CrowdProperty is a specialist property peer-to-peer lending platform.
Business overview
| Location | Birmingham, United Kingdom |
|---|---|
| Social media | |
| Website | www.crowdproperty.com |
| Sectors | Property Mixed Digital/Non-Digital B2C |
| Company number | 08764786 |
| Incorporation date | 6 Nov 2013 |
Idea
Introduction
CrowdProperty launched in 2014 and is a specialist property peer-to-peer lending platform, facilitating loans between private individuals and UK professional property businesses.
• Loans are for property development finance; ranging from significant refurbishment to new build projects.
• All loans are secured by a registered first legal charge against the property.
Loans are originated via proprietary access to one of the largest property investor networks in the UK (and wider grass-roots networking), providing broker-free property development finance deal flow.
CrowdProperty was founded by a team with >80 years of property development/investing experience.
CrowdProperty Ltd, fully authorised and regulated by the FCA, has proven its model surpassing £10m lent across 27 projects with no defaults, is now profitable and cash generative and is now ready to scale to realise its potential*.
Intended impact
Our aim is for CrowdProperty to become the #1 place for:
• Project-based property finance direct to SME property professionals, and
• Strong first-charge secured returns for lenders.
We work with UK property developers to help them raise funds for their projects:
• Interest is rolled up to the end of the loan term giving clear and predictable pricing and alignment to development project cashflows.
• We have clear and objective project and developer lending criteria which is supplemented with subjective assessment of the team.
• Quick decision making and issuance of offers where accepted.
We also work with retail lenders to offer them secured, fixed returns providing:
• Lending opportunities that we consider to be relatively easy to understand vs SME lending
• No lender fees
• The option to lend from personal savings, business reserves or from pensions (SIPP/SSAS)
• Soon lenders can gain tax free interest returns on funds lent through a CrowdProperty managed innovative finance ISA (IFISA)**
Substantial accomplishments to date
CrowdProperty has achieved £10.7m cumulative lending and £206k revenue / £145k operating profit in the 3 months to the end of October 2017, including income locked in to be received at the end of completed loans*.
We consider that we have a structural economic advantage amongst P2P lenders in achievable fees, loan size, borrower repeat frequency and average loan size, which we believe will enable us to build a stronger, more profitable P2P lending business.
Our marketplace has grown to £10.7m lent with £5.8m paid back with a current default rate of 0%.
To date our business accomplishments are:
Borrowers:
• 2,717 borrowers registered on our platform
• 236 project finance applications received
• 27 projects listed and funded
• 19 borrowers have or are raising funds (with a growing base of repeat borrowers)
• 17 projects paid back
Lenders:
• 3,987 registered lenders
• 1,269 individual pledges towards projects
• 396 active pledgers
• 301 lenders having one or more loans paid back
• 230 lenders reinvesting
Our platform:
• A strong platform with continuous development of the borrower and lender propositions and internal process efficiency
• Pension lending approved
• Robust legal loan and underwriting documentation
• Recognised and trusted borrower and lender brand
• Proven direct route to borrower and lender markets
Having funded 27 projects, CrowdProperty is now funding at speed, our last two projects funding £910,000 in 41 minutes and £490,000 in 17 minutes respectively.
Monetisation strategy
Borrower fees: Arrangement fee to the borrower of 5% with 1% fee paid upon approval of application, 4% paid on completion of legal documents and transfer of the first tranche of money (which can be deducted from loan amount).
Interest: Interest for the duration of the loan is 10% p.a. fixed which is rolled up and paid at the end of the loan term. Retail lenders who participate in the loan are paid 8% interest p.a. which is also paid at the end of the loan term.
Referral fees: CrowdProperty receives many funding applications that do not meet our underwriting criteria. We can refer declined leads to third party lenders for a fee to increase revenues; just one example of future revenue streams.
CrowdProperty is already profitable and we have built our model so that it lends itself to offer more favourable economics than typical peer to peer platforms in consumer and SME marketplaces. This is due to our shorter average loan lengths, higher average loan sizes, borrower frequency/retention and achievability/sustainability of fee levels, thereby giving us the potential of monetising each £1 lent far more productively.
Use of proceeds
This fundraise will cover cashflow requirements in our expansion business plan, including investment in:
• 20% Tech (payments processor, security, ongoing platform development, product development etc)
• 40% Marketing / PR (both borrower and lender side)
• 20% Team (capacity development and potentially strategic hires)
• 10% Operating cashflow (enabling us to flex timing of fees rather than reducing fees)
• 10% Regulatory capital requirement contingency
Please note that the company has a £224,681 director loan. Funds raised as part of this campaign will not be used to repay this loan.
*Source: Unaudited Management Accounts
** This is dependent on receiving an IFISA Licence, which has been applied for recently but not yet received.
Market
Target market
Our target borrowers are SME experienced property developers who are in need of funding in the £200k - £2 million range.
We regularly communicate with hundreds of property development businesses through the property investors network (founded by Simon Zutshi), one of the largest in the UK. No need to pay commercial brokers for deals. This proprietary access to thousands of potential borrowers gives us a competitive advantage of responding to borrower needs in product, service and proposition development.
Our target lenders have funds available, looking to earn a rate of return higher than elsewhere, whilst still understanding the risks involved in lending. These are mitigated by CrowdProperty taking the first legal charge on the property on behalf of the lenders. Lenders prefer our 12-18 month loan term rather than the longer loan terms typically offered by other peer to peer lenders whilst retail lenders find security against a property more comprehensible than security against SME businesses.
Characteristics of target market
• The core market that CrowdProperty is disrupting is the £10bn+ project, development and bridging finance market
• The peer to peer lending industry has reached £10+ billion of cumulative lending and has grown at a rate of 69%p.a. over the last 3 years
• Peer to peer lending in property, the highest growth segment within alternative finance, has grown at a rate of 84% p.a.with Business Insider Intelligence expecting this segment to be the largest by 2020
The alternative finance market is driven by relative cost inefficiencies and costs of regulatory capital requirements in financial institutions, especially in business and property lending. Alternative finance has satisfied £10bn cumulative finance demand to date and grown rapidly, validating commentator forecasts of high growth for the overall sector.
Marketing strategy
Limited marketing to date, as almost all leads have come through the property investor network (pin) channel. A full time resource will be joining the team to generate and convert more leads from this well-established network / community to ensure we maximise this direct route to market, plus other property network meetings.
Having proved the model and acquired customers on both sides of the marketplace outside of existing networks, we intend to build very strong digital marketing capabilities to focus on broader awareness throughout the target property professional segments. Funds raised will be used on various marketing channels to establish the most efficient use going forward in developing our direct channel further.
Based on lender feedback we have implemented a pre-launch webinar for each new launch to answer initial questions and bring the deals to life. Engaging with our lenders breeds confidence and has resulted in projects being funded in less time on each subsequent raise.
Competition strategy
The CrowdProperty team have >80 years property experience and networked relationships with property professionals. On the critical origination side we differentiate by professional guidance through clear and transparent borrowing, access to decision makers and approachability in all cases, plus we consider that we outcompete in the following ways:
Challenger banks:
• Speed
• Flexibility to understand non cookie-cutter assets / deal structures
• No 6 month refinance rule
Bridging Lenders:
• Transparent fee structure
• Speed
• Potentially higher LTV lending
Property peer to peer lenders:
• Specialists in development finance
• Team experience as developers
• Direct access to small and medium sized developers
On the lender side, not only do savers in banking institutions receive <1% on average, but we also differentiate v alternative finance players in the following ways:
• Always 1st charge security
• Pure P2P model
• 12-18 month liquidity
• Fixed, strong returns
• Simple structure
• No direct exposure to property market
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