I don’t often write about the ethical, ecological, responsible, “doing good” or social aspects of lending. Hardly anyone clicks on headlines like that. Yet now that I’ve tricked you into this one with my vague title, would you give me a few minutes, as: We…
LEND.ch is a Swiss peer-to-peer lending provider offering lending in Swiss francs (CHF). It hasn’t opened up to 4thWay’s specialists with data and access to its key people and therefore we haven’t conducted our usual week’s long assessment of it. So this is kind of…
Update: the first answer was corrected on 10th June after a stupid error by me. My apologies. On the positive side, on the 11th June HMRC explicitly confirmed to 4thWay that our second answer is correct. We have two questions on flexible ISAs and one…
We had a query from a 4thWay user about tax rules on lender fees recently, so I thought we could answer that for everyone. The reader was asking about whether lender fees are tax deductible, what that even means, which P2P lending companies currently charge…
Occasionally lenders reach out to 4thWay and describe what they are up to, how they’re doing and what their experiences have been when lending. I really appreciate the contact from you! Recently I had an email that inspired me to write this page today. I’m…
The people normally using 4thWay’s research are all very lucky. I mean, I presume you have money to spare if you’re lending it. There are an awful lot of people who can’t say the same. Yet I think it’s worth looking at the other side…
Whenever you invest (and money lending is a form of investment), you’re taking a risk that you’ll lose money. Not just lose to inflation – which is a loss that is practically guaranteed to happen in savings accounts. But I mean an actual loss in…
However, I’m not going to remind you what the latest property-price forecasts from the UK’s best-known economists are for 2025 or the next 12 months. If you want to know, you’ll have to look them up yourselves. Here’s why… What happened in 2024? To start…
This content today is extremely different to normal, but I need to get it out, as it’s pressing on my mind. Unusually, this page is not about a cold assessment of an investment provider or lending tips. Instead, it’s all about me. I have to…
The key risks in IFISAs are: Psychological risk: your own greed and fear. Concentration risk: you don’t spread your money across lots of loans and P2P lending sites. Credit risk: borrowers don’t repay you. Platform risk: the P2P lending site (the “platform”) goes bust and…
Lendwise’s lending accounts are unrated. These loans are expected to pay lenders around after bad debts. Visit Lendwise or keep reading the Lendwise Review.
Your main protection is that loans and cash are segregated Firstly, lets get a sense of proportion. Because FSCS protection here is actually a very minor point. If you have loans at a P2P lending company or if that site is holding some of your…
Just brief thoughts on this new story. LandlordInvest is apparently winding down at the insistence of the FCA, which appears, according to brief reports from Alternative Credit Investor, to have issues with its CEO, Filip Karadaghi, who has been forced to step down. We have…
This guide page is to: Describe to you just how incredibly powerful it is to spread your money across lots of high-quality loans. Offer guidance on how much diversification you need. Give you tips on how to go about doing that and how to lower…
Invest & Fund lending slowed, but should pick up again 4thWay’s specialists conducted a full reassessment on Invest & Fund this month. There’s nothing at all to report on the risk-reward balance, which remains solid. This update is more about a slow down in lending…
There are some items that we pay close attention to at 4thWay. For example, we have often described some of the signs we look for that a P2P lending provider is kicking the can of bad debt down the road to hide its actual performance….
Recently, for a friend, I returned to my old stomping grounds of share investing to look at the best options for her. I was interested to know how these had changed since I last assessed them in great detail, which would have been early in…
I’m back! It’s been ages since I told you about anything through 4thWay, so I’m pleased to take you through the latest on cashback. Whatever happened to P2P lending cashback? A few years ago, the regulator banned cashback, which had been used to lure people…
Borrowers were hit hard over 2022 and 2023. Property prices were unclear and somewhat rocky. And those who were borrowing to complete property developments have been suffering a shortage of workers. The worst for borrowers though was rocketing inflation. That didn’t just push up interest…
Sourced Capital’s Bridging & Development loans are currently unrated, due to not enough information being provided. This account has been paying lenders in the region of interest after bad debts. Visit Sourced Capital or keep reading the Sourced Capital Review.
Sourced Capital does loans to UK property developers. The loans are usually to develop the property, but they can include part of the cost to acquire the land or to support developers while they seek buyers for their developed properties. Sourced Capital targets returns for lenders of 10%-12%, before bad debts.
Sourced Capital opened its P2P arm in mid-2019. Its total lending is now around £55 million, including some millions in test loans prior to opening.
We always like to see P2P lending companies that are highly focused on one type of lending, especially with development lending, which is unlike any other. While Sourced has other parts to its business that are involved in property in other ways, its P2P lending platform is purely for development lending.
Sourced Capital has its own ecosystem. All or most of its borrowers are Sourced franchisees that commit to receive education, support and tailored advice in taking their development projects profitably from start to finish. Some franchisees are experienced, but appreciate the support, in particular when it comes to arranging the financial aspects, which is often the biggest headache.
Sourced is obligated to support franchisees every step of the way, which should help improve the success rate of developments for their less experienced borrowers. This ecosystem also offers potential pricing advantages when it comes to setting lending interest rates for the borrowers, who are already Sourced customers and work regularly with Sourced.
Sourced Capital is for either high-net-worth investors or for lenders accepted as sophisticated by the regulator, which includes anyone who has already lent in two P2P loans and/or two P2P lending accounts in the past two years.
Sourced Capital no longer provides easy access to its key people nor provides data to 4thWay, so what we knew is now substantially out of date.
The last we were told is that the maximum that a borrower is allowed to borrow initially is 70% of the starting property value. And the maximum that the borrower can borrow over the course of the development is 70% of the expected sale price.
These are good core standards that it’s hopefully sticking to.
Lenders in Sourced loans are always first in line to be repaid in the event that a loan turns bad and the property needs to be repossessed and sold. This is a very solid basis for lending and a tighter standard than many property P2P lending companies.
Sourced Capital last told us it aims to get at least 20% of the project funded by the developers themselves. That’s good, but an aim is not a minimum, so lenders need to watch for how much skin their developers have in the game.
You also need to watch for the developer’s profit too, which is one indicator of the risk level. Sourced looks for projects that are projected to make a 20% profit for developers, but, in supporting its franchisees in London, expected profit can sometimes be as low as 12%, it once told us, which is getting more on the low side than I feel totally comfortable with. That’s especially the case in loans where developers have funded a smaller amount for themselves, so keep an eye on that when reviewing loans.
It’s too early to say anything about the number of loans that will turn bad and where official debt recovery will need to take place.
Sourced Capital told us its directors have 30 years’ relevant experience. We’ve not yet been able to verify that much of the experience was highly concentrated on property, or that it involves development, development lending or credit policy on development lending.
The founder-CEO has the most demonstrable path in this regard and is likely to have acquired quite a lot of relevant knowledge over a decade or more of intense work in the property space, although not in lending. He’s also adaptable, switched on and likely to learn fast, but his gift for salesmanship makes him harder to read.
Sourced has, at least in the past, got some external advice from the former head of credit at Assetz Capital, which is highly relevant, although it seems likely his involvement is or was limited.
It also briefly benefited from the experience of Stephen Wallis, the former head of credit for Rebuildingsociety. While Rebuildingsociety did not do full-on development lending, we believe its former head to be conscientious of standards.
Sourced has briefly told us it has two full-time quantity surveyors, although we have no details about them and they’re not listed on the Sourced Capital website. Nevertheless, it always (appropriately) hires external, independent surveyors for developments, which is more important.
Sourced has its own development arm and it is training developers every week, so certainly developers are being convinced about Sourced’s knowledge and capability. We have not had contact with franchisees and can’t gauge satisfaction levels at this time. It’s often the way with new P2P lending companies that they simply need to build a good lending record to prove their ability.
This is an extraordinarily ambitious company, as revealed in particular by its main founder’s entrepreneurial history as well as its own, ongoing £150 million development in Manchester, namely Regent Plaza. (I have no information on how that development is doing.)
Ambition is a trait to watch: while it can lead to a substantial, stable P2P lending company, it can also coincide with biting off more you can chew, or stretching for rapid growth at a cost of quality loans.
Sourced has an interesting points system for franchisees, which can borrow more or less money depending on points scored – provided they also make it through the loan application assessment. Points are earned based on the franchisee’s level of development experience, on attending Sourced training courses, on previous development sales, and more.
Any borrower scoring system started from scratch needs plenty of time to test. As it’s not verifiable for outsiders, it will probably take some more years before the results filter through to the general public.
We have not been able to reassess Sourced Capital’s lending process for many years, but here is an outline of how it worked.
On top of its franchisee scoring system, Sourced considers each loan application in detail. Sourced claims to have a very strong commitment to the key ratios and numbers that are essential in good development lending.
Sourced Capital takes substantial steps to confirm a borrower’s successful completion of prior developments and extensively reviews the borrower, the borrower’s legal structure, the project, the builder, the builder’s capacity, and the exit.
Sourced’s many stage assessment covers what we’d expect to see. It looks into the borrower’s exit strategy and, in best practice, considers and tests at least two other ways that the loan could be repaid (such as the borrower paying off the loan by borrowing elsewhere and a sale of the property to investors at a discount.)
The last we were told, the entire amount needed is raised in advance and paid out to the borrower in stages, as and when an independent monitoring surveyor finds that it has completed a phase of the project as planned. Raising all the money in advance is best practice, as it means that the project can’t stall if the borrower is unable to raise more money mid-way through the project.
Sourced is one of very few P2P development lending companies that raises the entire project funding in advance. A feature that’s not to be underestimated.
Ideally, Sourced would add in quality-control checks for the monitoring surveyors themselves, using its two in-house surveyors.
Sourced is incentivised to help and advise the borrower with the development every step of the way, since the borrower is also a franchisee customer.
The credit committee is a sensible mix of people. It decides whether to lend by a majority vote. Although on balance I prefer to see loans succeeding by unanimous vote, in the end it comes down to rigorous application of lending criteria, which will ultimately be seen in Sourced’s results.
What we’d ideally like to see is a greater interest in detailed numerical analysis and figures.
I don’t know if Sourced’s bad-debt collections policy has been tested. Some loans have fallen late and been extended, but I don’t know if any have ever gone into default or whether any borrowers have otherwise failed to keep important contractual terms.
Lending interest rates are usually 10%, although they reach 12% if you lend £20,000+ in a loan. Considering Sourced potentially allows less experienced borrowers, these double-digit interest rates are appropriate. However, Sourced Capital did not increase its borrowing and lending rates alongside inflation, as most other P2P lending providers did.
Sourced has some franchisees who are prepared to pay a premium interest rate in return for not having to deal with the headache of securing funding elsewhere. Some interest rates might therefore turn out to be very generous to lenders.
While I don’t know if there have been any bad debts, Sourced once forecast 1% losses. But forecasting is not easy at this stage due to lack of history, and we haven’t seen Sourced’s forecasting models. 1% is very low for interest rates of 10%+, although it has been done in P2P lending.
Sourced Capital initially provided a huge amount of access and information to 4thWay when we first assessed it in 2020.
In mid-2022, it provided a much needed mini update, although no data was provided to back it up.
It no longer provides any information or data to 4thWay, so it’s not possible to assess whether its interest rates give you a decent margin of safety.
Regarding transparency direct to potential lenders, Sourced is very sparing on its website in details about its people, processes, loan book and results, providing limited data.
Its sales script has included several bold claims without evidence. To take one example, it once stated that it’s already the largest property investor network in the UK. Sourced is a very new business, so it needs to substantiate that its network is larger than the 75,000-strong Property Investors Network, formed in 2003, which does 50 network meetings a month.
It is a company that is very big on sales talk, and that makes it harder to drill down to the facts and seek out evidence.
To take one example, it once stated that it has 100 offices, but it turns out it’s referring to 100 franchisees. This very loose way of speaking is common business marketing practice in all industries. And so-called “hustle” is standard procedure for growing a new business and even admired in entrepreneur circles. But it make it less easy to distinguish what’s actually happening, what actual skills and experience the people have, and so on.
What is a little bit concerning is that I personally can’t find the documents that the financial regulator requires it to publish on its website, called “outcomes statements”. While the information in them is basic and not verifiable, and therefore can’t be used for any assessment of the risks, you still expect to see it.
The last I checked, Sourced did a lot better in its individual reports on loan opportunities when you sign up and look at its full assessment of each loan. These reports explain the opportunity with a lot of detail and clarity, which is entirely appropriate and indeed essential for lenders. On top of that, lenders can submit questions to both the borrowers and to Sourced about each lending opportunity, and you can attend webinars about them. So the bottom line is to ignore the sales pitch and focus on the details of the lending opportunities.
Due to Sourced’s unique ecosystem, what I’d also like to see in future is broad, substantial evidence of high, widespread satisfaction levels among the franchisees.
It’s not possible to review Sourced’s financial situation, because publicly available information regarding its franchisee revenue, the financial structure of its own large development and its overall results, is limited.
Its web of businesses with few public details makes it impossible to track what’s going on. Many connected businesses can be quite normal in the property industry and in property lending, and few published details is also normal for small businesses.
We know it lost money up to and including 2022, but it’s unknown whether it made a profit or loss in its last two filed periods of 2023 or 2024.
Sourced once told us it was looking to reach profitability in five years of trading. Having reached that time now, its success is unknown.
4thWay previously found at least one of Sourced’s public websites was infected with malware.
According to a new, soft scan from 4thWay’s security provider, Sucuri, no new malware has been detected. However, some behaviour of the site in relation to bots might possibly involve malware, but only because that behaviour is most often (but certainly not always) caused by malware.
The website is however listed as clean by Google Sage Browsing, McAfee and Yandex and it carries a valid security certificate.
Aside from that, Sourced Capital’s public website could probably do with a little security tidying in terms of security to prevent attacks or leaks.
More importantly, a broad, arm’s length scan finds that the website partitioned to provide the actual P2P lending platform that you log into appears to be up-to-date and low risk. 4thWay has never found any substantial cybersecurity concerns in its actual lending platform.
The minimum you can lend is £1,000. You need to choose your own loans. I don’t know if there are many to choose from, but you could drip your money in over the course of a year to spread across a larger number of them.
Sourced Capital’s loans are available in an IFISA.
No.
Thank you for reading the Sourced Capital Review! Visit Sourced Capital.
3 PLUSes is best. What does the 4thWay PLUS Rating tell you about the risks and rewards?
Here we show the P2P lending site's own estimate (or 4thWay's if theirs are not appropriate)
Lower Risk Scores are better. How is this different to the 4thWay PLUS Rating?
£55 m since 2019 in loans to property developers. Available in an IFISA. Showing Sourced's forecast interest rate if you lend under £20k/loan. SOPHISTICATED/ WEALTHY INVESTORS ONLY
Early exit is not guaranteed. Usually, other lenders need to buy your loans
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