Category Archives: For Investors

Why you need loss protection when investing in Peer to Peer lending

If there was one strong lesson learnt from the GFC, amongst many, it was that the issuers who had their own capital invested and at risk in their offerings to investors (“skin in the game”) were the ones that typically survived the GFC, because they took on better risk at the time of obtaining the loan and were more committed to returning capital back to investors. It was their money at risk as well, and in some cases the issuers are the last to get their capital back.

Marketlend is very committed to this concept. It is a wholly owned Australian company that is here for the long term and testimony to that is that we invest with the lenders.  We invest in first loss position and are charged fees for that investment similarly to the lenders.

Protection against losses

• We are the only peer to peer lender in Australia to provide first loss protection which can be as high as 30% in addition to a loss provision. This means we invest with the lenders and suffer the first loss in a situation where a borrower defaults.

• There is a cost to this protection and it is taken into account in the fees paid by the borrower and not charged to the lender. In addition to the loss protection, we also have a provision for losses.

• The only peer to peer lender in Australia with a provision for losses as well as Marketlend is Ratesetter, and based on their figures as of 29 July 2015, they have A$444,372 in the provision, for loans outstanding of 6,034,957 equivalent to 7.36%.

• To date we have invested on average 12.44% in first loss protection and this is individual protection. This means that there is no depletion of the loan protection for one loan if another loan fails, whereas Ratesetter does not offer the same.

• As a note, based on the website of Thincats UK, there are cumulative expected losses of 1.16% for their 5 year period, 2010-2015.
• We do offer insurance on our loans. It presently is only available for our debt finance product. The policy states that where there is a failure by a borrower, this will result in an ability to make a claim on the borrower for 90% of any invoices we purchased. Again we will invest the remaining 10%.
• Marketlend has had no defaults to date.

Fees

At Marketlend, all fees are paid by the borrower, and not from the loan proceeds other than the Loan Listing Fee (0.5%). This is an important point as that if it is paid from the proceeds of the loan, it means the investor is funding the costs.

Below is a snapshot comparison of our fees compared to Thincats.

Why a recession is bad but necessary for Australia

A few years ago, when a recession struck almost every OECD country, Australia remained relatively unscathed. But could a recession be necessary for Australia, in its current state?

As the Chinese GDP growth rate slows, Australia must be prepared for inevitable decreases in export revenue. If the demand for exports decreases, an increase in unemployment is almost impossible to avoid. Unemployment, mixed with struggling wages, and a distorted housing market, typically leads to a shocking aftermath.

Before I employ the ‘R’ word, or recession, I’d like to give a brief insight into what a recession really is, and why it isn’t as bad as some make it out to be.

Recession is negative GDP growth for two quarters. No, it isn’t WW3, and it isn’t the end of the world either. In-fact, several economists believe that Australia is overdue for a recession. Why? Because recession creates reform, and it forces politicians to make hard decisions, decisions that they may not have made if the economy was performing perfectly. These decisions are important in the long-term to Australia’s well-being, culturally and economically.

There are some surprising similarities to America in the GFC, and Australia’s current position in the economy. America, did in-fact, go through a downturn, the dot-com bubble, and was left relatively unscathed. Although, one can argue that it was the Federal Reserve’s ability to forecast that downturn and act accordingly, that avoided the potential catastrophe, it is unarguable that America suffered heavily throughout the GFC. However, America took necessary reforms, and has emerged from the recession.

On a final note, perhaps Australia could gain some good out of a recession. A recession isn’t an optimal outcome, but perhaps there is a positive way to think about the situation. There is a big difference between a recession and a depression, and we should definitely avoid the latter.

Chinese Stockmarket crisis and how it is a worry

What do the Casino, a dart board, and the Shanghai Stock Exchange all have in common? Luck, and a little bit of skill. It’s important to realize this when you invest in volatile areas. As the heavy, iron wheels of the Chinese economy begin to slow, we, as investors, must think about the repercussions this has on our own economy.

The Chinese and Australian economies are very closely intertwined, as China demands much of Australia’s top exports, Minerals and Education. As a result, the recent Chinese stock market scare has also put fear into the hearts of many Australian investors. So, as an investor, what do you need to know about the Chinese Stock Market crash?

Well, I will summarize in a few brief points:

1. The term “down a third over the past month” to describe the Chinese stock market has been thrown around a lot on the news. However, a figure that they aren’t showing, is the fact that the Chinese stock market is still up 80% over the last year. Which would be amazing growth… for any other country but China.

2. Essentially, the other sectors of the Chinese economy are performing fine, including property and money-markets.

3. It is important to remember that any sort of over-valuation will require correction, and the Chinese stock market was simply over-valued at the time. When I put it like this, you are probably scratching your head, wondering why the entire globe seems to be up in arms about it.

Well, it is the Chinese Government’s response to a relatively common economic phenomena (over-valuation, and subsequent correction), that has investors worried. The Chinese Government decided to cap short-selling and employ central-bank funds to purchase stocks on the Chinese Stock Market.

You don’t need an Economics degree to see why that can have some adverse side-effects. By capping short-selling, the government further raises the price of the listed shares, listed pre-cap, hence distorting the over-valued shares even further, but more probably leading to a decrease in growth, in the long-term. So what does this emphasize?

The importance of valuation, and choice. P2P lending provides an opportunity to invest into companies that you can truly trust and gain full information on their business. It allows you to cross different sectors of the economy, whilst receiving a higher rate of return than most blue-chip stocks on the ASX. But more importantly, it is immune from politics.

 

The Greek Economic Crisis and Peer to Peer Lending

Commentary
The Greek Economic Crisis:
Greece has experienced a tremendous amount of attention, after the strenuous and frustrating months of negotiation between creditors and the Greek Government have come to a crescendo.
Creditors had given Greece another opportunity for a bailout, under the provision that strict austerity must be practiced. Alternatively, Greece could vote ‘no’ to these provisions, and default on these loans.
The Greek Government put its decision to a referendum. One side, led by the opposition leader, was ‘Yes’, we will adopt austerity and accept the bail-out, and on the other, campaigned heavily by the Greek Prime Minister, was ‘no’, which risks default and exit from the euro-zone.
From the moment that the votes were rallied, and a resounding majority voted ‘no’, Greece had stepped into uncharted, yet dangerous waters. It has an opportunity to create history, and hold its own destiny in its hands, a dangerous, yet empowering situation.
Businesses and institutions are struggling to manage, as imports become increasingly harder to obtain, the entire country is strapped for cash, and more importantly the political effects of default will soon resonate throughout the euro-zone, potentially leading to Greek exit. This has led to shockwaves in the world economy, as the Australian dollar fell to a six-year low, and almost all major economies were negatively affected.
Investors have a big question mark over their heads. What does this mean for them? The Greek Economic crisis highlights the importance of independence and information in investing. Investors should know where their money is going, and it is very easy to lose sight of this idea when you are investing.
Peer to peer lending platforms, like MarketLend, and other P2P lending hubs show the importance of this idea. Banks, Governments and Politicians are not always secure, typically not transparent and it is the unknown that seems to surprise us.
Statements we are hearing from super fund participants are “I didn’t know my fund was at risk, or took risks in countries where I would not invest”. To a lot of those funds, the answer is simply it is all interconnected. But how do you know?”
Investing and transparency should go hand in hand, so that you can invest knowing the risks. It’s in situations like these, it comes to be known that directly investing is favourable because you can know your risk. Peer to peer lending offers such investments.

Marketlend P2P lending Australia in Australian Banking and Finance article

http://www.australianbankingfinance.com/banking/asic-clearing-the-way-for-fintech–innovation-/

Budget 2015 – Something to clap about

The Budget 2015 is something to clap about if you are a small business.

When you have a look at the budget the big ticket points for a small business are:

Cuts to the corporate tax rate

From 1 July 2015, the corporate rate of tax for incorporated small business (pty ltd) is reduced from 30% to 28.5%

Capital allowance

As of today, up to June 2017, any small business will be able to claim a 100% tax deduction on any capital equipment purchased for their business for items up to A$20000 in value.

Tax discounts for “non-incorporated” small business

For every other small business with valid ABN, the individual taxpayer will be entitled to a 5% discount on taxes they pay on income declared from their business at A$1,000, (a total of 20,000 tax write off at 5%).

We recommend that you speak to your accountant for more details

Marketlend – The only Australian Peer to Business lending marketplace

Marketlend Peer to Peer Lending Australia Testimonial

My name is Brendan Gregory and I’d like to say a massive hello to all my fellow investors in the Marketlend community, and  to peer to peer lending Australia.

In the grand scheme of things I am a relatively small investor. Over recent years I have watched bank deposit rates fall significantly and in late 2014 I started looking for new and much more modern ways to invest. After researching Marketlend and the Leadership team thoroughly, I decided to get involved.

I have now participated in four loans to date and I am very happy with the current rate of returns on each loan.

I invest with Marketlend because I love having direct control of where my money gets invested and I take great satisfaction in empowering Australian business owners to realise their dreams. I find the online platform is an easy and convenient way to participate and the access to borrowers documentation to be a very transparent way for me to understand each loan.

Above all else I invest in Marketlend because I genuinely believe in their people. Leo has been involved in the finance industry for many years and his extensive legal background gives me confidence. I also really value that Marketlend themselves invest in every loan and stand next to investors as a partner.

Its great to be part of a like minded community with you…. I don’t think it really matters if you are investing $100 or $10000 dollars…. Its all about being part of something bigger and peer to peer lending gives us all that opportunity.

I wish you all the best.

Brendan Gregory

Investor protection is paramount, and present regulations should not be relaxed

In a recent article in the financial review on today’s date, Rate Setter and Society One argued that the current Australian regulations are adequate and flexible enough. Furthermore, any relaxation or graduate regulation could threaten the confidence in the emerging business model.
Here at Marketlend, we completely agree with Society One and Ratesetter’s arguments. As one of the only four operational peer to peer lenders, Marketlend sees that the present regulatory environment is a suitable and appropriate environment to enable the development of the fintech industry and protection of the investors.
The biggest risk for the P2P lending industry, a fintech industry, is the loss of confidence of investors, and the suggestion to weaken their protections could be a catalyst to such a loss. PayPal Australia, an obvious conglomerate with the ability to pay compliance costs for operating within this environment is pushing for something that you would consider unlikely necessary for such an entity.
If Paypal wishes to act like a bank, why shouldn’t it comply with the same requirements that banks are required to, and if it thinks that other competitors are not being treated in the same way, then why doesn’t it use its legal avenues to seek remedies.
It would seem that the Murray inquiry was not aimed at entities like PayPal, but at smaller start-ups that do not have the capital and resources to meet the same regulatory requirements as a bank. It is hard to see how PayPal fits within that category.
It begs a question, is Paypal arguing for its own better good or for the good of the fintech industry?

For Marketlend, we see that the Australian regulatory environment is well established, effective and tested through the courts. The present regulation was materially the same regulation in place during the global financial crisis. If an entity can abide by these regulations, then we would hope that investors are comfortable with these protections and are comfortable that when the next financial crisis arrives they will be protected.

New players in the Peer to Peer Market – Kikka Capital

I noticed today and announcement of a new player coming into the peer-to-peer lending Australian market later this year. They are called Kikka capital and state that they will be able to provide working capital loan approval within seven minutes. I’m unclear what this means by approval, maybe I am mistaken, but I must say that typically when I speak to clients or the clients who list with us we do say that it’s not so much approval, as we dont approve loans, what occurs is that your loan will meet criteria that enables it to be listed on our marketplace for investors to participate in part or whole.

If it is the case that they can quickly approve the loan and fund the loan within that period of time as well, this will definitely be a very competitive product and a new concept to the market. What I do find surprising is how it meets the peer-to-peer concept as typically a peer to peer lender needs to get investors to actually look at that risk and determine whether they wish to participate in it. But who I am I to critize, the fact of the matter is there are a lot of different models out there and the word peer-to-peer lending is a fairly generic concept albiet the fact that both Ratesetter and Marketlend in Australia presently have trademark applications for the words peer-to-peer lending.

My response back to people who ask the question am I concerned or do you welcome new competitors in the marketplace, is a response the majority of existing peer-to-peer lenders in the Australian market would say, that is we welcome new players coming into the market. The more exposure and the more competitive environment places more attention on this business and hopefully over time a high percentage of the population of Australia will understand what peer-to-peer lending is and why it is an investment or a borrowing avenue that they should consider.

For Marketlend we presently offer a note trading exchange, where lenders can trade notes, or loans via our website, initially for Marketlend loans or notes, and subsequently other peer to peer lenders loans in the marketplace. It is this exchange that will bear fruit for us if there are more players in the market, and with our proprietary rating technology we rate their loans that their investors own and list them on the marketplace at no cost to the seller. We anticipate the peer to peer lenders in the market will welcome this solutions as its a win win for all as we give investors liquidity, other providers the ability to offer liquidity and more transparency to all.

Leo Tyndall
Marketlend

Demand for Working Capital Business Loans is staggering – 7.1M listed within weeks, with another 1M in pipeline

The obvious need for working capital business loans in Australia is evidenced by recent demand from the newly launched only Australian business peer to peer lender, Marketlend.

Within a month, Marketlend has  7.1 Million loans listed on the marketplace from borrowers with strong credit and significant asset positions, and another 1.2Million in the pipeline. It is obvious that the need for working capital business loans is not filled by the major banks, or corporate credit providers.

The borrowers are strong corporates who seek to improve their bargaining power with suppliers or consolidate debts that are charged at rates in excess of 20%.  Without the security of property collateral, competing products to Marketlend are corporate cards or expensive factoring solutions that are limited by high interest rates or limit to the lending amount.

Investors – Self Managed Super funds and others

With a burgeoning Australian self managed superannuation market looking for yield, it is a no brainer for these investors. Marketlend provide a stringent credit and rating process, and offer investors net returns between 10-14% dependent on the risk. A personal property security interest is created over the supplies and the business, complimented by director’s guarantees. This is fully transparent and accessible to the investor.

For the borrower the ease of an application process that takes less than 10 minutes to complete, with approval and listing within 1 hour, there are few competitors in this space.

“These are borrowers  have bank facilities, and strong credit performance but seek for an alternative for their working capital that offers transparency, speed, reduced finance and administration costs. We return to the borrower the ability to bargain with its suppliers by paying them overnight, and to the investor, a strong yield that is stable and easy to collect” Leo Tyndall, Founder of Marketlend.