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CapitalStackers COVID-19 Planning

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By on 6 April, 2020 | Read more by this author

CapitalStackers recently celebrated £15 million in lending through its platform.

CapitalStackers* reports a total of £60 million lent to property developers and other property owners, when you include other lenders, such as Royal Bank of Scotland. CapitalStackers tends to do junior lending. So it arranges for its lenders to lend first, but to sit in a junior position to banks and other lenders, which lend their money second.

I've been struck by how much CapitalStackers' team and results have impressed 4thWay's specialists, so it interested me to dig a bit deeper into one of CapitalStackers' recent updates related to COVID-19. They wrote:

“Disappointingly, some of our borrowers are reporting difficulties with the supply chain. Builders’ merchants and timber factories going into lockdown isn’t helping and will only serve to push out build programmes. We’ve reviewed and remodelled all our deals to take this into account.”

So one of 4thWay's specialists reviewed CapitalStackers' new COVID-19 modelling on a few of its loans. The modelling has each CapitalStackers loan with a 20-page report showing the impact if COVID-19 contributed to higher construction costs of as much as 15%, substantial construction delays, and a big delay to sale of the completed property, combined with a lower sales price of as much as 15%.

If all of these things happen, lenders are still getting around the level of returns they expected on the loans reviewed by 4thWay.

I bet the figure that just caught your eye was the 15% lower sales prices. Lenders could actually tolerate a drop of 20% or even a lot more on many loans before starting to lose any interest – depending on how much else goes wrong with the project. For every deal on CapitalStackers, the drop has to be 25%+ before any lenders could lose money on any of their individual loans.

At present, with the property market not being at the centre of the current crisis, few forecasters are expecting a fall as large as the last property-driven crisis in 2008 and 2009. CapitalStackers shows that England and Wales property prices (as per Land Registry figures) came down 18% during that last severe property crash. That was the average drop at the worst point in the downturn.

It matters, with these kinds of loans, what the senior lenders do, i.e. what the banks do. If a development is struggling, they can try to push for a quicker repayment of the loans, even if it causes losses for the developers and junior lenders. However, we can expect the government to put its own pressure on the banks to treat borrowers with restraint and patience.

The modelling – and other submissions from CapitalStackers received by 4thWay over the years – shows that developers put a lot of their own cash into their developments. This gives the senior lenders – and CapitalStackers' lenders – peace of mind as well.

CapitalStackers' directors are also lending their own money through the CapitalStackers platform, to the tune of 27% of the total outstanding loans.

The modelling looks comprehensive and the numbers sound. There's little point reading too much more into CapitalStackers' modelling than that. After all, they are projections not fact. In the end, it comes down to whether you trust CapitalStackers and what fate/COVID-19 has in store for us.

Visit CapitalStackers*.

Read more:

CapitalStackers Review.

Selling Loans For A Profit At CapitalStackers.

Independent opinion: the opinions expressed are those of the author(s) and not held by 4thWay. 4thWay is not regulated by the ESMA or the FCA, and does not provide personalised advice. The material is for general information and education purposes only and not intended to incite you to lend.

All the specialists and researchers who conduct research and write articles for 4thWay are subject to 4thWay's Editorial Code of Practice. For more, please see 4thWay's terms and conditions.

*Commission and impartial research: our service is free to you. We already show dozens of P2P lending companies in our accurate comparison tables and we keep adding more as soon as they provide us with enough details. We receive compensation from CapitalStackers and other P2P lending companies not mentioned above when you click through from our website and open accounts with them. We vigorously ensure that this doesn't affect our editorial independence. Read How we earn money fairly with your help.

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Important information before you visit Wellesley & Co.

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Unlike its P2P lending service, neither of these bonds allows you to lend directly to 100+ borrowers.

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Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers two “bonds”, one of which is available as an ISA.

Unlike its P2P lending service, neither of these bonds allows you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

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Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers “bonds”. Unlike its P2P lending service, its bonds don’t allow you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

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