What happens if the borrower does not repay at the end of the loan term?

There may be occasions where the borrower is not able to repay the loan at the end of the term. This is not necessarily indicative that the loan will not repay in full. For example, a property developer who is refurbishing a property to sell may have underestimated the time necessary to complete the refurbishment. Vestrow will generally contact the borrower before the loan end date to discuss the situation and this should highlight any potential issues. Vestrow will communicate any issues to the investors, along with a recommended course of action and seek votes from investors on important decisions such as whether to offer the borrower a loan extension. In general the courses of action available are:

How long does it take from pledging money for a loan until the funds are required?

There are many completed loans on the platform and would expect an investor to have funds in their account with us before pledging to a loan. For loans that are not yet finalised, Vestrow asks for funds to be deposited in Vestrow’s Client Account within 3 working days of a pledge being made. If funds are not transferred by this time, then Vestrow may replace that investors participation in the loan with another investor.

Vestrow takes the due diligence process very seriously and about a third of loans that enter legals do not complete, this tends to be because the due diligence process cannot be completed to our satisfaction. We generally do the following:

1. Identity: Obtain a certified copy of a passport/driving licence of the borrower as well as a recent utility bill, plus conduct an anti-money laundering check and ensure the borrower has not changed their name by deed poll
2. Documentation: Ensure the documents have all been signed in front of a solicitor who countersigns them to witness that the borrower has signed them. We also ask for a letter signed by a solicitor to show that they have explained the documents to the borrower/guarantors, so they understand what they are signing
3. Insurance: We need to ensure that the assets are insured, and the insurers are made aware of Vestrow’s loan so that if there is an outstanding claim they contact us before paying any proceeds of a claim to a borrower, to avoid any potential fraudulent activity
4. Purpose of the loan: Vestrow seeks to ascertain the purpose of the loan and if it is for business purposes then to see a business plan and if possible, some third party documents to back up the purpose of the loan
5. Exit strategy: Vestrow ascertains that the exit strategy of the borrower appears to be viable so that investors are unlikely to be left with forcing a sale on a borrower
6. Title defects: Where the loan is on a property, Vestrow appoints a solicitors to carry out a full report on title the same checks as would be done for the purchase of a property. These include obtaining the title documents on the property from the land registry and doing a number of ‘searches.’ These searches are generally:

– a chancel liability check (to see if there are monies owing to the Church)

– a local search (for example to check about forthcoming new roads and planning issues)

– a drainage search (to check the property is connected to water and local drains/sewers)

– an environmental search (for example to ensure there is no risk of contaminated land or risk of subsidence or Radon gas which might reduce the value of the property)

As some of these searches can take some time, as an alternative, we ensure the borrower’s solicitor puts in place insurance to cover lenders against a potential loss in value of the property related to the above

1. Lender consent: Where the Vestrow loan is a second charge, the first charge lender’s consent may be required. If this is the case we ensure that their permission has been granted as otherwise it may be impossible to register the Vestrow charge at the Land Registry. We also ask for evidence of the outstanding balance on any loan that would sit in priority to Vestrow’s loan or loans that our loan is designed to repay
2. Red Flags: We follow a strict underwriting process which may lead us to have concerns about a loan, and therefore may mean Vestrow refuse to lend:

– Director’s disqualification check

– Bankruptcy check

– Internet search on the borrower and any guarantors which might reveal something such as a criminal record

– How long the solicitor has acted for the borrower

– How many partners and employees are in the solicitor’s firm acting for the borrower and have they received any reprimands from the Solicitor’s Regulatory Authority or any other regulatory body