MoneyThing is the trading name of Capital Mortgages Direct Registered in England & Wales in 2004. Our registered office is 39 Church Crescent, Whetstone, London, N20 0JR (Company No. 05254797). Capital Mortgages Direct Limited is (interim) authorised and regulated by the Financial Conduct Authority (562505).
Whenever you invest with a business lender, your capital is at risk and is not protected under the Financial Services Compensation Scheme. Consequently it is important to understand the risks you are taking when you lend your money using the MoneyThing platform.
Assessing Risk Before Lending
MoneyThing works with business borrowers in a diverse range of different industries from property development to car stocking.
It is your responsibility to assess whether MoneyThing is suitable or appropriate for your needs and any decision made to use our services is done so entirely at your own accord. We provide you with the loan particulars and details of the loan so that you can make your own assessment of the level of risk associated with the loan and so that you can decide whether or not it is the right loan for you.
Please also be aware of the term of the loan. MoneyThing loans typically range from 3 months to 2 years. Once you lend against a loan, you have agreed to commit these funds for the term. MoneyThing offer a secondary market where you may be able to sell your loan part before the end of the term. The secondary market has been created to give lenders greater liquidity. However, you can only sell your loan part if there is a buyer. If there is no buyer, then you keep your loan to term.
Diversification: The best way to manage risk is to diversify your investments across a range of different loans. If you spread a little of your investment across a range of different loans there is less risk than having all of your money invested in one loan. If a borrower has difficulty in repaying a loan, there will be less impact on you if you only have a small investment in that loan.
Loan-to-Value Ratios: All MoneyThing loans are asset-based which means that there is always an underlying asset securing the loan. We lend at what we consider to be appropriate Loan-to-Value (LTV) ratios. This means we lend at a lower value than the market value of an asset, to account for any changes in the market value of the loan.
The LTV that we apply is a judgement call, based on what we think might happen in the market. The idea is that if the value of the asset decreases through the lifetime of the loan, the LTV we have applied will mean that the asset is still worth more than the amount loaned against it. It is useful for you to look at the LTV applied to a loan and decide whether you think this is appropriate for the type of asset and loan term.
Risks when things go wrong: arrears and defaults
Sometimes businesses experience events that mean they can no longer make payments or pay back their loan. Our approach to late payments and defaults is firstly to avoid them in the first place. Throughout the loan period, we work closely with our borrowers. This regular contact means we can often pre-empt problems and work with borrowers before they get into difficulties.
Sometimes arrears and defaults are unavoidable and in this case we try and minimise losses as much as possible. As a last resort, we will sell the underlying asset that secures the loan and we will reimburse lenders with the proceeds. This may or may not cover the total investment depending on the circumstances. We have a conservative approach to loan-to-value ratios so that in the event that we need to sell the underlying asset, it should cover the total debt. There are no guarantees however as the value of assets rise and fall.
What would happen if MoneyThing went out of business and ceased to trade? There are a number of risks to being in business as a lending platform and we carefully manage our business risks to make sure that we can continue to trade and build up a long term successful business.
We have also built in resilience to our operational set up to make sure that our own finances and operations are separate from that of our lenders. For example, we operate a segregated client account where all monies are deposited which keeps client funds separate from our own.
We also operate a separate company called MoneyThing Security Trustee which holds the title to loan assets. This separate legal entity gives lenders their own entitlement to a portion of the loans they participate in. This means that if MoneyThing were to go out of business, lenders retain their rights to the loans they have lent against.
In spite of our careful approach to risk management and our built in resilience, it is hard to manage unforeseen events. We are required by the FCA to put measures in place to ensure an orderly wind-down of our business in the event that we were to cease trading. We have done this to protect our borrowers and lenders. We have measures in place to ensure that we can manage our own loan book in an orderly fashion in the event that we were to cease trading. In effect this means that we will stop accepting new loans and run down our own loan book and repaying lenders as we do under normal conditions.