Landbay
A peer to peer lending platform for secured residential Buy-to-Let mortgages.
- Location
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London,
United Kingdom
Categories: Finance & Payments Mixed Digital/Non-Digital Mixed B2B/B2C
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Investment
sought: - £300,000
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Discount
offered: - 12.50%
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Investment
amount: - £549,300
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Valuation
(pre-money): - Convertible
Learn more about convertible campaigns.
Idea
Introduction
Landbay is an exciting new peer-to-peer finance option for the UK’s frustrated savers and investors who have long struggled to secure low risk returns at rates above inflation, whether from cash accounts, savings accounts, bonds or other traditional financial products.
For borrowers seeking a buy to let mortgage, Landbay aims to offer very competitive rates and a faster, more rational application process than banks and building societies.
With a minimum investment of just £100 Landbay is opening the door for a much wider cross section of the British public to enjoy attractive, low risk returns from the UK’s favourite and best known investment asset – residential property.
This investment round is in the form of a convertible on the basis that we are looking to undertake a Series A investment in the near future. If you participate in this convertible, you will receive shares at a discount to the price set by such Series A investors.
They key terms which apply to the Landbay convertible are as follows:
• Valuation cap - £30m.
• Discount:
o 12.5% discount on conversion prior to 1 December 2015;
o 15% discount on conversion between 2 December 2015 and 31 March 2016; or
o 20% discount on conversion on 1 April 2016 and thereafter.
• Shares to be issued on conversion are Ordinary shares.
• Conversion is triggered by:
o An Equity Fundraise – defined as the Company raising investment capital of at least £1m from one transaction or a series of transactions, in exchange for the issue of Ordinary Shares. The Seedrs fund raise does not count as a transaction;
o A Change of Control of the company (transfer of more than 50% of the share capital), on which shares are issued to Seedrs investors prior to the change; or
o An IPO – being a listing of the company’s shares on a recognised stock market or secondary market.
• At conversion, the investment agreement governing an Equity Fundraise (in particular) shall contain the standard Seedrs investor protections including pre-emption rights, tag & drag rights and information rights.
• If conversion has not been triggered by the longstop date (12 months after this convertible) shares will be issued based on the lower of a minimum company valuation of £10m or the price for a share issued during the period.
Intended impact
Since 2008 and the Global Financial Crisis, banks have reduced their exposure to property finance, having been forced to strengthen their capital positions by the regulatory authorities.
At the same time, savers in the UK are getting historically low rates of interest, if in fact they are earning any interest at all. At present even alternative investment offers from platforms such as Zopa only offers gross 3-year returns of around 4%.
Landbay offers owners of residential BTL property a quick and highly competitive form of finance while offering lenders a significantly higher rate of interest than they would receive from traditional savings product. All loans are secured by a registered first charge.
In addition Landbay operates a "Rainy Day Fund” so that individuals lending enjoy an additional layer of protection for their savings.
As Landbay’s membership grows and the platform matures we will look to widen our product offer further in to the B2L sector, as well as leveraging our P2P lender base to introduce new investment products.
Substantial accomplishments to date
As of May 2015 Landbay has completed 38 mortgages and lent c. £7.2 million. All loans are performing and we haven't had one late payment to date.
The current pipeline of mortgages expected to complete over June/July is £4.1 million.
As of May 2015 Landbay has just under 500 active retail lenders.
We have built a strong board and management team, including Paul Clampin as Chief Lending Officer joining July 2015 (Previously Director of Underwriting at Paragon).
Agreed terms with an institutional funder to lend up to £250 million annually through Landbay, enabling the business to rapidly scale origination from summer 2015.
Cemented strong broker relationship with leading UK BTL specialist brokers.
Monetisation strategy
Landbay will charge borrowers a fee at the time of funds being drawn down. In addition Landbay charges a margin between the "Lender" and "borrower" rate. All BTL mortgages are non-amortising and so as the loan-book grows we are building significant annuity income in the business. Landbay does not intend to charge lenders a fee at this stage.
Use of proceeds
Technology - 50%
Marketing & Brand development - 25%
General Operating expenses - 25%
Market
Target market
The initial target market of borrowers are owners of property in England, Wales and Northern Ireland who are looking to borrow £100,000 - £500,000 on a Buy-to-Let basis.
The target market of lenders is any UK resident who has at least £100 to lend. In addition we will pursue institutional investors who want to invest in low-risk, income yielding secured debt.
The government has given a green light to lending via p2p platforms to become ISA eligible in 2016. We expect this to increase the retail market significantly and creating our ISA offering will be a key focus for 2H of 2015.
We believe this significantly increases the appeal of our offering and the potential size of our lender catchment. People are increasingly becoming accustomed to lending on P2P platforms, and now that the sector is regulated and the rates available on other platforms drop, we believe that a significant opportunity exists for new entrants with straightforward and secure yet differentiated product offerings.
Characteristics of target market
The B2L market has largely been occupied by building societies and specialist B2L lenders, all with fairly similar offerings. As such the criteria and requirements for securing B2L mortgages tend to be rather rigid. By splitting each loan into risk bands this will enable us to price risk effectively and tailor the mortgage to the individual needs of the borrower, taking a holistic and rational approach to underwriting.
The size of the BTL market in 2014 was £27billion.
P2P lending in the UK recently passed the £2bn mark. A large number of platforms exist in the UK - Zopa, Ratesetter and Funding Circle are the largest of these. Within Property P2P, LendInvest & Wellesley both launched in 2013 and have made strong starts. These focus on development/bridging/commercial finance. By operating exclusively in BTL mortgages on residential property, Landbay is offering a lower risk proposition that is simpler to understand, more automated and more scalable.
Marketing strategy
So far we have used PR (with articles in many national publications) and affiliate channels (such as moneysupermarket & money.co.uk) to attract lenders. We have done a little bit of advertising, mainly online.
We use leading BTL mortgage Brokers to source the applications for them. Rather than operating whole of market we work with a small number of respected specialists that we can work closely with and develop strong relationships.
Competition strategy
Landbay has built a comprehensive technology platform that will automate much of the lending process.
This system will include the management of the loan pools, lender portfolios/reporting, diversification, loan and security documentation as well as day-to-day loan administration.
Many smaller P2P sites have not yet made this technology investment, and thus limit lending to individuals with a minimum of, say, £5,000. We believe that this is a too big a hurdle in order to seriously scale a P2P platform over the long-term as many P2P lenders like to stick their toe in the water before they commit significant savings to a particular platform. Landbay’s key competitive differentiator is its simplicity, control and ease of use. Landbay’s offer is very much a simple and safe ‘savings’ proposition for lenders – many other sites require you to keep logging in and bidding on separate auctions etc.
This – along with the enormous size of this market – should allow Landbay to scale in a way that other ‘similar’ P2P platforms have not yet managed to achieve.