Rebuilding Society, formed in 2012, is a peer-to-peer lending UK platform focused on facilitating commercial loans to UK businesses. Investors can manually select loans graded from A+ (least risky) to C (most risky), receiving healthy returns ranging 14% — 18% per annum, as displayed on the Orca Lender Profile and also Rebuilding Society’s website. This is how Rebuilding Society display their risk graded annual interest rates:

A+: 11% and underA: 14% and underB: 17% and underC: 20% and under

Before we venture further into this review, we spoke with the Founder, Daniel Rajkumar, who had this to say to prospective investors across Rebuilding Society:

We’re pleased to bring a wide selection of investment opportunities to our lenders. We’re one of the only places where experienced p2p lenders can regularly earn double digit returns.

At Orca Money, we would echo Daniel’s sentiment that experienced peer-to-peer lenders are well suited to this type of investment, rather than first time P2P investors.

Rebuilding Society Statistics

(*all statistics correct at time of publication 08/16)

Return/Rates

(rate averages, per annum)

A+: 0%A: 14.1%B: 16.1%C: 17.9%All: 16.8% p.a (gross yield)

*Interest earned on capital loaned out at a given time, not on amount loaned over the lifetime (more in ‘Uncertainties Investing’ below).

Minimum investment

• £10
• No max.

Performance

Overview by Risk Grade

(Rebuilding Society overview statistics by Risk Grade)

Overview by Years

(Rebuilding Society overview statistics by Years)

Rebuilding Society is evidently a riskier platform to invest across when scrutinizing their historic default rates — 9.6% overall, currently. However, with a solid track record when it comes to bad debt, i.e capital losses, you may wish to consider the effectiveness of their recovery processes when a loan goes into default. In 2015, 1 in 7 loans defaulted and yet not a penny of investor capital was lost, testament to the underwriting and securing of loans.

Bad debt overall: 0.02%

Liquidity

Total lent funds to-date: £10.1mTotal no. borrowers: 184Total no. users: 6,366 (not representative total investors)

Rebuilding Society Borrowers

Rebuilding Society facilitates secured and unsecured loans between investors and commercial borrowers in the UK.

Here are the headline statistics for Rebuilding Society loans funded:

Loans completed: 184Total lent to-date: £10.1mA- business rate: 13% (avg)

Rebuilding Society borrowers are accepted onto the platform if they meet the following criteria:

• £25k — £2m loan range.
• 6–60 months’ loan terms.
• Limited companies, LLPs, PLCs, and social enterprises accepted.
• Businesses must have been trading for two years and have two sets of annual accounts filed.
• Good credit history required (no CCJs over £250 outstanding).
• Businesses must be profitable and VAT registered.
• Directors/partners must be UK residents.
• Average quarterly turnover of £50k for last four quarters required.

Visit Rebuilding Society Site

Rebuilding Society Security

Overview stats

Default rate: 9.6% (avg)Bad debt rate: 0.02% (avg)

All Rebuilding Society loans carry security ranging from personal guarantees to 1st charges on property.

A personal guarantee is the minimum level of security required, and is in addition to other forms of security taken as well.

All security is held in a segregated company called Amueri Ltd, ensuring that should Rebuilding Society cease trading the assets and right to pursue them can continue.

Personal guarantees

If the borrower, or guarantor, is securing the loan then their net assets must be equal to the loan, e.g: £25k loan requires £25k guarantor’ assets as collateral.

Debenture security

A commercial borrower may use their business assets, ‘fixed’ or ‘Floating Charge’ depending on the asset coverage, to secure the loan. In the event of a default, Rebuilding Society will recover the business asset(s) and sell to cover the debt repayment.

Rebuilding Society always seek to achieve a first priority All Asset Debenture against the business.

Rebuilding Society History & Team

Founder/CEO: Daniel Rajkumar

Rebuilding Society was established by Managing Director and Founder Daniel, a serial entrepreneur with a background in IT, languages and business. Daniel holds Directorial positions at Rebuilding Society and Web-Translations — helps businesses trade internationally in non-English markets — where he has been Founder & Managing Director since the year 2000.

Rebuilding Society professes strong, community-centric values, where the ethos centres upon helping entrepreneurs who value productivity access finance when the banks over-speculate. At the same time, Rebuilding gives hearty returns to investors seeking better rates than received on their savings account.

Rebuilding Society Products, Returns and Access

Investment opportunities

There is one live loan auction on the loanbook, on this date:

Pmm Business Limited Automotive

Risk grade: C
Required: £240,000

Offered: 13% (£31,650)

Rate: 19.47%

Be conscious that this is a current live auction, it may not be available to finance at the time of reading. Ensure and visit Rebuilding Society’s ‘Investment Opportunities’ to keep updated on loan availability.

Portfolio builder

For institutional investors, Rebuilding Society offers ‘portfolio builder’, a function that allows institutions to purchase portfolios of performing loans on the Rebuilding loanbook. Continual diversification across loans will add security and the secondary market provides a reasonable exit strategy.

Secondary market

Rebuilding Society claims liquidity ‘is strong’ in their secondary market. Loans re-sold at par or just above are typically sold within 10 days.

Investors looking to sell out of a loan can divest by selling ‘Microloans’ on the Secondary Marketplace. Sellers can charge/discount the capital outstanding by up to + or — 5% this charge/discount is reflected in a user’s dashboard as a ‘Microloan gain/loss’.

Rebuilding Society has a clear and effective display of loans in their Secondary Marketplace where sellers and buyers can see the loans available, with ‘Buyer Rate’ displayed, which indicates the approximate annual rate of return after the premium/discount is applied.

Example of some current loans on the Secondary Marketplace:

Visit Rebuilding Society Site

Uncertainties Investing in Rebuilding Society

Double-digit returns often ring alarm bells in investors’, particularly less experienced investors, ears. You should be very much aware of Rebuilding Society’s default rate, which is higher than many major platforms (currently 9.6% all-time). You should, however, also be aware of the transparency of this platform, which makes it clear to investors how borrower applications are reviewed, underwritten and managed. This, combined with robust security measures, means Rebuilding can boast a 0.02% bad debt rate.

Risk is inherent in investing; this is no different for peer-to-peer lending. If you choose to invest across a manual loan selection platform like Rebuilding Society you need to be able to assess borrowers yourself, and you should also be conscious of a couple of primary risks.

Interest repayments

Interest earned is on capital lent out per month and not on the amount loaned over the lifetime of the loan. Here’s an example:

£100 lent over 10 months at 12% p.a

1st repayment: £10 capital = 1/10 total loan amount = 1/12 of 12% = 1% or £1 earned2nd repayment: £10 capital — however £90 outstanding capital — 1% earned on £90 = £0.90p3rd repayment: £10 capital — however £80 outstanding capital — 1% earned on £80 = £0.80p

The repayments continue on this trend.

So, where you would expect to receive £10 on a 12% per annum loan over 10 months, having lent £100 for the loan term, you actually receive £5.50.

Risk grading

When reviewing a borrower’s loan application Rebuilding Society assesses data provided by the borrower, leading credit agencies and data suppliers.

Information provided by the borrower typically includes:

• Statutory accounts
• Management accounts
• Statement of assets
• Additional security details

Information supplied by external sources, includes:

• Business trading history
• Business payment history
• Adverse information (CCJ’s, winding up petitions etc)
• Verification of accounts supplied

For more, please visit the FAQs section on Rebuilding Society.

The issue lies in the team interpreting and managing the borrower application process and underwriting of loans. Philip Pawson, Operations Director, is responsible for determining the creditworthiness of borrowers. Philip has 40 years’ business experience and is currently serving on the ICAEW Business Law Committee. With nearly a 10% default rate over three + years lending, you may infer that the assessment of borrowers as creditworthy in some instances is incorrect.

In saying that, the suitability and enforceability of security held, as managed by Kylie Greeff — 1st class hons in Business & Law — has proved accurate and effective as loan defaults have been recovered, resulting in a 0.02% bad debt rate (avg).

Conclusion

Rebuilding Society is a small platform compared to the billions of pounds lent across the ‘big three’ platforms and other surrounding major platforms. This means Rebuilding Society can focus their attention on the niche group of investors who seek high-yield returns, ensuring the management and balance of return and risk is accurately weighted for both investor and borrower alike.

Rebuilding Society may be a good option for experienced investors seeking risk graded investments to bolster their portfolio, returning up to 20% per annum, by manually selecting SME loans to invest in. There is a lot of material on Rebuilding Society, testament to their transparency, but be sure to thoroughly understand the platform before investing across it.