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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 they meet our credit criteria. The maximum Loan to Value (LTV) ratio that we permit is 60% of market value.  Our approach is fundamental to reducing risk for our Investors.

In the event of a Borrower defaulting, the property may be sold and sufficient cash should be generated to repay the Investors’ 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 Investor.

To date, no FOLK2FOLK Investors have lost any capital, though past performance is no indication of future trends. 

Case study: How we handle defaults

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 treated in the same way as the outstanding loan amount and recovery will be sought from the sale of the security property.

As a responsible finance provider, FOLK2FOLK treats both Borrowers and Investors 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 Investors 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, all costs of foreclosure were recovered and the Investors were repaid all of their initial investment plus all interest owed.

Read more about our defaults record