London Capital and Finance Mini-bond, et al, commercial loans direct seller query
The London Capital and Finance Mini-bond investment is discussed in the London Capital and Finance (LC&F) threads in the MSE Savings and Investments Forum re pros and cons. However, this post to the MSE Loans Forum is primarily a search for info about LC&F's direct seller commercial lending business, the sole means of LC&F bondholder interest payments. LC&F Plc is registered at Companies House and with the FCA with various permissions.
Can any subscribers to the MSE Loans Forum, who are experienced in or knowlegeable about commercial lending, shed light on where and how to find validation of the LC&F direct selling commercial lending business and by similarities perhaps other commercial lending companies who have issued mini-bonds to raise debt finance?
The investment marketing website to raise investment finance for the LC&F mini-bond, not the core commercial lending business, is located at https://www.londoncapitalandfinance.co.uk. Although looking at the website the core business of LC&F appears to be raising investment finance rather than commercial lending. The website has little to say on the commercial short term loan business to small and medium size enterprises (smes), the only source of bondholder interest returns and LC&F income and expenditure.
Interest of up to 8% APR is paid to investors in the London Capital and Finance Mini-bond issue over a 1-3 year term. To date investor interest is being paid but the mini-bond investment is high risk and investor capital is 100% unprotected. The bond interest is currently claimed to be paid from loan interest at 12-20% APR on secured commercial sme loans funded from invested capital raised by the private mini-bond issue offer. Rates of 12-20% APR are uncompetively higher than the 4-6% APR current commercial loan market rates, but lower rates would not be able to cover the bond interest payments and LC&F profit and expenses.
It is not easy to accept the LC&F marketing team and website claim that LC&F have, at 12-20% APR interest, as of June 2017 lent out over £66 million of investor capital with over £215 million worth of asset security provided by over 200 smes, and with no borrower defaults. Especially in the light of the greatly contrasting fact LC&F, a 2012 start-up company with few assets and little cash, only had one loan client in the previous accounting year 2014-15 and little lending activity in the two years before.
In 2015-16 in response to questions to the LC&F marketing team about validation of the stated commercial lending business, "...the bond contracted marketing team were unable to substantiate to potential or existing investors the sme loan trading interface. Unlike other sme business loan providers, there appeared to be no available company website for sme borrowers to apply for LC&F business loans. No physical location other than the registered office. No available names of existing sme borrowers, no names of the lending team employees. No credit underwriter name. No lending team employee contact, no phone, no email address, no loan statistics, reviews by investors but no reviews by borrowers. Business loan enquirers were asked to email the contracted bond marketing team. No internet searches revealed evidence of the sme lending, nor how the bondholder interest was paid through sme loan interest, nor was there such evidence on the LC&F website, nor could the bond marketing team provide such when asked." (Extract from London Capital and Finance Mini-bond Review, MSE Savings and Investments Forum, http://forums.moneysavingexpert.com/showthread.php?p=72739908#95).
A later website (1/12/2017) http://www.lcaf.co.uk has a business loan (£500,000 minimum) online application form but still no evidential info re the commercial loan business. No detailed loan statistics, no borrower reviews (except one which was recently added), and no lending team details or contact.
LC&F bond interest term payments are paid to date. But evidence of the commercial loans business from which bond interest paying finance is said to be sourced is lacking. The only website info given by LC&F referring to their core business is that it is a commercial lender to smes and the loan totals of monies lent, sme borrower assets value, sme borrower numbers, and lately an online loan application form on the https://www.lcaf.co.uk website as mentioned above. Yet contrary to info from the bond marketing team there does not appear to be a LC&F lending team. 2015-2016 Annual Accounts state LC&F has only two employees who manage operations in addition to the CEO and sole owner and shareholder, Michael Andrew Thomson (see LinkedIn).
Are there any experienced commercial lending experts here in this MSE Loans Forum who can provide info on how to find and or check commercial lending records to confirm a company is doing what it actually claims it is doing? LC&F and other similar loan companies cite data protection law to support there non-disclosure reasons. But the DPR under the Data Protection Act! 1998 only applies to living individuals not to companies. The FCA Principles re the relationship between firms and customers support company disclosure, although officers and employees are under contractual terms protected by civil law to maintain confidentiality.
Of course as detailed above the LC&F company itself has already been asked for proof of business lending, as have other similar debt finance start-up loan companies, with little useful response. It is unreasonable for a potential investor with a sizeable potential investment to be refused evidence by a loan firm confirming the lending business means to provide interest payments on the investment. Just as it is unreasonable for a loan firm to be expected to enter into an asset secured loan agreement with a borrower firm without checking the borrower's claim of actual possession of those assets.
This is an issue of due diligence. Without complete and transparent information how is it possible for an investor to fully perform a Fundamental Analysis on which to base the decision to invest? However, the law is on the issuer's side. By law an unregulated minibond issuer does not have to disclose such detailed information in the offer, only a description, in the authorised prospectus or promotional document, of the means to raise the interest payments to bondholders. Although the FCA Principles do include such a responsibility on firms in relation to potential and existing customers. Caveat emptor, let the buyer beware, applies. If the issuer evades or refuses to provide evidence of the business means to pay income and fund bond interest it is best to walk away. Not for mainstream investors, mini-bonds are highly risky anyway without the added risk of insufficient evidence of the means to raise and pay bond interest to bondholders. Many start-up private mini-bond issuers endeavour to advertise and promote the bond offer but often there are scant details and practicalities of the business means of raising bond interest payment to the bondholder.
If an investment mini-bond issuing company is not doing what it states it is doing then the investment is likely to fail. Without the means of checking how can it be known by investors what the issuer is actually doing? What difficulties the issuing firm is facing. Investors should be entitled to carry out checks, confirmations, etc. They should expect honest and accurate answers to reasonable searching questions, not evasiveness. The info should be provided without asking as the need for such is clear. Yet, even the bond corporate trustee, who is independent and supposed to secure bondholder interests, mainly interest payments and end of term return of capital, may not know what the investor capital is or has been used for.
Corporate trustees, unlike the issuer, do not have hands-on managerial rights, as was recently shown in two recent mini-bond failures where bondholders lost capital: Providence Bonds and Secured Energy Bonds. In the former case the bondholder capital, unaware to the bond trustee, was not being used for stated purpose, wrongly partly being used to fund promotion of the bond. In the latter case, again unaware to the corporate trustee, the bondholder capital was illegally siphoned off by the Australian parent company which later declared bankruptcy. This is no better than the now illegal pyramid scams a few years back.
For an indepth review of the London Capital and Finance (lcaf.co.uk) mini bond visit the links in the MSE main London Capital and Finance thread below. There are later posts in the same thread, pages 10, 11, by bail-in on commercial due diligence re disclosure of the LC&F commercial lending business.
London Capital and Finance Mini-bond Review Part 1
http://forums.moneysavingexpert.com/showthread.php?p=72739908#95
London Capital and Finance Mini-bond Review Part 2
http://forums.moneysavingexpert.com/showthread.php?p=72739908#96
London Capital and Finance Mini-bond Review
Both Part 1 and Part 2 are published in one page here:
https://anonymouslcafgmail.weebly.com/
Can any subscribers to the MSE Loans Forum, who are experienced in or knowlegeable about commercial lending, shed light on where and how to find validation of the LC&F direct selling commercial lending business and by similarities perhaps other commercial lending companies who have issued mini-bonds to raise debt finance?
The investment marketing website to raise investment finance for the LC&F mini-bond, not the core commercial lending business, is located at https://www.londoncapitalandfinance.co.uk. Although looking at the website the core business of LC&F appears to be raising investment finance rather than commercial lending. The website has little to say on the commercial short term loan business to small and medium size enterprises (smes), the only source of bondholder interest returns and LC&F income and expenditure.
Interest of up to 8% APR is paid to investors in the London Capital and Finance Mini-bond issue over a 1-3 year term. To date investor interest is being paid but the mini-bond investment is high risk and investor capital is 100% unprotected. The bond interest is currently claimed to be paid from loan interest at 12-20% APR on secured commercial sme loans funded from invested capital raised by the private mini-bond issue offer. Rates of 12-20% APR are uncompetively higher than the 4-6% APR current commercial loan market rates, but lower rates would not be able to cover the bond interest payments and LC&F profit and expenses.
It is not easy to accept the LC&F marketing team and website claim that LC&F have, at 12-20% APR interest, as of June 2017 lent out over £66 million of investor capital with over £215 million worth of asset security provided by over 200 smes, and with no borrower defaults. Especially in the light of the greatly contrasting fact LC&F, a 2012 start-up company with few assets and little cash, only had one loan client in the previous accounting year 2014-15 and little lending activity in the two years before.
In 2015-16 in response to questions to the LC&F marketing team about validation of the stated commercial lending business, "...the bond contracted marketing team were unable to substantiate to potential or existing investors the sme loan trading interface. Unlike other sme business loan providers, there appeared to be no available company website for sme borrowers to apply for LC&F business loans. No physical location other than the registered office. No available names of existing sme borrowers, no names of the lending team employees. No credit underwriter name. No lending team employee contact, no phone, no email address, no loan statistics, reviews by investors but no reviews by borrowers. Business loan enquirers were asked to email the contracted bond marketing team. No internet searches revealed evidence of the sme lending, nor how the bondholder interest was paid through sme loan interest, nor was there such evidence on the LC&F website, nor could the bond marketing team provide such when asked." (Extract from London Capital and Finance Mini-bond Review, MSE Savings and Investments Forum, http://forums.moneysavingexpert.com/showthread.php?p=72739908#95).
A later website (1/12/2017) http://www.lcaf.co.uk has a business loan (£500,000 minimum) online application form but still no evidential info re the commercial loan business. No detailed loan statistics, no borrower reviews (except one which was recently added), and no lending team details or contact.
LC&F bond interest term payments are paid to date. But evidence of the commercial loans business from which bond interest paying finance is said to be sourced is lacking. The only website info given by LC&F referring to their core business is that it is a commercial lender to smes and the loan totals of monies lent, sme borrower assets value, sme borrower numbers, and lately an online loan application form on the https://www.lcaf.co.uk website as mentioned above. Yet contrary to info from the bond marketing team there does not appear to be a LC&F lending team. 2015-2016 Annual Accounts state LC&F has only two employees who manage operations in addition to the CEO and sole owner and shareholder, Michael Andrew Thomson (see LinkedIn).
Are there any experienced commercial lending experts here in this MSE Loans Forum who can provide info on how to find and or check commercial lending records to confirm a company is doing what it actually claims it is doing? LC&F and other similar loan companies cite data protection law to support there non-disclosure reasons. But the DPR under the Data Protection Act! 1998 only applies to living individuals not to companies. The FCA Principles re the relationship between firms and customers support company disclosure, although officers and employees are under contractual terms protected by civil law to maintain confidentiality.
Of course as detailed above the LC&F company itself has already been asked for proof of business lending, as have other similar debt finance start-up loan companies, with little useful response. It is unreasonable for a potential investor with a sizeable potential investment to be refused evidence by a loan firm confirming the lending business means to provide interest payments on the investment. Just as it is unreasonable for a loan firm to be expected to enter into an asset secured loan agreement with a borrower firm without checking the borrower's claim of actual possession of those assets.
This is an issue of due diligence. Without complete and transparent information how is it possible for an investor to fully perform a Fundamental Analysis on which to base the decision to invest? However, the law is on the issuer's side. By law an unregulated minibond issuer does not have to disclose such detailed information in the offer, only a description, in the authorised prospectus or promotional document, of the means to raise the interest payments to bondholders. Although the FCA Principles do include such a responsibility on firms in relation to potential and existing customers. Caveat emptor, let the buyer beware, applies. If the issuer evades or refuses to provide evidence of the business means to pay income and fund bond interest it is best to walk away. Not for mainstream investors, mini-bonds are highly risky anyway without the added risk of insufficient evidence of the means to raise and pay bond interest to bondholders. Many start-up private mini-bond issuers endeavour to advertise and promote the bond offer but often there are scant details and practicalities of the business means of raising bond interest payment to the bondholder.
If an investment mini-bond issuing company is not doing what it states it is doing then the investment is likely to fail. Without the means of checking how can it be known by investors what the issuer is actually doing? What difficulties the issuing firm is facing. Investors should be entitled to carry out checks, confirmations, etc. They should expect honest and accurate answers to reasonable searching questions, not evasiveness. The info should be provided without asking as the need for such is clear. Yet, even the bond corporate trustee, who is independent and supposed to secure bondholder interests, mainly interest payments and end of term return of capital, may not know what the investor capital is or has been used for.
Corporate trustees, unlike the issuer, do not have hands-on managerial rights, as was recently shown in two recent mini-bond failures where bondholders lost capital: Providence Bonds and Secured Energy Bonds. In the former case the bondholder capital, unaware to the bond trustee, was not being used for stated purpose, wrongly partly being used to fund promotion of the bond. In the latter case, again unaware to the corporate trustee, the bondholder capital was illegally siphoned off by the Australian parent company which later declared bankruptcy. This is no better than the now illegal pyramid scams a few years back.
For an indepth review of the London Capital and Finance (lcaf.co.uk) mini bond visit the links in the MSE main London Capital and Finance thread below. There are later posts in the same thread, pages 10, 11, by bail-in on commercial due diligence re disclosure of the LC&F commercial lending business.
London Capital and Finance Mini-bond Review Part 1
http://forums.moneysavingexpert.com/showthread.php?p=72739908#95
London Capital and Finance Mini-bond Review Part 2
http://forums.moneysavingexpert.com/showthread.php?p=72739908#96
London Capital and Finance Mini-bond Review
Both Part 1 and Part 2 are published in one page here:
https://anonymouslcafgmail.weebly.com/
0
Comments
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I'm sure you know from the investment side, caveat emptor. I mean you even posted as such yourself.
If a company isn't being forthcoming when trying to sell you a risky investment, that should be all you need to know.
To answer you? No idea. If the company you want to buy this bond from are in the business of providing finance to business, how do they do this? They can't lend without ties to brokers, or a direct B2B lending model.
Do they even directly lend? Are these loans that back up the bonds theirs, or packages of loans they've picked up on the derivatives market?
In debt and looking for help? Look here for the MSE Debt Help Guide.
Also, If you need any free and impartial debt advice, the National Debtline, Stepchange, and the CAB can help.0 -
LONDON CAPITAL AND FINANCE MINI-BOND REVIEW extract relating to company disclosure re financial, legal and commercial due diligence:
APPENDIX 1
The Financial Conduct Authority (FCA), along with the Financial Ombudsman Service (FOS) are responsible for the regulation of authorised companies in relation to consumers. They are unable to help in a financial loss case with an unregulated financial product, such as a mini-bond, only a regulated product. The FCA has published principles of conduct which apply to all FCA regulated companies. These can aid you in your communications with investment providers. These principles are laid out in the FCA Handbook, available online, as follows:
The Principles
1 Integrity
A firm must conduct its business with integrity.
2 Skill, care and diligence
A firm must conduct its business with due skill, care and diligence.
3 Management and control
A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.
4 Financial prudence
A firm must maintain adequate financial resources.
5 Market conduct
A firm must observe proper standards of market conduct.
6 Customers' interests
A firm must pay due regard to the interests of its customers and treat them fairly.
7 Communications with clients
A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.
8 Conflicts of interest
A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.
9 Customers: relationships of trust
A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment.
10 Clients' assets
A firm must arrange adequate protection for clients' assets when it is responsible for them.
11 Relations with regulators
A firm must deal with its regulators in an open and cooperative way, and must disclose to the appropriate regulator appropriately anything relating to the firm of which that regulator would reasonably expect notice.0 -
Why do you keep hammering on about LCF? And on this 5 month old thread that generated no interest.
It looks suspicious at best and combined with the other threads makes people question your motives.0
This discussion has been closed.
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