BLEND Network Review
Below, from one of 4thWay's experts, is the BLEND Network review. Blend is a P2P lending platform focused on development loans and lending to businesses secured against real property (real estate), with good-looking interest rates and attractive looking security.
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BLEND Network Quick Expert Review
Interest rates look attractive and its first few years have got off to a fantastic start
When did BLEND Network start?
BLEND Network has completed £28 million since 2017.
What interesting or unique points does BLEND Network have?
Loans are mostly to fund property developments, as well as short-term property loans. BLEND Network compensates for what is probably a shortfall in experience with stricter lending criteria. Unusually, lenders selecting loans for themselves can question the borrowers directly.
BLEND Network during COVID-19
BLEND Network actually managed to lend slightly more in 2020 than in 2019. It is now the start of 2021, and it has delivered an average return to lenders of 10.29% per year since it started.
Just three loans needed forbearance for COVID-19 and all of those loans have now repaid in full, with additional interest to lenders.
How good are its loans?
BLEND Network focuses on the quality of the property security as opposed to the quality of the borrower. This is typical of a lot of short-term lending, although I would have liked to have seen unprompted enthusiasm about the record of the property developers it allows as borrowers.
In loans such as these, lenders might normally expect there to be a number of bad debts among the loans they make, but they should generally expect that all or most of those bad debts will ultimately be recovered.
BLEND Network has set itself tight criteria in terms of the amount that can be borrowed versus the property valuation. Borrowers can usually borrow a maximum 65% of the hoped-for future sale price when it comes to developments, or just 65% of the current property valuation for other loans.
BLEND Network ensures that the loans put you at the front of the queue if the borrower's property ever needs to be repossessed and sold.
It also takes possessions owned by the business borrower as security.
How much experience do BLEND Network's key people have?
We haven't been provided with enough evidence that the key in-house team has the skills and direct experience required to assess the loans it does, so at present it will be relying on continuing to build a record to prove itself.
BLEND Network review: lending processes
BLEND Network relies on external partners to provide loans and to conduct a deep assessment of them, which isn't optimal for assessing the risks. Those partners also profit from BLEND Network taking on the loans, which introduces what we call “moral hazard”. That said, BLEND Network's record is both positive and lengthening, and so it reduces the risk that lenders through BLEND are being passed dud loans.
BLEND Network does some checks itself and has a final say on whether to accept the deal.
Development loans are offered to developers in tranches, so that they get a chunk of the loan first, and then – crucially – only get further chunks after a monitoring surveyor has assessed progress on the development.
The money for each tranche is raised as-and-when it's needed, not up-front. This can lead to unforeseen difficulties in funding the loan in full. This is one of the least likely risks, but the impact could be substantial.
After the first few bad debts start arising on BLEND, we'll be looking to see that it's quick to acknowledge them as such and take action. This greatly improves chances of success in recovering bad debts. BLEND Network is demonstrating to us that it probably will react on the quicker side.
How good are BLEND Network's interest rates, bad debts and margin of safety?
With its strict lending criteria based on loan amount to property value, and just one loan that is an outstanding bad debt and no losses to lenders, BLEND Network should be hoping to continue to build a record of very low bad debts after recoveries.
The average interest rates, should also, then, turn out to be attractive for the risks involved. However, its short history means we can't conduct our stress tests to see how it might perform in a serious recession and/or property crash.
Has BLEND Network provided enough information to assess the risks?
BLEND Network doesn't provide regular data to 4thWay, but it does respond to our ad-hoc requests for information and data, and it is very accessible. It's therefore around the middle of the pack in terms of providing information. More is better, but nevertheless it's sufficient to make a decent prognosis about the risks.
Is BLEND Network profitable?
We have little information on BLEND’s financial health. It's still new, so we expect it will take some time before it becomes profitable. It received a little funding to grow the business in late 2018, but it's unclear how much.
What is BLEND Network's minimum lending amount and how many loans can I lend in?
You can choose your own loans or spread your money across multiple loans automatically. The minimum you can lend in each loan is £1,000.
There are few loans to find, so it could take a while to spread your money across loans.
BLEND will, if you want, allow you to choose a maximum amount to be lent automatically to any one loan. For example, you could choose a limit of £1,000 per loan. This limit is per loan, not per borrower.
Does BLEND Network have an IFISA?
BLEND Network doesn't have an IFISA.
BLEND Network: key details of its lending account
4thWay PLUS Rating
Interest rate after bad debt
Here we show the P2P lending site's own estimate
4thWay Risk Score
Lower Risk Scores are better. How is this different to the 4thWay PLUS Rating?
BLEND Network Quick Expert Review: interest rates look attractive and its first few years have got off to a fantastic start
BLEND Network has completed £28 million since 2017. Loans are mostly to fund property…Read the full review here
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