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Downing Crowd Review

Downing Crowd is part of a much larger business that has been profitable for many years, but it doesn't provide us with information to assess the risks

Company logo in the Downing Crowd Review This lending account is Unrated or Not rated

Downing Crowd's Senior Property & Renewable Energy Lending is unrated, due to lack of information.

These loans have been paying lenders around 5.50% interest before bad debts.

Visit Downing Crowd or keep reading the Downing Crowd Review.

 

What is Downing Crowd?

Downing Crowd does loans to UK businesses that own property or energy projects, including businesses developing property. It’s looking at typical interest rates for lenders before bad debts of 5.50%.

It also enables you to lend to residential property developers, typically for large developments of dozens of housing units, provided you are classed as a high-net worth or sophisticated investor.

When did Downing Crowd start?

Downing has been lending investors’ money since 2010. Its peer-to-peer lending branch opened in 2016, where individuals have lent £210 million.

What interesting or unique points does it have?

Downing Crowd is part of a much larger, highly profitable business that has existed since the 80s and that collectively manages around £2 billion in investments.

Its loans are to such trading businesses as pubs and care homes, typically for renovation and expansion, or to renewable energy businesses with working installations that receive taxpayer-funded subsidies.

Downing Crowd review: how good are its loans?

Borrowers usually have a profitable history and earn an income already, which can lower the risk of a loan falling into trouble. The income isn’t necessarily high enough to get a bank loan the size that Downing offers, so Downing caps the loan at 75% of its internal valuation of the property or renewable plant, which is reasonable. Valuations here aren’t always easy; property or plant sales could reduce losses on a bad debt, but not always eliminate them entirely.

For development lending, the cap is 70% of the hoped-for sale price of the completed developments. Downing Crowd claims the average has recently been a little over 60%. Both of these ratios are comparably good.

Downing cherry picks the loans that it funnels to its P2P arm from its wider business to contain the risk for lenders. A long time ago, Downing Crowd provided data showing that the first cherry-picked loans it put on its P2P platform were probably high quality. But we have not received any data since then.

How much experience do Downing Crowd’s key people have?

Downing Crowd has approved the same kinds of loans for a decade and its people have complementary skills, including property loan approvals, development lending and renewable energy.

It was convincing about its experience when we conducted our interviews with it many years ago. However, with team changes and no successful contact with Downing for sometime, there’s no-one left there who we have interviewed directly.

Downing Crowd review: lending processes

Some years ago, we talked to Downing Crowd about many of its processes in lending, loan-monitoring and bad-debt collection, and we took information and data to back it up. We thought it had in place some capable and professional lending operations.

While we are unable to get an update on that, it’s more likely than not that its processes have remained robust.

It also outlined its credit-risk modelling, which is a technique for containing risks that’s not always applied – and harder to do – for many of the types of loans that Downing Crowd does, but it’s good to see.

How good are Downing Crowd’s interest rates, bad debts and margin of safety?

Very old, detailed data we obtained showed good results. Potentially as few as seven out of every 100 borrowers suffered problems and less than 4% of debt was written off. That was highly satisfactory compared to similar competitors. We can no longer assume that its results have continued that trajectory as its online lending platform has matured.

While access and detailed data and supporting evidence is needed for a proper assessment of its online lending results, we can still glance at the summary statistics of its results that it publishes on its website.

According to those stats, it has a good track record in lending in the following sectors: pub and leisure, care homes, energy and property development.

In the following sectors, lending is either too new or borrowers have continued to repeat borrow, and so not enough have come to their final conclusion: wholesale finance, multi-sector and “other”.

Lending interest rates are low at Downing Crowd compared to similar competitors. It’s not possible any more to establish whether they are appropriate for the risks.

Has Downing Crowd provided enough information to assess the risks?

Downing Crowd was extremely open with 4thWay for our initial detailed assessment of it, providing all the data, information and interviews we requested.

While we initially received a great deal of information from Downing Crowd, we have not had a detailed data update since 2018.

For some years now, Downing Crowd hasn’t responded to our requests for basic information to enable a superficial assessment of its performance and the risks of bad debts, or answered our ad-hoc questions, nor have we had any interviews with its key people.

Downing Crowd doesn’t provide 4thWay or the general public with regular, highly detailed updates on the ongoing performance of its loans. We don’t know how many loans are having trouble, with recovery procedures happening.

Is Downing Crowd profitable?

Downing Crowd is owned by Downing LLP, an investment manager that has made annual profits of £3-£12 million in recent years and has been profitable for all or most of the past 14 years at least. This provides lenders good safety in the event Downing Crowd needs to be wound down.

As we’re missing all the information we need to give any assessment of risk and performance, in 2022 I’ve not gone through the company filings for every single company related to this group, as there are a large number of subsidiaries.

However, I read the most recently filed audited accounts of the parent company, which show over £7 million net profit in 2021. It has plenty of cash and assets outweighing debts.

What can you tell me about Downing Crowd’s cybersecurity?

A soft probe of Downing Crowd’s cybersecurity from our security provider has shown its website is likely to be well programmed from a security standpoint, with negligible issues.

It appears to be malware free and is marked clean by Sucuri, Google Safe Browsing and others.

However, Downing Crowd has not responded to our requests for information about whether it takes some of the expected safeguards, such as firewalls, regular website monitoring or independent analysis of its security.

Is Downing Crowd a good investment?

My best guess, if pressed, is that Downing Crowd is still a good investment, but guesses aren’t good enough. Downing Crowd needs to provide more information for potential lenders to make a more sensible decision.

What is Downing Crowd’s minimum lending amount and how many loans can I lend in?

The minimum loan is £500. You need to choose your own loans.

The last data we received – an age ago – showed there aren’t a huge number of loans to choose from. But, if it’s continued to approve a similar number of loans, over the course of a year I expect you could spread sufficiently across one or two dozen borrowers.

Does Downing Crowd have an IFISA?

Downing Crowd’s loans are available in an IFISA.

Can I sell Downing Crowd loans to exit early?

Not easily. There’s no online market for buying and selling.

You would need to find another Downing Crowd lender who wants to buy and ask Downing Crowd to trade the loan manually, for a £25 fee. The amount that the buyer pays for your loan parts is agreed between you (e.g. if the buyer wants to pay less as the loan is now considered more risky.)

What more do I need to know?

Downing Crowd also has offered a product that blends lending with part-ownership in property. Plus, it might still sell fixed-rate bonds that involve lending to other Downing group companies or to businesses it owns. These are not always peer-to-peer lending and are outside 4thWay’s scope. Consider lending in just one loan where Downing is the borrower.

Visit Downing Crowd.

Is Downing Crowd truly P2P lending?

The legal structure is what protects you from seeing your money going off to pay the P2P lending company’s own debts, if it was to go bust. So long as the structure is legally correct, and the provider operates those structures correctly in practice, your loans are ringfenced from the likes of Barclays taking a slice from you to pay off what the provider owes it.

We only note legal structure for you when a P2P lending company doesn’t use the standard “P2P agreements”. While Downing Crowd has had permission from the regulator to offer those agreements in the past, it has never used them.

Currently, it uses permissions related to the FCA’s debt-based investments regime. Rather than being called loans, Downing Crowd’s bonds are technically known as “non-readily realisable securities”.

Cutting short the mumbo-jumbo, the important point is that Downing Crowd is so structured that it never has any right to the loan, or any part of your loan repayments or interest, except for receiving its fees and costs agreed with you.

The bottom line is that there’s no perceptible difference in risk between this and a standard P2P agreement in terms of protecting lenders from Downing Crowd going bust.

Downing Crowd review: key details of its Senior Property & Renewable Loans

Interest rate after bad debt

5.28%

Here we show the P2P lending site's own estimate (or 4thWay's if theirs are not appropriate)

4thWay Risk Score

N/A

Lower Risk Scores are better. How is this different to the 4thWay PLUS Rating?

Description

£210 m since 2016 in secured short-term loans to trading businesses with property, property development loans & loans to renewable energy providers. Available in an IFISA

Minimum lending amount

£500

Exit fees - if you sell loans before borrowers fully repay

N/A - no early exit possible

Early exit is not guaranteed. Usually, other lenders need to buy your loans

Do you get all your money back if you exit early?

N/A

Loan size compared to security value

No info on avg; 75% (max); developments 75% (max) of future sale value

Reserve fund size as % of outstanding loans

Company/directors lend alongside you/first loss

No

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