Understanding Loan Performance
Investing in Wellesley involves matching lenders with borrowers whose loans are secured on property. It is important to understand that as part of lending to small businesses and individuals, a percentage will be unable to repay their loan. This means that lenders capital is at risk.
At Wellesley, we only participate in asset backed lending, which means that the total value of the loan is secured against an asset. If a borrower does not repay a loan, we can sell the asset to seek to recover any shortfall.
There are many stages a loan must go through before it is in default, and even at this stage it does not necessarily mean that Wellesley or its lenders will experience a loss, as a loan can be recovered from a default.
What is a performing loan?
A loan that is performing to its loan conditions, and that is not in or near default. Interest and capital payments by the borrower are on time.
What is a loan performing in arrears?
A loan enters into arrears when a payment should have been made, but hasn’t. This does not mean a loan is in default, as it is possible for the borrower to make a late payment and therefore recover the loan before it enters into default.
What are defaults?
The biggest risk to investors is if one of their borrowers do not repay a loan. When a borrower takes out a loan, there are conditions within the loan agreement that the borrower will have to stick to. Not meeting these conditions is known as default.
What does a non-performing loan with recovery forecast mean?
This is a loan that has entered into default or is soon to be in default, but is expected to be recovered either in part or whole.
What are loans that are non-performing with loss forecast?
Losses, otherwise known as impairments, are when a loan is non performing and in default. There is an expectation of loss or there has already been an impairment, and this means that the borrower will be unable to pay back all of the capital and interest owed.
Not all defaults turn into losses, in fact, most don’t. However, in some cases if the problem with the loan cannot be cured, then a borrower will enter into default.
Investment through Wellesley involves lending to individuals or companies and therefore your capital is at risk and interest payments are not guaranteed if the borrower defaults. It is important to remember that historic loan default rates are not necessarily indicative of future default rates.
Wellesley Secured Finance Plc (the Issuer) was established as a special purpose vehicle for the sole purpose of issuing asset backed securities. Wellesley Secured Finance Plc is not part of Wellesley Group Limited. Wellesley Secured Finance Plcis not authorised or regulated by the Financial Conduct Authority. Wellesley Secured Finance Plc are not covered by the Financial Services Compensation Scheme.
The Wellesley Mini-Bonds are issued by Wellesley Finance Plc, a company incorporated in England and Wales with its registered office at 6th Floor, St Albans House, 57/59 Haymarket, London SW1Y 4QX. The information contained in this webpage which relates to Wellesley Mini-Bonds has been approved as a financial promotion for UK publication by BDO LLP, 55 Baker Street, London W1U 7EU (FRN: 229378) which is authorised by the Financial Conduct Authority to conduct investment business.
The Wellesley Property Bond is issued by Wellesley Secured Finance Plc (10565816) whose registered office is at 35 Great St. Helen’s, London EC3A 6AP. The information contained in this webpage which relates to the Wellesley Secured Bond financial promotion has been approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by The Share Centre Limited. The Share Centre Limited is authorised and regulated by the Financial Conduct Authority and is entered in the register under 146768.
Wellesley is the singular name for the following collective of companies, Wellesley Group Limited (09811856), Wellesley & Co Limited (07981279) and Wellesley Finance Plc (08331511). Wellesley & Co Limited is authorised and regulated by the Financial Conduct Authority (FCA) (Registration Number 655503). Wellesley & Co Limited is not covered by the Financial Services Compensation Scheme. Wellesley Finance Plc is not authorised or regulated by the Financial Conduct Authority. Wellesley Finance Plc and Wellesley Secured Finance Plc are not covered by the Financial Services Compensation Scheme.
Wellesley & Co Limited and Wellesley Finance Plc are registered in England and Wales and their registered office is at St Albans House, 57/59 Haymarket, London SW1Y 4QX. The trading address for both Wellesley & Co Limited and Wellesley Finance Plc is St Albans House, 57/59 Haymarket, London, SW1Y 4QX. The registered address for Wellesley Secured Finance Plc is at 35 Great St. Helen’s, London EC3A 6AP.