Rebuilding Society is a relatively well-established platform which has funded £17 million in business loans since launching in 2013. It is regarded as an innovative platform, being the first to launch a ‘buyback guarantee’ feature to the UK peer-to-peer lending market. Unlike many UK P2P platforms, investors can read details about the lending opportunity and state the interest rate they are prepared to lend at.
Please read my comprehensive Rebuilding Society review below, and if you find it useful, I would be grateful if you would sign-up via my referral link. By doing so, you will benefit from £25 cashback if you invest £1,000 or more.
Rebuilding Society - Small Business Loans
Name: Rebuilding Society
Description: The Rebuilding Society cashback promotion offers £25 cashback if you invest £1,000 on the platform.
- Time in business
- Hands-off investing
Summary of key features
The key features of the Rebuilding Society investment account are listed below:
|Estimated annual returns||Generally over 10%, before consideration of potential losses. Platform cites an average 7.4% net return.|
|Loan security||Varies, see each individual loan page.|
|Provision fund||No, but ability to purchase loans with ‘buyback guarantee’.|
|Innovative Finance ISA||✓|
|Cashback offer||£25 if you invest £1,000 (2.5%)|
How does Rebuilding Society work?
Whilst an auto-investment tool (BidPal) does exist, the majority of lending via the Rebuilding Society platform is manual investments. Rebuilding Society’s credit team assesses each loan and applies a risk rating from A+ to C, with C being the riskiest.
Each risk band has an upper interest rate limit:
- A+ – 11% and under
- A – 14% and under
- B – 17% and under
- C – 20% and under
Lending opportunities are placed on the ‘primary market’ and have an initial deadline period set. Until the lending deadline is hit, investors can place ‘bids’ even if the loan has been fully filled. Borrowers get the the lowest interest rates offered.
Once a loan has been issued, investors can opt to resell their loans on the ‘secondary market’. Secondary market sales are subject to investor demand and sellers can set their selling price at a premium or discount of up to 15%.
If you invest via the secondary market, you can opt to invest in normal with or without a buyback guarantee.
What is the ‘buyback guarantee’?
A common feature across European P2P lending platforms (e.g. Mintos), a ‘buyback guarantee’ is effectively an offer to repurchase loans in the event of default. In the case of Rebuilding Society, this comes into effect if a loan falls into arrears by more than 60 days.
How does the buyback guarantee work in practice?
Rebuilding Society enables you to invest in loans via the primary market (i.e. new lending opportunities) or the secondary market (i.e. loans being resold by other lenders).
The ‘buyback guarantee’ is only available via the secondary market. This is because the ‘guarantee’ is offered by individuals who originally invested in the loan and are now choosing to resell.
In the below screenshot, you can see how the buyback guarantee is denoted on the secondary market.
By clicking on the ‘profile’ button for the first loan listed, you are taken to a page including lots of detail on that particular loan (i.e. company name, business information, interest rate, security details, risk indicators, finances). When on this page, click the ‘loan offers’ tab to see details of the micro loans for sale on the secondary market.
The Rebuilding Society secondary market enables lenders to sell their loans at up to a 15% discount/premium. Loans with a buy-back guarantee are always listed at a premium.
When you buy a loan part with a buy-back guarantee, you are buying from another lender on the platform. The other lender will be selling their loan part at a premium (e.g. if they loaned £10 on the platform, the loan may be for sale at £11.50, representing a 15.0% premium).
Is a buy-back guarantee, really a guarantee?
No, the word ‘guarantee’ is a little bit of a misnomer as cash should always be considered at risk whenever investing in P2P lending. However, the way in which Rebuilding Society has structured the buy-back guarantee does reduce lending risks.
For instance, only investors who have been lending with Rebuilding Society for six months or more can opt to become a guarantor and once approved, they can only offer up to 40.0% of their loans for buyback guarantee.
By setting this 40.0% limit, guarantors will have a larger portfolio which Rebuilding Society expects could be utilised to fulfil the guarantor liability if required. When loans fall into arrears, limitations are placed on the guarantors account in an attempt to ensure funds will be available for the buyback.
Does Rebuilding Society offer any automatic lending facility?
Yes, the ‘BidPal’ and ‘BuyPal’ tools are automated lending tools, enabling you to lend your funds on the Primary and Secondary markets, respectively.
When setting up BidPal, you can:
- Limit your max bid per loan to a proportion of your total investment.
- Choose which risk bands you wish to invest in (A+, A, B,C).
- Exclude certain industry sectors.
When setting up BuyPal, you can:
- Exclude loans with arrears.
- Set a minimum effective interest rate %.
- Set a maximum microloan amount (£).
- Select whether to purchase only buyback guarantee loans.
What rates/fees do Rebuilding Society charge?
One of the great things about Rebuilding Society is how upfront and clear it is in relation to the fees they charge. On each detailed loan page, the platform sets out its own fee % (4.0%), the broker fee % (varies), and legal fee % (varies). In addition to fees generated from the primary market, Rebuilding Society takes a 0.5% fee from the sale of micro-loans via the secondary margin.
How good is the website reporting?
The ‘simple dashboard’ reporting is quite clear, showing you a list of loans, split between those which are performing and those which are non-performing. In addition, you can see loan updates, overview of bids made, a repayment calculator and a list of your micro-loans for sale.
You can also click to view an advanced overview. This shows the quantum of available funds, bids, capital employed, interest earnings, average gross and net return %, transaction gains/losses, estimated losses, promotional credits and fees paid on micro-loan sales.
You can also generate tax statements by hovering over the ‘Dashboard’ tab and clicking ‘Tax statement’.
Does Rebuilding Society share lending statistics?
Yes, detailed statistics are shared on the statistics page. This clearly shows the overview of loan performance split by risk grade, year of origination and region. A full download of loan book performance data is also available.
Interestingly, the platform reveals:
“Of 1273 lenders who have participated on a loan, 175 (13.7%) have a net return less than 0% pa, i.e. they have taken a loss, whereas 1098 (86.3%) have a net return of 0% pa or above. Of the 1098 positive lenders, 825 (64.8%) have received 5%* or above, and 475 (37.3%) have 10%* or above, with a lucky 234 (18.4%) who have earned over 15% pa*.”
What are the key risks of investing in Rebuilding Society?
The key risk is borrower default. The loans offered on the platform are typically higher risk. Some level of bad debt is expected which reinforces the importance of diversifying your investments so that you are not overexposed. If the economy were to enter a downturn, this risk would increase and levels of borrower default would likely rise.
The next key risk consideration is potential platform failure. As with all P2P lending platforms, Rebuilding Society is required to have a wind-down plan in place to ensure that the underlying loans continue to be administered. This plan involves loans being serviced by a third party service provider.
How frequently is interest paid?
Principal and interest payments are paid monthly.
Can you invest in an IFISA or SIPP?
Yes, Rebuilding Society offers both an IFISA account and a SIPP account.
How easy is the sign-up process?
I found the sign-up process to be very quick and easy. If you are interested, you can set up an account with no commitment to investing funds (click here).
How can I pay money into my Rebuilding Society account?
To fund your Rebuilding Society account, you must transfer the funds via bank transfer. There is currently no option to deposit via debit card.
What is the current Rebuilding Society cashback promotion?
If you sign-up via my referral link, you will benefit from £25 cashback when you invest £1,000 or more in the platform. This offer is currently only available via referral.