Crowdstacker is a UK-based P2P company founded in 2014 and headquartered in London. Crowdstacker is under the supervision of Financial Conduct Authority (FCA). Launched in 2015, the company's platform enables individual investors to lend money to "unlisted but medium-sized and financially stable businesses". The project financing scale ranges from one million to 50 million pounds. By July 2017, the platform had launched three projects with a financing amount of nearly 26 million pounds.
Focus on Financing for Large and Medium-sized Enterprises
Crowdstacker is unique in that it targets larger, more stable and potentially more viable businesses, while other platforms tend to target lending to individuals and small businesses. The company hopes to build the platform into a model for a similar stock exchange in the future. The companies listed online are outstanding enterprises with financing needs that are reviewed by the platform.
In the investment process offered by Crowdstacker, the platform shows the companies that want to raise funds. These are called "Stacks" and they disclose specific information about the company and their financing projects to investors. Investors have the choice of investing on their own, receiving quarterly interest after investing and receiving the principal at the end of the loan term.
Currently, there are more than 3,000 investors on the platform, with an average investment amount of about 7,000 pounds. The average financing amount of each project is 100-200 million pounds per month. Projects can choose to continue financing and settle the account monthly until achieving the financing amount.
The latest project on the platform is the ongoing BurningNight Loans. The BurningNight Group was established in 2010 with a focus on bar operations and launched loans on the Crowdstacker platform in September 2016 with the hope of offering two new multi-purpose bars in Nottingham and Birmingham, as well as improving the existing bars in Leeds. At that time, BurningNight successfully raised £3.5 million and implemented its plan. At present, BurningNight has set up venues in more cities and raised their funding target to £7 million. They plan to raise £3.5 million with a fixed annual interest rate of 7% and paid quarterly within three years. The loan will be secured by all assets of BurningNight Ltd. and its subsidiaries.
BurningNight plans to launch a new round of financing and invest in new sites in Leeds, Harrogate, Cardiff and two other cities. Relying on the bar's potential extra income and the capital value in six months after the initial investment, they expect the cash flow to exceed the loan amount.
The first guarantee of this loan is guaranteed by BurningNight's assets which can be valued by the profitability of leasing and free bars at present and in the future; the second guarantee is a cross guarantee provided by 6 subsidiaries, which favors the bond trustees; the third guarantee is that two major subsidiaries (Cornertrack Limited and BurningNight Limited) giving first-level debt warrants to bond trustees respectively. If a default occurs, the trustee can enforce the claim and control the company's bank account to ensure that the cash flow is used to repay borrowers.
How Crowdstacker Reviews Large and Medium-sized Enterprises
As mentioned, Crowdstacker mainly aims at profitable large and medium-sized enterprises in UK that operate for more than three years. Crowdstacker conducts its own risk management and this mainly includes a three-part process:
1) Auto-screening. The company automatically filters out customers with high credit rates through its own credit model with reference to the company reports and data of Credit Safe, a third-party credit bureau;
2) Review on the financial status. Staff with audit experience review the companies' financial history and the current financial status of the company;
3) On-site due diligence. The company will communicate with the lenders' management for further review.
The entire credit review process lasts for about 1-2 months with relatively low success rate of about 8.4%—only 26 in 300 million pounds sought passes the credit review.
For each project, the platform requires guarantee according to the risk assessment. The Loan to Value Ratio (LTV) is generally less than 70%.
Profit Model of Crowdstacker
The platform charges about 20,000 pounds of setup fees at the early stage of the project to pay for costs in due diligence and legal expenses, and this will be refunded to the borrower if the project is not approved. Then, according to the borrower's financing amount, the platform charges a fee of up to 3.5% of the successful financing amount and a 0.5% management fee (for loan terms of three years) on a monthly basis. The percentage of successful financing fee will decrease if the loan term is shorter than three years and increase if the loan term is longer than three years. The platform is expected to break even in 6 months.
