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Kuflink Review

A profitable property lending record since 2011 and highly satisfactory lending results

Company logo in the Kuflink Review 4thWay PLUS Rating of 3/3

Kuflink's Auto-Invest 1 Year Account received an Exceptional 3/3 4thWay PLUS Rating.

This account has been paying 10.25% interest.

The Kuflink website often shows higher lending rates than that, but we are using the annualised calculation with compounding that most closely matches the rates we show for other P2P lending companies. This makes it easier to compare and it's more realistic.

Visit Kuflink* or keep reading the Kuflink Review.

What does Kuflink do?

Kuflink* does loans to property developers as well as to property owners requiring short-term (bridging) loans. All loans are secured against the properties for your benefit as lenders.

Established in 2016, Kuflink lenders have lent £333 million. Kuflink has a prior business operating since 2011 that has been successfully lending in the same kinds of loans.

Kuflink’s loans fit in an interesting space for bridging and development in terms of the risks. Many loans are extended substantially before finally repaying. Yet it has a good record, showing a fairly low proportion of loans that go bad for six months or more. And it’s shown to have an excellent recovery of bad debt.

Just a very small proportion of loans have had to write-off some debt. Kuflink takes the first loss of up to 5% on loans in its manual lending account, called Select Invest. Loans for less than 65% of the value of the property – or less than 65% of the expected sale value on developments – are not covered by a first loss.

In its Auto-Invest accounts, its first strategy when a loan is going wrong is to look to take over the loan by moving lenders onto a new loan. Although that isn’t legally agreed or guaranteed, it could be useful sometimes in helping lenders to maintain their full interest rates.

The combined result of these facts is that lenders have still had zero losses, even after Kuflink has built a large history of loans.

Kuflink* has two key requirements of its loans and borrowers and these are typical of this kind of lending.

Firstly, the maximum that a borrower is allowed to borrow is 75% of the property’s valuation. That’s not the best, but quite normal.

However, very sensibly – even necessarily – Kuflink sometimes requires the borrower to secure the loan against a second property if it’s coming close to this maximum. And Kuflink limits the maximum to 65% if it doesn’t know the area well. Combined, these standards are good for these kinds of loans, and we have seen sufficient results to show that Kuflink’s RICS surveyors are valuing properties sensibly.

Secondly, the borrower needs a clear exit strategy – a clear way to repay the entire loan at the end. This is a standard, essential requirement that we’d expect to see.

If loans pay regular interest, the ability to meet those interest payments is also important to Kuflink. So far, the data shows that these loans are also doing well, although, for this sub-segment of Kuflink’s loans, a little more history is needed before we can do any sensible, risk-based calculations.

These days, just 10% of Kuflink’s loans are junior loans. The historical results of its jnuior loans have been exceptional, demonstrating that Kuflink thinks carefully before agreeing loans where Kuflink lenders are not first in the queue to recover their money if a loan turns bad.

While Kuflink does allow some first-time developers to borrow smaller amounts, the quality of all its loans that have elements of refurbishment, conversion or development are in line with the rest of its loans, with the results of these loans even being a tick better.

Developers can usually borrow up to 70% of the starting property valuation and further borrowing as development progresses may not exceed 70% of the expected sale price of the property. These are very sensible standards.

Around a third of Kuflink loans get officially extended, sometimes as many as two or three times. This is more than usual , so it’s something to watch very closely for any signs that it’s moving beyond normal and, instead, concealing problems by kicking them down the road.

However, Kuflink shows an excellent, long repayment record on older loans that have been extended at least once. There have been just a handful of small bad debts among all those loans, totalling less than 0.1% of the amounts lent. (Kuflink covered those bad debts itself.) All the rest were repaid in full.

To provide compensation to lenders for extended loan terms, as of 2023 Kuflink started passing higher rates, in some cases.

The family business Kuflink* demonstrably has over a decade’s experience with these loans and it has brought more people in with substantial skills. It has a large pool of people with different experiences in bridging, development and property surveying.

My assessment of its key people are that they have sufficient experience to conduct the key lending operations of its business, from approving loans to recovering bad debts.

The data it provides is very comprehensive, suggesting an interest in numbers that, while not essential for all kinds of bridging lending, does correlate with the lower- to middle-risk end. Even so, I believe Kuflink could improve its results further by making more ratios and hard lines central to its underwriting policy, as well as more emphasis on quantitative factors.

Kuflink is not what we at 4thWay between ourselves call a “swinger”, which means a P2P lending platform that is willing to approve loans without solid property valuations, in return for higher interest rates or smaller loan amounts compared to the estimated valuation of the property. Kuflink’s data and its explanation of its processes show that it prefers to err towards tighter standards.

Although Kuflink has some surveying experience of its own, it always requires an independent valuation of property security.

Kuflink has explained that it’s important for it that a borrower can meet regular interest payments, if they have been agreed for the loan. (Most loans don’t have regular interest. The loan and all the interest is repaid at the end.)

Kuflink could probably lower the chances of loans falling late a little bit further if it was stricter about the borrower having experience, although this might also be at the cost of less lending and lower interest rates. Borrower experience is not as crucial when Kuflink’s other core standards are high.

Critically for these kinds of loans, Kuflink* reacts fast when they fall late, initiating formal recovery proceedings 30 days after a loan goes late and attempting – frequently with success – to recover the debt within about another 30 days.

Kuflink’s credit committee – which makes the final decision on whether to approve or reject a loan – includes some independent directors. Kuflink’s independent directors have probably made mistakes in some other areas, but their relevant experience and the overall performance so far is supportive of the committee’s record in signing off loans.

With Kuflink’s eyes largely focused on the property security and not as much on the borrower, this explains the fact that some loans turn bad – albeit temporarily.

Kuflink has enough history to show convincingly that almost all its loans recover in full if they turn bad. Even if recovery of bad debt ultimately turns out to be shockingly bad and far worse than I expect, the bad debt will still be low.

Losses have been confirmed on just a few individual loans. These losses have reached 20%-30% of the amount lent on some of them, but Kuflink has so far taken the full hit on all those bad debts.

If individual lenders had taken the cost of that bad debt, the overall lending results would still have been excellent, only lowering average annual lending returns by about 0.2 percentage points.

Most bridging, in our experience, is either super safe with just about zero loans even temporarily suffering bad debts, or they have high bad debts. Here, we have something a little different, with low numbers of loans turning bad, combined with excellent recovery.

Kuflink’s lending rates of 7.00%-10.25%, depending on the lending account you use, are very satisfactory. Do however see the section below “Lender interest rates shown on Kuflink’s website are not appropriate”.

I would feel especially comfortable with lenders choosing the higher-rate accounts and committing to lend for several years. That means lending longer and earning higher interest rates, but with the same underlying risk in the loans, so the overall risk of losses goes down further.

Note that this currently means lending in its shorter-term accounts, which it now pays higher rates on, and then choosing to lend again.

Kuflink has decided to pay higher rates on shorter-term accounts mostly for commercial reasons and because it better matches the borrowing term, although there’s always some balancing supply and demand. But it has safety valves, such as the ability to choose to repay you excess cash if it can’t safely approve new loans to put your money into.

Our international banking standard stress tests of Kuflink’s loan book, using a much stricter version of the Basel standards than global banks are required to use, indicates that Kuflink* lenders should still make money overall when lending through a one-in-100-year recession and property crash similar to the 2008 crisis. This gives lenders an excellent margin of safety.

Kuflink recently closed the gaps in the information it provides 4thWay, now filling in all the blanks and providing detailed loan data and access to key people. It has also improved its website statistics for the public. Its marketing language on its website has also improved since 4thWay last checked. The level of information now provided is complete and highly reassuring.

It’s still a new industry, but Kuflink has now had three years in a row of substantial profits and has been profitable every month since August 2021, helping make it one of the top three P2P lending providers based on financial health.

Is Kuflink a good investment?

I like the spot where Kuflink is. It’s not the high-risk bridging and development lending that involves huge numbers of problem loans that you hope will be offset by high interest rates. And it’s not the absolute safest of its kind, which can often pay unappealing interest rates. It’s above that level of risk, but with good interest rates.

It’s a good investment and its greater commitment to better accounting and governance over the past few years (see “What more do I need to know?” below) is just what it needed.

The Kuflink minimum investment is £1,000. Thereafter you can add in increments of £500. The minimums also apply to ISA transfers.

If you’re using auto-lend, your money is still split across loans, i.e. if you put in £1,000 it won’t all go to one loan. Kuflink will proportionally spread your money across all loans in the pool and will reallocate your funds as loans are repaid or new loans enter the pool.

In manual lend, it’s literally £1,000 in the first loan and then you can put in £500 (or more) into each further loan.

There are exceptions to the £500 minimum rule in both manual and auto-lend accounts:

  • If you use an auto-lend account and you’re getting less than £500 back at the end, you can still lend it out again through auto-reinvestment. However, if you don’t do this and have it transferred to your Kuflink cash account (or “wallet”) then you’ll need to top it up to £500 to lend it again.
  • If you have residual cash from previous ISAs under £500 then Kuflink will currently still enable you to lend this.
  • If the outstanding amount of loans currently available to lend in is under £500, you can lend that remaining amount.
  • Finally, when buying and selling existing loans on Kuflink’s secondary market, you can still trade amounts if they are for under £500.

Kuflink* recently told us that your money in auto-lend accounts is spread more or less across its entire pot of loans, which is a lot.

Text on the website suggests a little more ambiguity, as it will now re-allocate your funds “as we see fit in order to give you exposure to a range of Borrowers and Loan Parts as new opportunities arise. There will be specific trigger events, such as new loans entering the pool and repayment of loans”.

Kuflink’s auto-lend accounts are available as IFISAs.

Can I sell Kuflink loans to exit early?

You can sell loans early for a 0.25% fee in Kuflink’s manual lending account, called Select-Invest. With its auto-lend accounts, you wait till the end of their agreed terms.

What if Kuflink closes down?

Kuflink has become the first P2P lending company to provide every piece of information and data we want regarding its wind-down plans. Read about it here.

What more do I need to know?

Earn interest from day one

You earn interest from the time you pledge your money. So, if it takes a while for a loan to be fully funded, this doesn’t prevent you earning interest in the meantime.

Improved governance

In prior years, Kuflink was in the news after being criticised by its former auditors for its 2019 accounts for accounting and governance. It made huge changes since then and company accounts in all later years show a clean bill of health from its new auditors.

Transferring money out of your IFISA

Unusually, you pay a fee for transferring your money out of the Kuflink IFISA to another ISA provider. That fee is £35. On a £5,000 pot, that’s the equivalent of a 0.7% fee. Smaller pots will be most impacted by the fee.

Lender interest rates shown on Kuflink’s website are not appropriate

Details on the interest you earn on Kuflink’s website are somewhat confusing and they don’t always make it clear which of its lending accounts the information applies to. I’m going to clarify all this for you now.

Worse than that, for some months now, Kuflink has stated lender interest rates in a way that is highly unusual in the investing world – even inappropriate – and I could well understand why lenders might believe they’re earning more than they really are.

Despite contacting three people at Kuflink, including the two most senior directors, the only response so far has been that they’ll look into it. Most disappointing.

Recently, it’s doubled down on this, making it even harder to find the annualised lender interest rates calculated in the way that most other P2P lending companies do it, which in my long experience is the widely accepted (and only sensible) way across all types of investments.

Here’s the bottom line:

Lending account Rate shown mostly on the Kuflink website Annualised rate (with compounding) calculated the normal way
Kuflink 1 Year Term (auto-lend) “Up to” 10.25% Up to 10.25%
Kuflink 2 Year Term (auto-lend) “Up to” 8.86% Up to 8.50%
Kuflink 3 Year Term (auto-lend) “Up to” 7.50% Up to 7.00%

You’ll see that the different calculations impact the two longer-term auto-lend accounts, but not the one-year account. Its manual lending account is also not affected.

To make this worse, it’s not clear at this stage whether these rates – either from Kuflink or the annualised rate we calculated – are based on just the Kuflink loans with higher rates or on all loans that are being approved.

When you earn interest on top of interest, it’s not protected by security

Just one more small thing on the interest you earn.

When you earn interest, and then earn interest on top of that interest, it’s called compounding.

Due to the unusual way Kuflink compounds your interest in the two-year and three-year auto-lend accounts, the compounded interest earned by you is not secured by the borrower’s property. Even so, this is a very minor point as it only exposes you to a very small amount of non-secured lending.

Visit Kuflink*.

Kuflink: key details of its Auto-Invest 1 Year Account

Interest rate after bad debt

10.25%

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

4thWay Risk Score

5/10

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

Description

£333 m since 2016 in secured short-term (bridging) & property development loans, with auto-lend & auto-diversification. Available in an IFISA

Minimum lending amount

£100

Exit fees - if you sell loans before borrowers fully repay

N/A

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

75% (max); developments max 70% of future property value

Reserve fund size as % of outstanding loans

Company/directors lend alongside you/first loss

Kuflink endeavours to take over loans in auto-lend and move lenders onto new loans

Independent opinion: 4thWay will help you to identify your options and narrow down your choices. We suggest what you could do, but we won't tell you what to do or where to lend; the decision is yours. We are responsible for the accuracy and quality of the information we provide, but not for any decision you make based on it. The material is for general information and education purposes only.

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The opinions expressed are those of the author(s) and not held by 4thWay. 4thWay is not regulated by ESMA or the FCA. 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.

The 4thWay® PLUS Ratings are calculations developed by professional risk modellers (someone who models risks for the banks), experienced investors and a debt specialist from one of the major consultancy firms. They measure the interest you earn against the risk of suffering losses from borrowers being unable to repay their loans in scenarios up to a serious recession and a major property crash. The ratings assume you spread your money across hundreds or thousands of loans, and continue lending until all your loans are repaid. They assume you lend across 6-12 rated P2P lending accounts or IFISAs, and measure your overall performance across all of them, not against individual performances.

The 4thWay PLUS Ratings are calculated using objective criteria that can be measured and improved on over time, although no rating system is perfect. Read more about the 4thWay® PLUS Ratings.

*Commission, fees and impartial research: our service is free to you. 4thWay shows dozens of P2P lending accounts in our accurate comparison tables and we add new ones as they make it through our listing process. We receive compensation from Kuflink and other P2P lending companies not mentioned above either when you click through from our website and open accounts with them, or to cover the costs of conducting our calculated stress tests and ratings assessments. We vigorously ensure that this doesn't affect our editorial independence. Read How we earn money fairly with your help.

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