no such thing as an easy realisation. “Recovery and realisation are never easy and straightforward, although it is implied in that way,” he says. “It is often a slow and protracted process that creates more concern the longer it goes on. “There are always difficulties
depending on the type of asset and the market conditions prevailing at the time of recovery. “The chances of recovery can depend to a large degree on the cooperation of the debtors, some have their own agenda and can cause difficulties and delays for the platform.” Shaw says having an asset such as a classic car in its own storage vault makes the recovery process easier in the event of a default. “We have the asset in our possession,” he says. “If we need to enforce our rights we don’t have to go out and find it. “If the borrower’s business fails as you have an asset to sell.” Similarly, Butler says Lend & Borrow Trust can quickly sell the gold it has been storing as collateral. Lawther says Rebuildingsociety works with a team of collections agents, credit control agents, solicitors and insolvency practitioners to arrange for the enforcement of the security. “As all of our loans must be secured by a minimum of a personal guarantee from the directors or shareholders, we always have two avenues to pursue the debt – the business itself and the director,” he explains. “The latter is often more
“ Recovery and
realisation are never easy and straightforward
important when lending to small businesses, as many companies do not own sufficient assets to be confident of a recovery to unsecured creditors in the event of default. “Therefore, having the extra assurance that the directors will remain personally liable for the debt even if the business is wound up or liquidated is an effective tool to obtain a positive result.” He concedes that there will be times when the value of the security will not be sufficient to gain a full recovery of the capital and interest. “In these situations when all available legal means have been explored, the loan is declared as bad debt or unrecoverable,” he adds. Secured lending may appear to fall onto the safer side of P2P, but it is still an investment. There are always going to be risks in P2P lending and feeling reassured by the promise of returns from underlying assets is no substitute for due diligence.
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