We take credit risk very seriously, which is why we only offer secured lending. We carry out credit checks on prospective business borrowers and we ensure that they meet our credit criteria. The maximum Loan to Value (LTV) ratio that we permit is 60%. This value is assessed at a forced sale price* rather than market price. Our approach is fundamental to reducing risk for our Lenders.
In the event of a Borrower defaulting, the property may be sold and sufficient cash should be generated to repay the Lender’s original investment plus any interest owed and costs. We will consider various sale methods to achieve the best possible outcome for both the Borrower and Lender.
To date, no FOLK2FOLK Lenders have lost any capital.
In early 2017, FOLK2FOLK resolved its first default case since launching in 2013.
This involved two loans to one client in excess of £200k with the business Borrower officially going into default in the summer of 2016.
Once a loan goes into a default, the discounted interest rate is replaced with the standard interest rate, resulting in an additional 2% interest being added to the discounted loan rate until the outstanding interest is repaid. The interest amount accruing during the period of default will be recovered through the sale of the property or through other means from the Borrower.
As a responsible finance provider, FOLK2FOLK treats both Borrowers and Lenders fairly. Our team looks to work closely with the Borrower to understand their financial situation and find a resolution. Unfortunately, in this instance, it was necessary to proceed with the sale of the security property. In conjunction with our advisors, the property was sold on the open market to get the best price for both the Lenders and the Borrower.
Overall, the process took seven months and resulted in a successful sale value in excess of 175% of the original loan value. As a result, the Lenders were repaid all of their initial investment plus all interest owed.
* Forced sale price: The valuation we use is not an open market valuation, but a valuation based on the assumption that contracts for sale are exchanged within a 60-day period. This type of valuation typically gives a lower value than an open market value.
Your capital is at risk and is not protected under the Financial Services Compensation Scheme. FOLK2FOLK Limited (Company Registration No. 08178576) is authorised and regulated by the Financial Conduct Authority (FRN 720867). Our registered office address is NUMBER ONE Business Centre, Western Road, Launceston, Cornwall, PL15 7FJ. VAT Registration No. 152145832.
Your property against which the loan is secured could be at risk if you don’t meet payments. FOLK2FOLK Limited (Company Registration No. 08178576) is authorised and regulated by the Financial Conduct Authority (FRN 720867). Our registered office address is NUMBER ONE Business Centre, Western Road, Launceston, Cornwall, PL15 7FJ. VAT Registration No. 152145832.