Linked default estimates , deducting Linked charge 1.2% and allowing for the average tax/usc rate for average earners (c50%), net returns for

A loans....2.7% B loans 2.2% C loans 1.7% D loans 1.0% E and Y loans MINUS 1.1%...:rolleyes::(:eek I reckon Galway races are a better investment.

( Can I ask that one or more check my figures, please)

For 1 year loans...A 2.2% B 1.7% C 1.1% D 0.4% And E/Y MINUS 1.1%.

I've just done these quickly so not certain if accurate, I'm using a large loan amount to make it more accurate with rounding:


Lend 1000 @ 15% over 3 years
Gross Interest at end of 3 years 247.97 (using LF reports)
LF Fees 19.81
Net Interest (before tax,prsi,usc) 228.16


Example1:
Lend 1,000 @ 15% over 3 years to 100 borrowers (assume all loans given same week as principal is repaid in full in 3 years)

Total Lent: 100,000
Interest Received after LF fees (24,797-1,981) 22,816

If 8% defaulted before they had made any repayments 8,000
50% tax on the 22,816 11,408

Profit 3,408

Profit divided by total invested 3.408%
Rate divided by 3 years 1.136%



Example2:
Lend 1,000 @ 15% over 3 years to 100 borrowers (assume lending was done over a period of 24 months, therefore there will be a period of 5 years from first loan until the total principle is repaid)

As above except total interest is divided by 5 years instead of 3
Profit divided by total invested 3.408%
Rate divided by 5 years 0.6816%


**
- My calculations are assuming LF were unable to recover any of the loan
- During the final 3 years, the principal is being repaid and can be used used if needed or invested in a 12/24 month loan to earn extra interest.
- The 8% bad debt rate, thats just my interpretation of how to use it in calculations so I could be wrong

at9qu5vp0wcix7

I've completely ceased investing into Linked Finance. The question now is if it is even worth reinvesting repayments, or just withdrawing the money to use on Mintos

Strettie11

m320325

I hope you do not mind me pointing out your interest rate return is overstated

First you have calculated the interest on the 100 loans as if they paid interest for the full 3 years so the total interest will be less than the 22816 stated when you take into account the defaults below

Also the 8% is an annual default rate over 3 years 22 loans will default out of the 100 So in Year 1.... 8 loans will default ( 100 loans X 8%), year 2.... 7 loans ( 92 loans X 8%) and year 3.... 7 loans ( 85 loans X 8%)

so the bad debts for each year will be if we assume loans defult on average month 6 Year 1, month 18 year 2, month 30 year 3

Year 1 833.33 X 8 loans 6666.67
Year 2 500.00 X 7 loans 3500.00
Year 3 166.67 X 7 loans 1166.67
Total bad debts 11333.34

m320325

Strettie11 wrote: »

m320325

I hope you do not mind me pointing out your interest rate return is overstated

First you have calculated the interest on the 100 loans as if they paid interest for the full 3 years so the total interest will be less than the 22816 stated when you take into account the defaults below

Also the 8% is an annual default rate over 3 years 22 loans will default out of the 100 So in Year 1.... 8 loans will default ( 100 loans X 8%), year 2.... 7 loans ( 92 loans X 8%) and year 3.... 7 loans ( 85 loans X 8%)

so the bad debts for each year will be if we assume loans defult on average month 6 Year 1, month 18 year 2, month 30 year 3

Year 1 833.33 X 8 loans 6666.67
Year 2 500.00 X 7 loans 3500.00
Year 3 166.67 X 7 loans 1166.67
Total bad debts 11333.34

thanks, good points about the interest and the bad debts

Strettie11

F&*k it that email from the new CEO is incredible. Did they do any homework on the numbers they sent out !! Sceach16 has quickly given a good net return profile of the different grade of loans

But there is no way a grade A loan should be resulting in a higher net than a grade E loan it is proof that the interest rate is not high enough to compensate for the astronomical default rate.

Even funnier is the riskiest grades have the same interest rates whether they are 1 year or 3 year loans !!!!

The grade A loans has an annual default rate of 1.5% which is higher than there overall loan book default rate published less than a couple of weeks ago @ 1.16% ( which was incorrect) and is nearly twice the average default rate for business p2p lending in the UK.

Who are the lenders who wanted more fixed rates not something that was loudly called for on this forum

feedback for the email should have been to a forum or post listing viewable by all not to a private comment box. Linked Finance WE NEED A LENDERS FORUM NOW are you listening ?

Quote from email "These lenders just want a quick and easy way to deploy their capital. "
No what I want is a safe and secure deployment of my capital and confidence in the information posted for each company. To see the answers businesses have posted on the Q&A section and sometimes the ignoring of questions are the reasons loans are not being funded.
We should not have to ask every borrower the same questions e.g. on what the "Other assets" ot "Other liabilities" are on their balance sheet
Give us the information LF to help us invest

Am I the only lender who has the suspicion that every fixed loan offerred will be in the A & B grade with the occasional Y?

Thats great now to get that off my chest how is everyone this evening

spudwould

Mila Calm Ax wrote: »

I've completely ceased investing into Linked Finance. The question now is if it is even worth reinvesting repayments, or just withdrawing the money to use on Mintos

I have done exactly that myself(ceased re-investing for the time being) ... and I am seriously thinking of withdrawing my funds and reinvesting all into my Mintos portfolio.
From personal experience when I take into account bad debts minus tax, usc & PRSI the returns are not worth it for me.
I thought I was a shrewd investor but I just maybe a bad dept magnet!
Please depolarize me! :D:D:D:D

Squall Leonhart

spudwould wrote: »

From personal experience when I take into account bad debts minus tax, usc & PRSI the returns are not worth it for me

Won't that be due on Mintos as well?

spudwould

Squall Leonhart wrote: »

Won't that be due on Mintos as well?

Of course ... Tax, PRSI, USC ... but NO loan DEFAULTS. :eek:
Taking this into account I would have twice the earnings.

spudwould

OK OK OK .. I have just read the email from LF and that ALL loans will now be a "fixed Rate" loan!
WOW that is quite the change from when LF started up 3 odd years ago!

I also had a look at the grading and good ole LF have decided that if I want to give a loan to a A Rating borrower ...I MUST give it at 8.5%!

My reply to that is .. if they are so stable then let them go to a bank and get the same rate.
I am NOT giving an UNSECURED loan at the same rate of the banks.

UNSECURED lending is about HIGH risk and HIGH returns!

1000 euro over 1yr yields 46.33 interest .. then minus LF 1.2% = 39.66 or 3.97%
That is not a HIGH return for an UNSECURED loan!

It seems I am being dictated to as to what I can ask for when I am lending money .... to me this is arse about face ... and yep I can smell the sh**e lol

Or is it just me that thinks in these terms?

tomwaits48

They want their cake and eat it, they shouldn't offer low fixed rates without guaranteeing some kind of repayment if the loan goes bad.

Squall Leonhart

spudwould wrote: »

Or is it just me that thinks in these terms?

No, I completely agree with you. If it is high risk, and lets face it, it's not exactly a secure investment, then yes there should be much higher returns than what's being offered on the A grade loans!

Having your cake and eating it definitely comes to mind.

scheister

just had a look at the loan under the fixed rate and what you would actually make on each loan.

A loans
1 year 4.55%
2 year 4.68%
3 year 4.87%

B Loans
1 year 4.92%
2 year 4.99%
3 year 5.18%

The above percentage reflects the return on your money for one loan at that grouping. i.e. invest €100 in a 1 year A class loan you will make €4.55 after the LF fee. Invest €100 in a 3 year B loan and you will make €5.18 total over the 3 years again after the LF fee.
This is only looking at one loan and assuming the loan does not bad debt.

m320325

scheister wrote: »

just had a look at the loan under the fixed rate and what you would actually make on each loan.

A loans
1 year 4.55%
2 year 4.68%
3 year 4.87%

B Loans
1 year 4.92%
2 year 4.99%
3 year 5.18%

The above percentage reflects the return on your money for one loan at that grouping. i.e. invest €100 in a 1 year A class loan you will make €4.55 after the LF fee. Invest €100 in a 3 year B loan and you will make €5.18 total over the 3 years again after the LF fee.
This is only looking at one loan and assuming the loan does not bad debt.

scheister wrote: »

The above percentage reflects the return on your money for one loan at that grouping. i.e. invest €100 in a 1 year A class loan you will make €4.55 after the LF fee.

Would a 1 year loan of €100 (Type A) return €4.66 interest (before lender fees)?

Then (4.66 x 1.2%)/8.5% = €0.66 fees
(on a 8.5% loan with 1.2% fees, it really means we pay 14.12% [1.2/8.5] of the interest in fees)

Interest Received after fees = €4.00

scheister wrote: »

Invest €100 in a 3 year B loan and you will make €5.18 total over the 3 years again after the LF fee.
This is only looking at one loan and assuming the loan does not bad debt.

€100 @ 10.2% over 3 years
Gross interest received after 3 years= €16.22
LF fees = (16.22x1.2)/10.2 = 1.91
Interest Received after fees = €14.31

If you could post your calculations it would be great, just want to see where I'm going wrong with it, thanks!

sceach16

I just had a long conversation with linked about cases where businesses had become companies after being sole traders or partnerships. Linked requirements for companies who want to borrow is that they have 2 years accounts with the CRO.

At present, 3 live loans do not meet this criterion including 2 that I lent to within the past 12 months ! (I only copped this requirement when querying detail on one of them). I am not pleased with Linked that they issued these loans in the first place. I should not find out afterwards that, according to Linked rules) the loan should not have been issued.

Linked made the point (strongly) that the businesses were long standing operations before incorporation and they had done their credit reviews etc. I suggested to them that they review their rules to cover this type of case and in the meantime they should email lenders explaining the position.
I emphasised my view about the importance of transparency and reminded them of the need for a users forum.

Addendum....there is a reply on the Clorane Farm Q/A from Linked which I think covers the situation.

sceach16

I have been making comments earlier on this forum. My main concern is that a business can be incorporated and put up a balance sheet which has not been submitted to the CRO.

One such balance sheet had a size of 143,487 euro with shareholders funds/net assets of 52,905 euro. I lent to this company in August 2015 on the basis of the financial information provided.

The company is now seeking another loan and has posted a balance sheet dated 31/12/2014 showing a size of 841,251 Euro with shareholders funds/ net assets 28,160! Included in the balance sheet is 750,000 for goodwill. Other unexplained liabilities are 772,419 euro.

The company is BKRM. Their Q/A responses are not very informative.

spudwould

m320325 wrote: »

Would a 1 year loan of €100 (Type A) return €4.66 interest (before lender fees)?

Then (4.66 x 1.2%)/8.5% = €0.66 fees
(on a 8.5% loan with 1.2% fees, it really means we pay 14.12% [1.2/8.5] of the interest in fees)

Interest Received after fees = €4.00

This according to my figures is correct.
LF get 1.2% on the whole loan so yes we are paying 14.12% of the interest on fees. :eek:

spudwould

sceach16 wrote: »

I just had a long conversation with linked about cases where businesses had become companies after being sole traders or partnerships. Linked requirements for companies who want to borrow is that they have 2 years accounts with the CRO.

At present, 3 live loans do not meet this criterion including 2 that I lent to within the past 12 months ! (I only copped this requirement when querying detail on one of them). I am not pleased with Linked that they issued these loans in the first place. I should not find out afterwards that, according to Linked rules) the loan should not have been issued.

Linked made the point (strongly) that the businesses were long standing operations before incorporation and they had done their credit reviews etc. I suggested to them that they review their rules to cover this type of case and in the meantime they should email lenders explaining the position.
I emphasised my view about the importance of transparency and reminded them of the need for a users forum.

Addendum....there is a reply on the Clorane Farm Q/A from Linked which I think covers the situation.

Hi COA....If we had a forum on Linked Finance we could discuss this ! :P

I do not think that LF would like a forum that the lenders can air their views on ... which may in turn put off potential investors
We live in hope.

scheister

My logic on calculating the was:

In the case of an 1 year A loan,finding the monthly interest rate 8.5%/12 and multiplying this by the outstanding balance at the start of the month.
This give the interest payment for each month.

Then I added all the interest payments for the year and took 1.2% of this as being the LF fee.

Took this from the total interest and what was left was the return to the investor

m320325

scheister wrote: »

My logic on calculating the was:

In the case of an 1 year A loan,finding the monthly interest rate 8.5%/12 and multiplying this by the outstanding balance at the start of the month.
This give the interest payment for each month.

Then I added all the interest payments for the year and took 1.2% of this as being the LF fee.

Took this from the total interest and what was left was the return to the investor

ok i understand, I think the 'linkedfinance fee' in your calculations should be a lot higher. So in the case of the 1year/8.5%, you need to deduct 14.22% (1.2/8.5) from the interest instead of 1.2%.

sceach16

scheister wrote: »

My logic on calculating the was:

In the case of an 1 year A loan,finding the monthly interest rate 8.5%/12 and multiplying this by the outstanding balance at the start of the month.
This give the interest payment for each month.

Then I added all the interest payments for the year and took 1.2% of this as being the LF fee.

Took this from the total interest and what was left was the return to the investor

m320325 wrote: »

ok i understand, I think the 'linkedfinance fee' in your calculations should be a lot higher. So in the case of the 1year/8.5%, you need to deduct 14.22% (1.2/8.5) from the interest instead of 1.2%.

Linked fee is 1.2% of the capital.

m320325

sceach16 wrote: »

Linked fee is 1.2% of the capital.

The Fee is on the reducing balance of the loan, so instead of working out the fee each month, I find it simpler to multiply

FEE RATE

---

x INTEREST RECEIVED = Linkedfinance Fee
INTEREST RATE

eg.

1.2
--- x 4.66 = 0.66 (which matches the LF repayment report)
8.5


otherwise if you tell someone the fee is 1.2% of the capital they might assume its 1.20 when in fact its 0.66

sceach16

m320325 wrote: »

The Fee is on the reducing balance of the loan, so instead of working out the fee each month, I find it simpler to multiply

FEE RATE

---

x INTEREST RECEIVED = Linkedfinance Fee
INTEREST RATE

eg.

1.2
--- x 4.66 = 0.66 (which matches the LF repayment report)
8.5


otherwise if you tell someone the fee is 1.2% of the capital they might assume its 1.20 when in fact its 0.66

Yes, I take your point. Technically it is 1.2% but charged on the monthly balance outstanding which obviously reduces during the 12 months. I use broad brush calculations rather than the precision you use!