We also help social impact investors who are looking to diversify their portfolio with property but do not wish to manage or run the project themselves or do not have sufficient capital to properly diversify across different sectors or projects.
You can choose which properties you wish to lend your capital against and we give you the chance to construct your own unique portfolio based on your lending preferences. Learn more about how you can start investing in our Investors section.
- We speak to every borrower who wishes to come onto the platform. We select only those borrowers who we believe have a viable exit plan and have a project which benefits the community that needs funding.
- We create an investor info pack for every project, including information from the borrower and external sources and internal analysis of the borrower and opportunity.
- We select only those deals which we believe represent a good financial opportunity with the right return, for the right risk, for the most social impact.
- Before we list the deals on our platform, each project is subject to a range of external and internal due diligence including
- An external valuation of the property
- An external project report (if necessary)
- Legal documentation including title searches, company due diligence and appropriate security charges
- An objective review of risks of the project - including risks that the borrower may default and the risk that the project may not be financially viable. We then apply this to our interest rate matrix to establish what an appropriate interest rate would be for the project
- We apply a discount to these rates depending on how impactful the project is. Broadly, the greater the impact (on society and the environment), the greater the discount
- We then list those deals on our website for investors to review and choose the deals they would like to fund.
- Investors commit funds to a deal and transfer money to Crowdestates via bank transfer.
- New Crowdestates investors go through our onboarding process which includes verifying their identity and setting up an account.
- Existing lenders can commit the funds immediately.
- If the deal is not fully funded the money will be returned.
- If the deal is fully funded, or is an 'immediate draw down loan' Crowdestates will finalise all third party due diligence before the money is transferred to the borrower.
- Once the due diligence is completed satisfactorily, the money is released to the borrower.
- If the due diligence is not satisfactory, the lenders will have the option to pull out of the deal.
- The borrower provides regular investment updates for lenders to monitor the progress of the project.
- If the borrower encounters financial difficulties and defaults on the loan, Crowdestates will immediately inform the lenders and may take any of the following steps:
- Liquidate the assets if possible and viable, or
- step-in to take over the development and appoint a professional team to complete the project if possible and viable, and
- Seek to recoup any losses from the project guarantor.
- At the end of the process any recovered funds will be duly returned to the investors
- Investors earn their return as outlined in the investor pack which is paid into the investor account.
- Investors can reinvest their funds in other deals or choose to withdraw the money from the account.
Crowdestates does not currently charge investors any loan setup, due-diligence or annual account operation fees. If you wish to exit your loan prior to maturity you will charged an exit fee.
Crowdestates are remunerated through fees chargeable to borrowers. These fees will be 2% of the total loan raised from the platform once raised, and a further 1% once the loan is paid back.
Please read more about the risks of lending money here.
- Interest rolled up - Both interest and principal will be returned when the loan ends.
- Interest only - Interest will be paid regularly over the period of the loan and the principal is returned once the loan ends.
- Repayment basis - Interest and a part of the principal will be returned regularly over the period of the loan until the loan ends.
The repayments will be reflected in your account balance on the dashboard a few days after the money is paid once the payment is processed. In case you wish to withdraw this money you can do so by setting up a transfer through your account. We will transfer the money from the client account to your external bank account once we receive the instructions which can usually take up to 3 working days.
The returns from peer-to-peer agreements are taxable income and the amount the lender is required to declare to HMRC is the full amount of gross interest arising in the tax year. Any tax payable will be on the full interest income arising from the loan without any deductions for lenders fee.
Further HMRC guidance is available here
Any losses made on loans to businesses might be available to offset if the loan cannot be fully recovered.
See further guidance available here.
You can see the gross interest you earn from a loan on the listings page and your account dashboard. Any realised interest during the quarter can be seen on your investor statement available to download on the dashboard itself. Crowdestates do not charge any lenders a fee for servicing the loan.
Please be aware that HMRC could consider you to be be carrying on a trade of money lending if you are lending to a significant number of borrowers as your main course of business. Further HMRC guidance is available here.
We use credit bureau data to assess the company doing the borrowing, and its directors, or if the company is a ‘special purpose vehicle’ (SPV), the parent or directors of the SPV. Those developers with the very highest creditworthiness are assigned an ‘A’ grading and the lowest would be assigned an ‘E’ grading. Please refer to the table below:
|Risk Level||Risk Grade|
|Very high risk||E|
|Very Low Risk||A|
In Collateral risk – we also assess a number of factors which are all project related. This covers a wider sense of how likely the project team will be able to achieve the target profit on the project. It takes into account multiple macroeconomic factors such as local market trends that may have a bearing on scenarios. As per ‘creditworthiness’, a grading between ‘A’ and ‘E’ is given to collateral risk. Please refer to the table below:
|Risk Level||Risk Grade|
|Very high risk||E|
|Very low risk||A|
We combine these risk assessments along with the charge on the security (either 1st charge or 2nd charge) to come up with an interest rate which compensates you as an investor for the risk you are taking. For more about the potential risks of an investment please click here
There is an initial ‘commitment fee’ of £250 to list it on the platform which can be waived in certain circumstances. You will then be charged a further fee of 2% of the loan raised once we have successfully raised money for it on the platform. You will be charged a further 1% once the loan is paid back. You will be given all of the information before committing to a listing. Our fees are not payable if the loan does not complete. Any broker introduction, legal, external valuation or survey fees as per your unique case may be payable in addition to the platform fee.
When you apply to us to raise a loan, we will check the records about you and your financial associates from Credit reference agencies (CRAs) and and Fraud prevention agencies (FPAs). When CRAs receive a quotation search from us they will place a soft search footprint on your credit file that may be seen by other lenders. They supply to us both public (including the electoral register) and shared credit and fraud prevention information.
We will make checks such as assessing your application for credit and verifying director identities to prevent and detect crime and money laundering. We may also make periodic searches at CRAs and FPAs to manage your account with us.
If you are making a joint application or tell us that you have a financial associate, we will link your records together so you must ensure that you have their agreement to disclose information about them. CRAs also link your records together and these links will remain on your and their files until such time as you or your partner successfully files for a disassociation with the CRAs to break that link.
Information on applications will be sent to CRAs and will be recorded by them. Where you borrow from us, we will give details of your accounts and how you manage these accounts to CRAs. If you borrow and do not repay in full and on time, CRAs will record the outstanding debt. This information may be supplied to other organisations by CRAs and FPAs to perform similar checks and to trace your whereabouts and recover debts that you owe. Records remain on file for 6 years after they are closed, whether settled by you or defaulted.
If you give us false or inaccurate information and we suspect or identify fraud we will record this and may also pass this information to FPAs and other organisations involved in crime and fraud prevention. If you have borrowed from us and do not make payments that you owe us, we will trace your whereabouts and recover debts. We and other organisations may access and use from other countries the information recorded by fraud prevention agencies.
Your data may also be used for other purposes for which you give your specific permission or, in very limited circumstances, when required by law or where permitted under the terms of the Data Protection Act 1998.
You can contact Equifax if you need more information or check the data they hold about you. They will charge you a small statutory fee.
Further details are provided on Equifax website www.equifax.co.uk.