IMPORTANT: Please read this document carefully.
What due diligence does Simple Crowdfunding undertake on potential fundraisers before we will host an opportunity on our website?
Before permitting a fundraiser to put an opportunity before investors, we want to understand the business, the people behind the business and the opportunity. For P2P crowdfunding where property is being offered as security, we also want to be certain that there are no obvious difficulties with that security.
The Business: For all business projects will check that the company exists, is registered at Companies House and its statutory filings are up to date. Equity projects will typically involve raising funds for a new Special Purpose Vehicle and as such the business will have no track history to consider. For P2P projects the company will need to be already trading and we will carry out a credit check on the business.
The People: We will instruct business history and credit checks on the key people involved with the project, typically this will the directors and the major shareholders, but may include other persons if we consider that may have a significant influence over the project. What we are looking to identify is a history of involvement with failed businesses or business that have a poor history of meeting their obligations.
The Project: We will consider whether the project as set out makes sense; what are the underlying assumptions, do the numbers presented add-up, is the time frame realistic, how do investors get rewarded, is there an alternative exit plan for investors if the original is no longr viable, and are the risks properly identified. Where it is a P2P project we will also want to understand when and how interest is payable, how will the company source the funds to pay that interest and how will the capital be repaid at the end of the term.
How does Simple Crowdfunding assess P2P loan risk?
Simple Crowdfunding assesses each project before it is offered to investors on our site. It does this firstly to determine whether the loan should be offered at all and, if it is to be offered, what is an appropriate rate of interest. For a loan to be considered eligible:
- The fundraiser must be UK limited company, properly registered at Companies House
- The company's statutory filings at Companies House must be up-to-date.
- The company's main operations must take place in the UK
- The company must be profitable, as determined from its accounts filed at Companies House.
- Simple Crowdfunding must be able to obtain satisfactory identity, fraud and credit reference checks on the key people involved with the project, as noted above.
Where a company meets the above criteria, Simple Crowdfunding will then consider the business proposal including the security to be provided, the means of meeting the interest payments and how the company intends to repay the loan capital. Depending upon the information provided Simple Crowdfunding will request such other information that it considers relevant to assessing the risk. If Simple Crowdfunding considers that the loan should be available on its website, it will use the information gathered to agree an appropriate price (interest rate) for the loan.
IMPORTANT: While Simple Crowdfunding will carry out due diligence checks on each project and a risk assessment on each loan before allowing them onto the website, this does not constitute an endorsement, recommendation or advice. Notwithstanding any security taken, there are no guarantees and your capital is at risk.
What is Simple Crowdfunding's process for dealing with late payments or defaults on P2P loans?
Late Payments: Simple Crowdfunding provides email reminders to fundraisers before each payment is due. If a payment is not received by midday on the due date, Simple Crowdfunding will contact the fundraiser by phone and email to check the position. Unless the reason for the delay is a result of administrative error by either the fundraiser or their bank and the funds are received within 3 working days, the late payment will be treated as a potential act of default and no further action will be taken. However, where a fundraiser shows a pattern of regular late payments, the these will be treated as breaches of the loan agreement and any clauses relating to late payment interest for investors and/or administrative charges will become relevant. Simple Crowdfunding will seek to work with the fundraiser to bring the loan back onto schedule as quickly as possible and will keep investors in the loan appraised of the situation.
Defaults: Simple Crowdfunding treats any event that indicates a fundraiser may not be able to meet their obligations as a potential default event, regardless of whether the payments are up to date or not. For each fundraiser company, we use credit agencies to monitor anything that may indicate a problem and enquire directly if an issue is flagged.
Where Simple Crowdfunding is of the view that the fundraiser is either unable or unwilling to meet its obligations to the P2P investors, it will take such actions as it deems appropriate. Where the investors security includes a first charge on property, this may include appointing administrators to arrange for the sale of the property. In determining what action to take, Simple Crowdfunding will always take into consideration that any costs incurred are payable either by the fundraiser or, if they do not meet them, the investors. Simple Crowdfunding will not incur costs on behalf of investors where it does not consider that they will be met from the funds recovered.
Simple Crowdfunding does not provide a secondary market for either equity or P2P investments. Investors should not expect to be able to access their funds any earlier than the end of the project investment term.
What is Simple Crowdfunding's involvement after the funds have been raised?
P2P Investments: Simple Crowdfunding is responsible for the administration of the loans from start to end. It receives and distributes payments received, pursues payments that are overdue, monitors (though credit reference agency checks) the status of the fundraiser and takes action where it considers that this is in the investors' best interests.
Equity Investments: As with P2P investments, Simple Crowdfunding requests status updates from the fundraiser and liaises with them and advises the investors where it has any concerns. However, and unlike P2P investments, it has no formal legal power to intervene in the running of the companies or the management of the investment projects.
All Investments: The purpose behind Simple Crowdfunding is to encourage active involvement in property investment. We are looking for investors who not only invest but want to learn and in due course possibly become fundraisers themselves. As such we insist that anyone fundraising though our site provides investors with regular reports about how their projects are proceeding and where possible, also provide webinars and site visits to increase investor understanding.
Changes to this disclosure statement
Simple Crowdfunding may change this statement at any time by posting new or amended information. Your continued use of this site after any changes are posted means that you are held to have accepted that you are bound by the new or amended disclosure statement. Please therefore check this statement regularly.