London Capital and Finance

masonic

Supercalafragalistic wrote: »

This is the bit i dont understand. They started off small , but had fees of 25 per cent. So if they were lending all these millions to lc and f, where did surge get the money from? If they started with 400k , are we saying they lent 300 to lc and f, kept 100 back, then l c and f loaned oit the 300k... then surge started flogging the bonds .....then kept lending the money from the bonds? So were the public actually giving money to surge who then lent to l c and f? Confused,com !

Let's suppose LCF wants to make a £400k loan to an SME (which seemed to be their lending model initially). So, it approaches Surge, who perhaps does some due diligence on the borrower and then pledges to underwrite the loan. Surge advances £300k to LCF in exchange for £400k of debt. The loan is made to the borrower who receives the £300k after the deduction of fees from the face value of their debt. Surge and LCF then go on a fundraise and LCF issues bonds worth £400k over the course of the next 4-6 weeks. The £400k is used by LCF to buy the £400k debt from Surge (which Surge paid £300k to acquire). So after that Surge has £500k in the bank, LCF has a loan worth £400k, bondholders have LCF bonds worth £400k and the borrower has £300k of additional funds.

Let's say they do that another 3 times in the following 6 months. Surge now has cash reserves of £800k, LCF has loans worth £1.6m and bondholders have LCF bonds worth £1.6m.

LCF starts going after larger companies and making larger loans, say £1m. So over the next 6 months Surge and LCF are able to write another £4m in loans. At the end of those 6 months, LCF has loans worth £5.6m and Surge now has close to £2m of cash reserves.

I suppose a business like Surge that has been able to grow from net assets of £400k to net assets of £2m in the space of the year is able to attract a lot of external investment, so it could raise capital to support LCF's lending business growing from £5.6m to £230m over a few more cycles.

The part that's really hard to believe is that borrwers would accept such an arrangement where after fees they only receive 75% of the money they borrowed... but then again, I suppose they must have been desperate, or willing to fold and avoid repaying.

Supercalafragalistic

Thanks Masonic. It sounds quite above board when you explain it that way...and yet...it doesnt feel like it somehow.

masonic

Supercalafragalistic wrote: »

Thanks Masonic. It sounds quite above board when you explain it that way...and yet...it doesnt feel like it somehow.

In effect, the companies worked together to extract the lions share of returns from a lending business where punters took virtually all of the risk for relatively little reward. Not at all uncommon in the world of unregulated investments, but this has to be one of the more extreme cases considering the size of the fees extracted.

Supercalafragalistic

I suppose the question is..did the investing public understand the risk? And i am guessing, even if they didnt, their will be no repercussions for the people who pedalled this stuff. What a horrible world we live in.
Heres another horrible one https://savingsexplained.co.uk/income-lp/?fbclid=IwAR0NfqpmSZXmcZ9pW0eqafAkVkX7rrrMU3vl-WvdWBUwN2lQd6gb4GTBjf4

eskbanker

Supercalafragalistic wrote: »

I suppose the question is..did the investing public understand the risk?

IMHO the investing public were generally paying attention to
8%
rather than
Your capital is at risk
so wouldn't even have got as far as considering the scale of that risk....

Supercalafragalistic

I see what you mean. Its like the site above though...savings explained. It is linked to an investment company called astute capital . It is depicting itself as an easy to understand savings guide. When people comment on the page, the advertisers are saying things like “fca protected” “100 per cent track record etc”. In fact someone is live replying to comments on there saying such things... they may even beliebe it, It is only when you look at astute capital there are warnings about capital not being protected. It really gets my goat.....in fact, so many of my goats have been got i domt think i have any goats left now!

Alexland

eskbanker wrote: »

8%

That sounds great, am I too late to invest in this non-scam opportunity? :j

Alex

eskbanker

Alexland wrote: »

That sounds great, am I too late to invest in this non-scam opportunity? :j

Alex

Too late for this one, but there will be plenty of others!

Or could I interest you in some investment in forestry, car parking spaces, hotel rooms, magic beans, etc, etc, perhaps?

Alexland

eskbanker wrote: »

Or could I interest you in some investment in forestry, car parking spaces, hotel rooms, magic beans, etc, etc, perhaps?

No I want to continue investing in land mines and chemical weapons via unethical companies within my low cost passive tracker funds.

Alex

Jelli

It has never been about understanding risks with these offers. If a website says "your investment could be at risk if we're operating in bad faith", then yes, fair do's. But we're mixing agreeing to the perils of a legitimate offer with something that's set up to be total bs.

So losing money because of a risky failed investment has nothing to do with these high interest offers. It's just highbrow bs.