How Your Farming Assets Can Fund Your Future 

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Farming faces a period of dramatic change. Currently there seem to be as many conversations about using land for carbon sequestration as there are regarding food production.  Will Vertical Farming become mainstream and the food to feed people in London be grown hydroponically in the disused areas under the city?  Certainly, any form of future government support will be different and more demanding, and the structure of farming will change.  But with all the discussion about the new, we must also consider the old. What are the options for farmers contemplating retirement? How do they engineer a dignified exit when they have given their lives to farming and all their wealth is locked up in land?

Picture this:

George and Mary have been married for over fifty-five years.  They started their life in the two up, two down cottage on the farm, moving into the farmhouse when George’s father died and Mary cared for George’s mother.

As an ambitious 30-year old farmer, George was one of the first to install an abreast parlour and the first dairy farm in his area to paddock graze and start using continental bulls to improve his calf income.  The farm increased in size when George purchased land from a retiring neighbour.  Mary admits that living with George can be a bit of a challenge but accepts that his stubbornness has helped them get through some tough times during their farming life. Their two boys enjoyed a happy childhood on the farm, but neither were prepared to follow agriculture as a career, and now both are married with families of their own with no intention of returning home.

On 3 June 2009, George’s milk buyer Dairy Farmers of Britain went into receivership.  Unable to find an alternative buyer for a relatively small amount of milk, the cows had to be sold.  Without that monthly milk income, the cash flow dried up and an overdraft slowly built up.  As the years ticked by, what work George could do in a day in his thirties now took longer and longer.  Mary on the other hand really would like to retire, downsize and spend quality time with George while they are still able to be active.

George and Mary are not unique in their situation and like many of their contemporaries they know what their last bit of land cost in the seventies, but not the current market value of a house, a cottage, buildings and land.  Through FOLK2FOLK the current assets of a farm can be used to prepare for retirement.  In George and Mary’s situation, the monthly letters from their bank caused unnecessary stress and upset.  Refinancing that debt against the land assets of the farm could create some space to make longer term plans.

Having lived on the edge of the same village for their entire life George and Mary are part of the community, through their church and village hall activities and Mary’s lifelong involvement with the local WI, and would like to remain in the area for their retirement.  By using their land and property assets to access a loan, FOLK2FOLK can enable them to be in a cash position to buy a local buy-to let investment property.

As everything starts to fit into place for an orderly winding up of the farm business, the loan can be repaid from the farm sale proceeds leaving George and Mary with the option of moving into their investment property in the village and the opportunity of becoming FOLK2FOLK Lenders, investing some of their surplus funds to earn an inflation-beating rate of interest each month to supplement a comfortable retirement.

How Borrowers Became Lenders: Tamara and David’s Story

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Becoming Lenders

Tamara and David became FOLK2FOLK Lenders in the summer of 2019 to supplement their monthly income from their newly refurbished guest house, Kinbrae House, in Cornwall.

Having moved from Jersey to Falmouth with the dream of opening their own holiday let business, they were originally introduced to FOLK2FOLK as Borrowers by their bank. With the help of a FOLK2FOLK loan, Tamara and David were able to transformed a beautiful Edwardian property into luxury 5-star self-catering apartments.  Now running a successful business, and having paid back their loan, Tamara and David found themselves in a position to make investments. Their first-hand experience of how FOLK2FOLK assess business Borrowers and how its Lenders make a very real and important difference to local businesses by lending funds, meant they had confidence in investing via the peer to peer lending platform.

“We are delighted to be able to offer our support to other businesses who need private funding in the same way that we did.”

Their Journey with FOLK2FOLK

Three years ago, Tamara, an interior designer, and her husband David, a former swimming pool designer, decided to up sticks and move from their home in Jersey to the seaside town of Falmouth in Cornwall. They fell in love with an Edwardian property, situated a stone’s throw away from beautiful Gyllyngvase Beach, which had become rundown and required a complete upgrade to transform into the luxury holiday destination it is now. Although having skills and experience fit for the job, they needed financial help to achieve their dream.

Tamara and David initially set their sights on using a high street bank to provide them with a mortgage on the property, but unfortunately, as they had not lived in the UK for very long, none of the banks they spoke to would lend to them. After beginning to believe their dream would never become a reality, they were heartened when a high street bank advised them to give FOLK2FOLK a call.

After contacting FOLK2FOLK, a meeting was set up at Kinbrae House to discuss David and Tamara’s business idea and after learning about their plans, FOLK2FOLK were thrilled to be able to help.

Tamara and David were passionate about keeping the work local, ensuring they used local tradesmen and supplies throughout the renovation of Kinbrae House.

“We were over the moon that we were able to save a lovely Edwardian property in Falmouth and to breathe a new life into it. We have used local trades people and suppliers for most of the work that we have carried out.”

Since opening Kinbrae house, Tamara and David are now in a position where they can invest some of their money and when thinking of where to invest, FOLK2FOLK was a natural solution having seen the positive and very real impact investing via FOLK2FOLK can make to people just like them.

When speaking with Tamara on why they chose to invest via FOLK2FOLK, she said:

“Very interesting projects are offered to Lenders and you can choose which ones to invest in and the FOLK2FOLK team are very lovely to deal with.”

Do you have a project we could help fund? Or are you interested in supplementing your monthly income by becoming a Lender? Give us a call on 0333 455 1902 or email enquiries@folk2folk.com.

www.kinbraehouse.co.uk 

Capital at risk. No FSCS.

How can peer to peer investing benefit farmers?

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In this blog we explore how farmers and landowners can use their surplus cash flow or land/property assets to secure their future by P2P investing.

Whether you’re looking for a retirement property or want to increase your monthly income, we discuss three ways FOLK2FOLK may be able to assist.

  1. Investing Surplus Cash

With Brexit creating uncertainty for farmers across the country, why not create a capital buffer for challenging times ahead?

By investing your surplus cash via the FOLK2FOLK peer to peer lending platform you could earn an inflation-beating interest rate of typically 6.5% p.a. paid monthly, while your capital is secured against land or property. Investments start from £20,000.

  1. Planning for Retirement

Do you have land or property you could use as security to access finance? Why not use this finance to aid your retirement preparations by:

  • purchasing a retirement property whilst the farm continues to earn you income.
  • consolidating and refinancing any existing debt.

Once you’re ready to retire, you can sell the farming assets, repay your loan and become a FOLK2FOLK Lender to earn monthly interest to supplement your retirement income.

  1. Succession Planning

This requires a delicate balance between ensuring the older generation have cash to retire without taking too much and thus starving the business of much needed working capital.

One solution is to invest capital via the FOLK2FOLK platform to generate a monthly income which may supplement the older generation’s retirement without reducing the capital holding of the farming business.

If you’re interested in finding out more about how you can start investing via the FOLK2FOLK platform give us a call on 0333 455 1902 or visit www.folk2folk.com/lend.

Capital at risk. No FSCS.

‘Are all peer to peer loan investments too high risk?’ and other myths

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Recent news articles have focused heavily on emphasising the risks involved in investing via peer to peer lending platforms. Such stories could encourage a perception that all peer to peer loan investments are too ‘high risk’ and have you running for the hills. But if you did, you’d be missing out on an investment class that can be an asset as part of a balanced investment portfolio.

So, it’s essential to understand the realities, rather than the perceptions, of the risks involved. Not all peer to peer lending companies are the same and the risks involved vary hugely depending upon the platform, the nature of their product, their credit process and whether your investment is secured or unsecured.

The peer to peer sector is still young. It emerged as a reaction to the financial crisis and developed at speed. Some platforms have fallen by the wayside as a result of poor credit choices and processes from their early days.  Now, as warrants a developing industry, the sector is subject to increasingly rigorous regulatory attention. We welcome the FCA’s vigour in ensuring that peer to peer lending platforms operate with prudence and investors understand the risks involved before investing. Our investors are the lifeblood of our business, so our highly experienced credit team are never complacent about the quality of our loan book nor our credit assessment process.

To help separate the facts from some of the fiction, we address what we think are the three most common myths:

Myth #1 All peer to peer loan investments are ‘high risk’

While it IS true your capital is at risk when you invest in a peer to peer loan investment – and that it is higher risk than having a savings account – it is not true to say all peer to peer loan investments are ‘high risk’. Across the sector, peer to peer loan investment propositions range from unsecured high risk/high return stakes to a more conservative, and secured, end of the spectrum which is where FOLK2FOLK sits.

Myth #2 You’ll lose all your money if you invest via peer to peer platforms

You ARE at risk of losing money when you invest via peer to peer lending platforms, because all investments carry degrees of risk.  All investors have a different risk tolerance and return appetite which is why peer to peer lending, with its broad array of lenders, levels of return and approaches to risk, has grown as an alternative investment option.

Approaches to reduce risk vary from platform to platform. At FOLK2FOLK, we only offer loan investments that are secured against UK based land or property.  We don’t offer unsecured lending which we consider to be riskier.  We only lend up to 60% of the open market value of the security property and a charge is held over the property.  At time of writing, none of our investors have actually lost money in our six years of business, but past performance is not a reliable indicator of future trend.

Myth #3 There’s not much difference between the peer to peer platforms

Peer to peer lending is a hugely varied industry with multiple platforms operating vastly different models, pricing structures, credit processes and approaches to risk. Comparison is far from straightforward – it’s certainly not comparing ‘apples with apples’ – and the behaviour of the few is not a reflection of the practices of others.

 

We advocate the importance of always understanding the risks, as well as the rewards, of investing in peer to peer loans.  We highlight the risks in our Lender & ISA Guide and illustrate the relative risk and reward of FOLK2FOLK loan investments when compared to each other in our handy infographic.

Retirement Planning for Farmers

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What happens if you’re an older farmer with a farm and land but without family to take over or the liquid means to transition into retirement?

Many of our farming clients continue to contact us to discuss funding for their diversification projects, but we’re increasingly hearing from older farmers; those who are past retirement age but still farming on their own farm.

They don’t want to come out of farming quite yet because of potential upcoming changes to the Basic Payment Scheme – where there’s a possibility of being able to draw down seven years of payments in a one-off lump sum. While that’s not confirmed, and the tax implications unknown, it appears to be keeping some older farmers hanging on in there with the farm.

But their life isn’t without pressures. Particularly from the bank. A common scenario is where the farm’s not been generating good profit, the overdraft has become uncomfortable and there isn’t the cash to buy somewhere else to live if they do come out of the farm.  But perhaps a cottage or bungalow has just come up for sale in the village and, having lived and farmed locally their whole life they’re part of the social fabric, they don’t want to miss the opportunity of securing a local home for their retirement.

The problem is they don’t have any cash. However, they’re sitting on an asset of £2.5m consisting of unencumbered farmhouse and land.  With the right level of security, FOLK2FOLK could help them refinance the bank overdraft, alleviating that pressure, and finance the purchase of the new house in the village. Perhaps it could then be let on an assured shorthold tenancy and the rent used to service the loan.

Within our loan time-frame of maximum five years, they could stay where they are on the farm and wait to see what happens with the Basic Payment Scheme and whether a windfall materialises.  When they decide to sell their farm, the sale income will pay off the loan and they can move into their new house in the village.  With the considerable funds left over they could go on to become a FOLK2FOLK Lender which would provide them with a monthly income of typically 6.5% p.a. to supplement their retirement.

If this scenario sounds familiar to you and you want to chat through how a FOLK2FOLK loan or investment could help, please Talk To Us.

 

Why investing locally can be life changing

FOLK2FOLK

If you’re thinking about making an investment, your options are vast: investing in stock markets, buying property, having a savings account with your high street bank or peer to peer lending. The choice you make may depend upon factors such as how much interest you receive or how quickly you will see a return, but investment isn’t always about making a quick profit.

More and more people now consider other criteria when choosing to invest – in particular, they are taking into account ethical factors such as, is this company sustainably run? Or is it involved in activities that I am not comfortable funding? Investing in ethical opportunities does not mean sacrificing profits for principles: rather, it is an opportunity to make money while also contributing to the wider social good.

FOLK2FOLK’s local lending model provides a compelling investment option. Individuals with £20,000 or more can lend directly to support creditworthy businesses in their area who are unable to access finance via traditional channels and receive interest up to 9% p.a. paid monthly.

By lending funds FOLK2FOLK’s Local lending Movement investors are enabling businesses to access the finance they need. This access to capital helps businesses grow, create jobs and develop new revenue stream resulting in increased employment and spending, boosting the local economy.

A number of FOLK2FOLK loans have been used to revive old properties such as restaurants, pubs and hotels, bringing life back to communities. Farmers have been able to diversify into new ventures by converting buildings and land or expanding their existing farming businesses to generate more revenues. Funds also supported local manufacturers and property development, often with affordable housing for local residents.

Local lending can be life-changing for both investors and Borrowers. Local investors receive interest up to 9% p.a. paid monthly which may supplement their retirement income and make a difference to their day to day life while local and rural businesses are able to secure the finance they need. If you’re looking for your next investment why not consider lending via The Local Lending Movement and supporting your local businesses; it might just change your life!

If you are interested to know more about investing through FOLK2FOLK or would like to hear more about our business loans, please call us on 01566 818535.

Your capital is at risk and is not protected under the Financial Services Compensation Scheme.

THE P2P SECRET BEHIND LENDING £260m WITH NO LENDER LOSSES

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Not all Peer-to-Peer (P2P) lenders are the same when it comes to risk and reward explains Roy Warren Head of Loan Portfolio & Risk.

After nearly six years of business, FOLK2FOLK still proudly reports that none of its Lenders have lost any money via the platform.  This may be an unusual record for a Peer-to-Peer lender and one we’re determined to preserve. So, what’s our secret?

I’d love to tell you something clever; that our secret is an amazing algorithm, a marvellous mathematical equation, a fantastic financial formula but instead, the secret to our sound track record when it comes to our Lenders’ money is something very plain and simple. It is prudence.

Prudence is paramount.

All investments carry a degree of risk and all investors have a different risk tolerance and return appetite which is why Peer-to-Peer lending, with its broad array of lenders and vastly different models and approaches to risk, has grown to become a popular investment option for many.

However, comparison is not straightforward and propositions range from high risk/high return stakes to a more conservative end of the spectrum which is where FOLK2FOLK sits with our 6.5% p.a. interest rate and maximum 60% (LTV) loan to value ratio of forced sale value (this means how much could be obtained if the land/property asset was sold within 60 days and usually equates to c. 45% (OMV) open market valuation).

This is where prudence comes in. For us, prudence is about respecting our Lenders’ hard-earned money and ultimately leaving their investment decisions totally in their hands.  We build strong relationships with our Borrowers and Lenders; understanding their requirements and preferences and take a common-sense approach to all things.

Lenders are the lifeblood of our business and we do all we can to protect their interests.  This means we are not complacent about our assessment process and the quality of our loan book: we continually strive to improve our processes; stay ‘ahead of the wave’ by keeping abreast of sector issues, property values and the wider performance of the economy; and foster a risk culture of ‘no surprises’ by maintaining regular dialogue with Borrowers

Our conservative approach to LTV (Loan to Value) has contributed to keeping our portfolio clear of Lender losses to date.  However, LTV cannot be viewed in isolation, it’s also about serviceability and a sound exit plan for the loan. It is within our DNA that ‘good folk lend to good folk’ and the character and track record of our Borrowers is also important in our loan assessment.

We continue to improve the ways in which we monitor and control our portfolio.  Our promise to our Lenders is that we’ll be open, transparent and not take our current track record of zero Lender losses for granted; prudence will remain paramount.

Find out more about Lending via FOLK2FOLK or enquire here for more information or to speak to us.

As with all investments, capital is at risk. Peer-to-Peer lending is not protected under the Financial Services Compensation Scheme. Our current track record of zero Lender loses relates to our past performance and is not a reliable indicator of future trends.

 

  Roy Warren, Head of Loan Portfolio & Risk

Is your capital working hard enough for you in retirement?

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Pension Awareness Day on 15th September is an annual reminder to take an interest in how hard your savings and pension are working for you in retirement.

As a retiree you have plenty of choice about how to use your pension to provide the income you need in retirement. For instance, you can leave money invested in the stock market while making regular withdrawals to cover living expenses (an option known as drawdown) and, of course, you can also take 25% of their money out of your pensions tax-free for use in other investments

These alternative options mean that pension savings have the opportunity to continue to grow even after retirement: a factor that has become increasingly important given the significant rise in life expectancy in recent decades.

But with this potential growth comes, as ever, an element of risk: by staying invested in shares, for example, there is a chance that the value of your capital could go down as well as up. And another possible downside of drawdown is that the investor takes too much income in the early years and thereby runs out of money at some point later on.

So, it is hardly surprising that a number of alternative forms of investing have become popular.

Peer-to-peer (P2P) lending is one investment option that has a lot to offer if you are happy to take on some additional risk compared to cash or bonds but with less risk and volatility than investing in shares. If you don’t feel your capital is working hard enough then investing via platforms like FOLK2FOLK can help you sweat every pound by providing an additional source of income to support your lifestyle during retirement while preserving your capital.  Additionally, secured lending provides you with the peace of mind that your capital is secured against tangible assets of land or property.

In the five years since FOLK2FOLK began nearly £250m has been lent via its platform without a single penny lost*.  If you would like to find out more about FOLK2FOLK’s secured lending and how you can supplement your monthly income with our 6.5% p.a. interest rate while helping rural businesses and supporting your local economy, call us on 0300 0535532 or visit www.folk2folk.com.

*Since FOLK2FOLK began in 2013, no Lenders have lost any money however this refers to the past and past performance is not a reliable indicator of future results.

Important: As with all investments, your capital is at risk. Peer-to-Peer lending is not covered by the Financial Services Compensation Scheme (FSCS).

Have you considered transferring your ISA?

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Britain’s ISA system has undergone some major changes over the past few years. As well as a number of new types of ISA (individual savings account) being introduced in a bid to encourage tax-free saving and investing, the rules around moving money between different kinds of ISA have also been relaxed to some extent.

For consumers, what this means is that there is now far greater scope for them to improve the returns they get even on cash they’ve been holding in ISAs for several years.

In the 2018-19 financial year which began on April 6, the annual limit for new deposits into an ISA is £20,000 in total – by way of contrast, it is worth noting that the limit at the start of this decade was just £7,200*.

And there is now a much wider range of ISA options available: as well as cash deposit accounts or stocks-and-shares ISAs, people can put money into Lifetime ISAs, aimed at helping the under-40s save to buy a home or to fund their retirement, as well as Innovative Finance ISAs, which cover new forms of saving such as peer-to-peer lending, to name just two.

But while there is a £20,000-a-year limit on new money saved into an ISA, the system’s transfer rules mean that anyone can move old ISA cash into any other form of ISA with no annual restrictions. This is crucial in allowing consumers to seek out the most generous rates of return on their money.

The main restriction on transfers concerns your destination ISA, and whether the provider allows transfers in – not all of them do. But since the start of 2018, FOLK2FOLK’s Innovative Finance ISA has been among the ISAs on offer that does indeed allow customers to switch their existing ISA holdings.

People who have managed to put aside their money diligently into ISAs since the system was introduced almost two decades ago, could in many cases have amassed ISA funds worth tens if not hundreds of thousands of pounds, depending on the yields or growth rates they have managed to achieve.

But with returns on cash currently below inflation, chances are that a lot of people will be looking for a more profitable home for their capital, this is where peer-to-peer (P2P) lending can provide an alternative solution for taking on additional risk.

FOLK2FOLK’s P2P platform offers Lenders 6.5%pa on their money by matching them to rural businesses across the UK in secured loans from 6 months to 5 years. As with any investment, capital is at risk.

The overall risk faced by Lenders is reduced by FOLK2FOLK’s policy of ensuring every loan is secured against UK property at a maximum 60% loan to value (LTV) on a forced sale basis and by allowing Lenders to diversify across multiple loans (minimum of £20,000 per loan). And by holding the loan in the Innovative Finance ISA wrapper, the interest earned is free of income tax.

Finally, it is worth remembering that to make a successful ISA transfer, it is best to speak to the company you want to transfer to first, so they can assist with the relevant admin of the transfer. If you simply withdraw cash from an existing ISA rather than formally transferring it, that money will lose its ISA wrapper status and be subject to the £20,000 annual limit when you try to reinvest.

For more information about ISA transfers with FOLK2FOLK please visit https://www.folk2folk.com/lend/ifisa/

 

* https://www.moneysavingexpert.com/savings/ISA-guide-savings-without-tax

 

Lender Captain Derek

FOLK2FOLK

From the high seas, to bricks and mortar investment

Captain Derek Andrew’s work on cruise ships took him all over the world. Away from home for months on end, he made a work/life balance decision 17 years ago in order to see his daughter grow up. He gave up life on the ocean waves to became a River Pilot.

Derek has been a Lender for over six years, through other peer-to-peer lending platforms, but recently decided to move his investments from them to lend to local and rural businesses through FOLK2FOLK.

“I wanted to diversity my investment portfolio and read positive comments online about FOLK2FOLK, so I got in touch.

“I liked the heritage of the company and the old-fashioned human element but most of all I like the fact that it only offers secured loans. The bottom line is that I have to be able to sleep at night.

“You can be specific about where you want to invest, geographically and by sector (for example farming in the South West), He added. “I’m less particular geographically but the company’s ethics give me the feel-good factor of knowing that I’m helping a local economy somewhere in the country.”

Derek’s first investment, of £250,000, is in a project in the South West to allow a property developer to buy land to move forward with a product. A second investment of £35,000 is in luxury lodges, currently a thriving emerging market sector.

“Everything was taken care of within FOLK2FOLK and handled by solicitors. In both cases I haven’t had any contact with the borrower, although we are aware of each other. In each case I can expect to earn 6.5% on my investment, one over five years and the other which is flexible.”

Derek hasn’t taken every opportunity offered to him by FOLK2FOLK. “I have control over what or where I invest, which differs from some other peer-to-peer platforms where you have no input into where your money is lent.

“I also don’t have to be too involved on a daily basis but the returns are steady – not so high that they come with huge risks, and not so low that the returns will dwindle away.”

“You don’t have the compensation that banks offer if things go wrong. So only invest sums you are comfortable with. Be sensible and diligent, and be realistic,” Derek adds.

It’s important to understand that peer-to-peer lending is not covered by the FSCS and your capital is at risk. It is not a savings product.

To learn more about becoming a Lender like Derek, please visit www.folk2folk.com/investing