How long has HNW Lending been trading and what background do the management have in lending?
HNW Lending Ltd has been trading since 2013 and we now have a team of 8 people. A number have backgrounds that are useful for a peer to peer lender - one of the Directors is a barrister who spent 13 years full-time at the Bar and the other Director (Ben Shaw) has had extensive experience with loans, property and high net worth individuals. For more info on Ben click here
. Other team members have previously specialised in debt collection and insolvency/bankruptcy proceedings and we also have a trained paralegal on the team
For whom does HNW Lending arrange loans?
Our borrowers encompass individuals, small businesses and the owners or directors of small businesses. The key characteristic about our borrowers is that they have assets to use as collateral to support the loan so that if they are unable to repay, we can sell the asset to repay the loan
What are the typical terms for the loans?
HNW Lending arranges bespoke terms for each loan. This will take into account the assets being offered as security as well as the length of the loan and the risk. Loans can vary from just a few months to several years. The rate of interest paid to the lender will accordingly typically vary from 6%p.a. to 15%p.a. depending on the length of the loan and the risk
How much do borrowers borrow and how much do lenders lend?
Borrowers typically borrow between £30,000 and £750,000 although we have done some loans as high as £3m. The averge loan size is c.£200,000
The average amount lenders have lent with us c.£140,000 although this masks a huge variety, with many lenders (particularly with ISAs) lending around £10,000-30,000 and a small number of people lending over £1m
Do lenders receive a payment of interest every month?
Not necessarily. Most of our loans have terms where the lender pays interest monthly, but a few have interest payments made quarterly and some have interest 'roll-up' whereby interest is not paid during the loan, but is all paid when the loan is repaid. HNW Lending is not required to deduct money for tax purposes. However you should declare any interest earnt from HNW Lending on your tax returns
What questions do HNW Lending ask lenders?
HNW Lending needs to satisfy anti-money laundering requirements and so we will need to ask lenders to provide a copy of their passport or driving licence and a recent utility bill before we can accept any funds
What happens if the borrower does not repay at the end of the loan term?
There may be occasions where the borrower is not able to repay the loan at the end of the term. However this is not necessarily indicative that the loan will not repay in full. For example, a property developer who is refurbishing a property to sell may have underestimated the time necessary to complete the refurbishment. HNW Lending will generally contact the borrower before the loan end date to discuss the situation and this should highlight any potential issues. HNW Lending will communicate any issues to the lenders, along with a recommended course of action and seek votes from lenders on important decisions such as whether to offer the borrower a loan extension. In general the courses of action available are:
-Take a partial repayment from the borrower to reduce the loan to value and agree a repayment plan for the remaining balance
-Allow the borrower a loan extension
-Take extra collateral (eg a charge over an additional asset)
-Commence steps to take possession of the asset in order to sell it (often at auction)
-Enforce the personal guarantee
How long does it take from pledging money for a loan until the funds are required?
There are many completed loans on the platform and generally HNW would expect a lender to have funds in their account with us before pledging to a completed loan. For loans that have not yet completed, HNW Lending Ltd asks for funds to be deposited in HNW Lending's FCA-compliant Client Account within 3 working days of a pledge being made. If funds are not transferred by this time, then HNW Lending Ltd may replace that lender's participation in the loan with another lender
What due diligence does HNW Lending undertake before a loan is made?
HNW Lending takes the due diligence process very seriously and about a third of loans that enter legals do not complete which tends to be because the due diligence process fails to complete to our satisfaction. We generally do the following:
a) Identity: Obtain a certified copy of a passport/driving licence of the borrower as well as a recent utility bill, plus conduct an anti-money laundering check and ensure the borrower has not changed their name by deed poll
b) Reference: Obtain a reference from a professional (eg accountant, solicitor) who has know the borrower for at least 18 months and can vouch that the borrower is indeed the same person whose picture is on the passport/driving licence
c) Documentation: Ensure the documents have all been signed in front of a solicitor who countersigns them to witness that the borrower has signed them. We also ask for a letter signed by a solicitor to show that they have explained the documents to the borrower/guarantors so they understand what they are signing
d) Insurance: We need to ensure that the assets are insured and if possible the insurers are made aware of HNW's loan so that if there is a claim they contact us before paying any proceeds of a claim to a borrower, as some of the claim may well be used to repay the HNW Lending loan
e) Purpose of the loan: HNW seeks to ascertain the purpose of the loan and if it is for business purposes then to see a business plan and if possible some third party documents to back up the loan purpose (eg business plan or pro-forma invoice relating to a large item to be purchased)
f) Exit strategy: HNW ascertains that the exit strategy of the borrower appears to be viable so that lenders are unlikely to be left with forcing a sale on a borrower
g) Title defects: Where the loan is on a property, HNW Lending organises the same checks as would be done for the purchase of a property. These include obtaining the title documents on the property from the land registry and doing a number of 'searches.' These searches are generally:
- a chancel liability check (to see if there are monies owing to the Church)
- a local search (for example to check about forthcoming new roads and planning issues)
- a drainage search (to check the property is connected to water and local drains/sewers)
- an environmental search (for example to ensure there is no risk of contaminated land or risk of subsidence or Radon gas which might reduce the value of the property)
As some of these searches can take some time, as an alternative, we ensure the borrower's solicitor puts in place insurance to cover lenders against a potential loss in value of the property related to the above
h) Lender consent: Where the HNW loan is a second charge, the first charge lender's consent may be required. If this is the case we ensure that their permission has been granted as otherwise it may be impossible to register the HNW charge at the Land Registry. We also ask for evidence of the outstanding balance on any loan that would sit in priority to HNW Lending's loan or loans that our loan is designed to repay
i) Red Flags: We have a number of Red Flags which are likely to give us concerns about a loan, and therefore a number of other checks are undertaken and this will usually lead HNW to refuse to lend:
- Director's disqualification check
- Bankruptcy check
- Internet search on the borrower and any guarantors which might reveal something such as a criminal record
- How long the solicitor has acted for the borrower
- How many partners and employees are in the solicitor's firm acting for the borrower and have they received any reprimands from the Solicitor's Regulatory Authority or any other regulatory body
How do HNW Lending value the items?
For a property, generally a formal Royal Institute of Chartered Surveyors (RICS) 'Red Book' valuation will be commissioned on which HNW Lending and its lenders can rely, and this will be uploaded to the HNW Lending website on the 'View More' page relating to that loan. HNW Lending also ensures that the valuer signs HNW Lending's instruction letter which makes it clear that we are relying on the valuation in making a lending decision and that the valuer has sufficient Professional Indemnity insurance cover
However, HNW will also look at publicly available information, such as the last purchase price for the property, which is generally available on the Land Registry website, as well as property portals such as Rightmove and Zoopla to ensure that the valuation given by the professional valuer is likely not to be overstated. The only exception is generally UK residential property where the loan to value is below 50% based on estate agents reports and zoopla/rightmove estimates, where we do not always insist on a formal RICS valuation
HNW Lending have a similar process for non-property assets in that the valuer would need to make a report addressed to HNW Lending and its lenders on which we can rely and have suitable professional indemnity insurance cover. We would then check the valuation against comparables we can find such as recent auction sales
How are the legal elements handled?
All the legal aspects on behalf of the lender are dealt with by HNW Lending Ltd's solicitors . However unless dealing with a charge over property, there is no need for a lender to have solicitors for each loan. For non-property loans where a solicitor is not required, HNW Lending will use the standard documents produced by our solicitors for the loan process
What happens to the borrower's assets when a loan is taken out?
All moveable assets cannot remain under the control of the borrower and as such will be moved to an independent third party storage facility where neither lender nor borrower can access them, but over which HNW Lending Ltd does have access. For wine HNW Lending generally uses the Wine Cellars, which has 500 private, climate controlled wine cellars and is located in Fulham, London. For jewellery and other high value small items, Metropolitan Safe Deposit Boxes are used. For antiques HNW Lending generally use Ward Thomas, whilst for cars, HNW Lending normally use a secure car storage facility such as Storacar which is under protective cover and has a dehumidified and climate-controlled environment
Are the items insured?
Yes - HNW Lending will arrange insurance, if the borrower does not have adequate cover already in place. This is generally paid for by the borrower
Do the Directors and Shareholders of HNW Lending invest in any of the loans?
Yes - The Directors and Shareholders of HNW Lending have invested in the majority of loans that HNW Lending Ltd has arranged and it is their intention to continue to do so unless a single lender takes the whole loan and does not wish the Directors to participate. Generally the Directors, in their personal capacity, invest in a 'first loss' tranche. This means that the Directors lose money before investors. The Directors, in their personal capacity, also fund loans where there are insufficient lenders signed up at the time a loan completes and then look to sell these parts on after loan completion. It is generally these pieces of completed loans that are available for lenders to purchase. The Directors are not allowed to sell their 'first loss' tranches
What protections are there over lender's money whist it is in HNW Lending's client account?
HNW Lending is fully authorised by the Financial Conduct Authority (FCA) and as such has to operate a Client Money account in accordance with strict rules. These include:
- HNW Lending must have a separate bank account for client money and cannot keep any of its business money in that account or borrow money from the Client Account to fund the business or for any other reason
- HNW Lending must have an agreement with its bank in the FCA prescribed format so that the bank is aware that the account is a Client Money account and the bank cannot, for example offset any debts HNW Lending may have against monies in the Client Account
- HNW Lending must do a reconciliation every business day of monies held in its Client Account at the close of business on the previous working day and be able to list how much of the balance in the Client Account belongs to each lender
- Any errors or unallocated items must be reported to the FCA
As part of HNW Lending's FCA authorisation process, the Client Money team of the FCA (called CASS) visited HNW Lending to check that HNW Lending were operating the account in accordance with the FCA's rules
What happens if HNW Lending becomes insolvent or ceases trading?
HNW Lending adheres to the FCA requirements. This includes ring fencing a sum for capital adequacy requirements in our accounts to pay for any receiver/legal fees. This is known as the Prudential Rule and forms part of HNW Lending's regulatory permission which needs to be reported regularly to the FCA. All loans are protected by way of a charge on the property or asset lent against and any receiver will see that a lender's loan is secured against the property and will work to repatriate the lender's money
Who can be a lender?
Lenders can be individuals, limited companies, partnerships, trusts and pension schemes. We are also authorised by HMRC as an Innovative Finance ISA manager so we can accept ISA money. If you do not fall into any of these categories, please contact us for clarification. Lenders can also be either UK or non-UK residents. For more information on using pension fund money (including SIPPs and SSASs) please click here
What is the minimum investment?
The minimum investment is £10,000 per loan. However for those investing via ISAs the minimum is £5,000 per loan. The reason we have a high minimum investment size is to reduce the costs of administering loans
Is there a secondary market?
Yes - all the parts available for investment on loans that have already completed are secondary market transactions. When a loan completes, if there are not enough lenders taking up the loan then the Directors may use funds in their personal capacity to fill the remainder of the loan so that it can complete. Indeed, some loans happen so quickly that they might only be on the website for a number of hours. It is generally these parts that make up the vast majority of the sales on the secondary market. However, lenders who wish to sell are also welcome to use the secondary market
Do you have any testimonials from lenders?
Yes - Please see two below:
I lend through HNW's Innovative ISA. When I called Ben he had all the information I wanted about each loan which helped me decide who to lend to. I have always had helpful and timely responses from the rest of the team too. With the great potential for large tax free earnings, HNW is my most exciting and promising investment which I hope to grow significantly over the coming years. (Rowland H)
I have been investing in p2p since 2013, currently using eight platforms including HNW, on the whole I have had a positive experience with one exception, the first site that I used was to put it politely a disaster.
In June 2018 I made my first investment with HNW, I now have ten loans on the site. My experience to date has been excellent, the communication is first class with a personal touch that in this day and age is unusual, the web site is straight forward and easy to understand, there is an auto lend option (I have not used yet), the Directors have a personal investment in the loans, it is possible to filter the loans and view them in a clear and concise way. No defaults on the site to date. My only regret it that I have not invested with HNW earlier. I will be moving some of my capital from other p2p sites to HNW. (Bill T)
Do you have statistics of past loans?
|Number of loans
|Amount lent (£k)
|Average loan size (£k)