Sourced Capital has described how it mitigated against the risks property developers faced during the pandemic.
Speaking on the Sourced Property Podcast, Derek Pratt, commercial director of the peer-to-peer lending platform, said the lender manages the development projects it lends to with “boots on the ground” oversight, while independent valuers and monitoring surveyors can pick up on any problems early on.
He said that Covid caused problems for some developers, such as impacting the availability of supplies and having workers on site. This meant that they often needed longer than they thought they would to complete a project.
Pratt said Sourced Capital works with lenders and borrowers throughout and if a development needs an extension the platform explains this to the project’s lenders and puts it to a vote.
“It is constantly monitored and managed and regularly reviewed to make sure its on track all the way through but that being said things happen, such as the coronavirus,” he said.
“Did that cause problems for some developers? Of course it did, both on cost and availability of supplies, and certain people needed longer to complete projects than they thought they would.
“We managed it by doing our job working alongside lenders and borrowers. We know what the schemes are doing and what realistically needs doing. If it’s still on target for cost but we’re out of time, we’ll go to the investors in that deal and give them a detailed update as to why and if it needs some extra duration it’s up to them.
“The lenders have the ability to vote yes or no. Before they are asked to make that decision, they are given full details as to the issues, what the borrower has done to mitigate them and why the period of the extension is helpful and why it would enable lenders to get full repayments and cashback and full return on their money.”
Pratt highlighted that Sourced Capital conducts secured lending to borrowers who undergo a rigorous due diligence process which is consistent across each loan.
He added that loan security is held by an independent trustee, which means in the unlikely event that the trading company did ever cease to exist, lenders would get their money back.
He said the infrastructure is there for the loan to run for a long duration and for the security to remain intact.
“We provide loans with first charged security over UK based bricks-and-mortar assets,” Pratt said.
“We’ve got borrowers which have been assessed and vetted and have a definitive exit plan.”