Our due diligence at LendSwift, when approving a loan, is as stringent as any lender on the market. Our primary concern is always the viability of the project and how we will ensure investor capital is protected and returned on time. Even with our extensive due diligence and our team’s years of property development knowledge, we still sometimes approve projects that turn out to be poor investments.
There are inherent risks with any investment in any asset class. Guaranteed capital returns exist only if your money is held in a bank where minimal interest can be accrued. Since our inception in 2016, LendSwift has completed 47 loans with two technical defaults and one repossession. These three investments seem like a disaster from a business perspective, but they are success stories. With our team’s careful management, both technical defaults resulted in the sale of the property by the developer. This enabled LendSwift to repay investors their full capital and contracted interest.
The repossession, when we approved the loan, seemed like a good investment opportunity. The borrower’s proposal was to convert a commercial building, in Arye Scotland, into usable office space. The exit strategy of the loan was the sale of the refurbished offices. We lent a bridging loan which was to be paid back in six months. Unfortunately, the borrower ran out of money to finish the project. We worked for several months with the borrower to try and assist them with project completion, but the borrower consistently failed to make monthly interest payments. With no money to complete the project and several failed interest payments, the borrower was in breach of their loan agreement. We made the difficult decisions to start repossession proceedings against the borrower, in order to protection our investors capital.
A call up notice was sent to the borrower, which requires the repayment of the loan within two months. With the loan still not repaid, six months after the calling up notice, we filled in a court application for a repossession order. We fully repossessed the property in November 2019 and immediately put the property on the market for sale.
Fortunately, a few months ago, we sold the property for £200,000. The original loan was for £189,000. This meant we were able to return 100% of our investor’s capital with 5% interest. Had the loan not defaulted, investors would have received 8% interested.
We are immensely proud of the outcome of the repossession. The bridging loan in Arye turned out to be a poor investment, but with careful management we returned all our investor’s capital with only 3% loss of accrued interest compared to the original loan terms.