Q: Who Can Become a Lender?
Application to become a Lender is open to all but admittance is strictly vetted. If you are an individual you must be 18 years of age or over and reside in the UK. If you are a partnership, limited liability partnership or a limited company we will expect that you are correctly constituted and regulated. We will request ID, undertake anti-money laundering and anti-fraud checks which will comprise of standard identity checks and credit reference checks.
Part of the registration process is that all our Lenders confirm they are able to pledge a minimum amount of £1,000 per loan request.
Q: What is the Minimum and Maximum Amount I Can Lend on Each Loan Request?
The minimum amount is £1,000 per request. The maximum amount is the loan application amount. What most Lenders will do is spread their available funds across a number of loans as this will ensure that your portfolio is well diversified and not overly concentrated in a small number of loans.
Q: How Do You Ensure the Borrower Is Who They Say They Are?
We carry out all reasonable steps via a series of industry-standard checks to satisfy ourselves as to the identity of the borrower.
Q: What is the Process for Assessing an Application?
We have a four-step assessment process:
Step One: Upon the Application being received the information provided is reviewed and a ‘first pass’ decision is taken.
Step Two: We will call the Borrower to confirm the nature of the request and ask supplementary questions.
Step Three: If an Application passes Steps One and Two, they will be called in for a virtual/face-to-face interview. This element of our process differs from other peer-to-peer lenders; we feel it is important that we have the opportunity to meet the applicant or its representatives/officers in order to get a better sense of the business and the people behind it.
The interview is also an opportunity for the borrower to ask questions of us and our process.
If, following the interview and the application passing other checks, we are as satisfied that the request has merit, the proposal moves to the next step.
Step Four: The application may well be sent for an independent external review. This step is undertaken by a group of specialist credit analysts with an extensive background in credit assessment. They will review the application from a number of perspectives and provide a recommendation to either support or decline the request.
It is important to understand that whilst we endeavour to cover all aspects of an applicant’s background and business it is ultimately the lenders decision to support the request or turn it aside.
Q: Could I lose money?
Yes – your capital is at risk. You should assume that a small proportion of loans will run into difficulties. We will do all we can to prevent this from happening. In the rare situation that a borrower fails to repay, Stratosphere works to recover whatever is possible from the borrower, and distribute it to the lenders involved in that loan.
If a borrower actually went out of business or bankrupt, we would work with the administrator where applicable (the person who has the legal responsibility to run a company in trouble) to reclaim as much as possible. In some cases, we may choose to appoint a debt collector.
Q: What Information Do We Get About the Borrower, Their Business and the Loan Request?
In order for you to make an informed decision on whether to lend to you or not we will provide you with the following information:
- The borrower’s name, business name, or the name they trade under
- The legal status of the business i.e. sole trader, partnership, limited liability partnership or limited company
- Description of the business
- Details of existing borrowing
- A summary of financial performance to include Annual Accounts, Management Accounts and projections
- The purpose of the loan
- The amount requested
- Repayment term
- Monthly repayment amount
- Credit Rating Score Band
- Type of security being offered
- The Credit Assessment Team’s recommendation
- Any other information deemed to be helpful in assisting to reach a decision
Q: Am I Investing Into a Fund?
No, your money is not being invested into a collective pool of money. Each loan you decide to support is on a standalone basis.
Q: How Do You Arrive at the Risk Grade?
Each loan proposal and business has a different level of risk; some will be low risk and others of a higher risk. The differing levels of risk are reflected in the interest rate and so each loan request is assigned a risk band and this is done via a Credit Rating Score Band (CRSB).
The CRSBs are:
A – Low Risk
B – Medium Risk
C – Average Risk
D – Higher Risk
E – Highest Risk
In order to avoid applicants attempting to present information in such a way as to improve the CRSB we do not disclose how they are calculated. However, key factors include:
- Age of the business
- Director’s/owner’s experience
- Financial performance from Annual Accounts and Management Information
- The business/directors/owner’s external credit rating and past credit history
- Type of security (if any) offered and the valuation
- The industry sector
Whilst we can put a series of parameters in place to assess the level of risk ultimately it’s down to the lender as to whether they agree or disagree with the CRSB. They need to arrive at their own view as to the perceived level of risk and whether their are comfortable at that level before deciding to support the request.
Q: Where Do I Send My Share of a Loan Request and How Is It Held?
We act as the facilitator of the loan. Lender funds are held in a designated Client Account (under the services and supervision of MangoPay https://www.mangopay.com/en_UK/) pending disbursement to the borrower (after all documentation and security is in place).
Q: How Am I Paid Back?
We will act as the collection agent for receipt of the payment. When funds are received the capital and interest portion of the loan are credited to an internal account held on your behalf.
Q: What Return Will I Get on the Money I Loan?
Unlike some peer-to-peer lending platforms we do not run a bidding process; we determine a Credit Rating Score Band for each application and each band has a fixed interest rate. In this way you immediately know what your return will be.
Q: Is Tax Deducted From the Interest We Are Paid?
No, your interest is paid gross via the repayments you receive. It is up to you to account for the interest you receive via the normal tax reporting procedures. If you are unsure about your tax position we recommend that you seek independent professional advice.
Q: Do You Charge Lenders Any Fees?
There are no fees for lenders to register or to participate in a loan request.
Q: How Is the Security Taken?
Where possible, borrowings will be secured. The security document will be drawn up by a Solicitor and will be held by a Security Trustee company, Stratosphere Inc. Trustee Ltd., for the benefit of the lenders on a pro-rata basis of the loan amount.
Q: If a Borrower Fails to Pay Back or the Business Fails How Am I Protected?
Firstly, it is important to understand that utilising your money via lending attracts a risk. Whilst we have a credit assessment process you have to always be prepared for a potential element of loss due to events which may occur after the initial approval is granted.
In circumstances where a borrower does default a debt collection firm will be appointed on your behalf by the Trust company who will work to recover outstanding monies together with the appropriate legal action.
In cases where security is held the security trustee is able to exercise your rights under the terms of the security documents. Remember that the value of any security can go down as well as up.
Q: Can I access my money on loan in an emergency?
You cannot access your money that is on loan. There may be an opportunity to sell your ‘loan share‘ provided there is a new lender available to match your existing loans but this is not guaranteed and should not be relied upon.
Q: Can I cancel my contract?
It may be possible to assign your loan(s) to another Lender (as the sole discretion of Stratosphere). A fee will be payable by the Lender to cover the administrative cost of this exercise.
Q: Do I have to be a UK resident to lend?
All lenders must reside in the UK and have a UK bank account. Applications to become a lender from non-UK residents are far more complex and costly to process because of Anti Money Laundering regulations. Because of this, we currently do not offer this to non-UK residents.
Q: Do you grade your borrowers according to risk?
Yes. Each deal is risk assessed by our own team based on stringent criteria and is clearly rated for lenders to see.
Q: Does Bankruptcy allow an individual to “get away” with not paying his (or her) debts?
We do not view bankruptcy as an “easy option” for debtors. Your loan is normally fully secured as a first charge over property (or other asset).
Whilst bankruptcy does allow individuals to get back on their feet, it also means that for a period of time the bankrupt’s conduct is heavily scrutinised by an independent insolvency practitioner, and various restrictions are placed on the individual during the period of bankruptcy, including in relation to the application of his income and expenditure.
A bankrupt individual is listed on a public register and may not be involved in the formation or management of a limited company during the period of bankruptcy.
The Trustee in Bankruptcy may sell assets of the bankrupt including his home, and may pursue friends or family of the bankrupt who the bankrupt has transferred assets to. A bankrupt will also have a poor credit rating and may find it difficult to obtain credit for up to 7 years after the end of bankruptcy (being the period after which credit records are cleared).
If the Trustee in Bankruptcy discovers conduct of the bankrupt that has acted irresponsibly, recklessly or dishonestly, or that the bankrupt has infringed any of the restrictions during the bankruptcy, then the Trustee in Bankruptcy may apply to court for a bankruptcy restrictions order. Further, if the bankrupt has deceived or misled the Trustee in Bankruptcy, or breaches the terms of any bankruptcy restrictions order, the bankrupt may receive a custodial sentence for contempt of court or otherwise under the Perjury Act 1911.
Q: How do I receive monthly interest and loan repayments on my loan parts?
Stratosphere collects all monthly interest and repayments from borrowers which are then transferred into your designated e-wallet linked to your bank account.