A Brief Background On Wellesley

I wrote this piece to give those of you new to Wellesley a little background to go with the recent sell alert from my colleague, Neil Faulkner, which you can read here.

What Wellesley does

Wellesley does development and bridging loans. It has four loans in Spain, but it is not planning to do any more foreign loans.

Size and history

Wellesley has completed over £360 million in loans since 2013, making it the sixth largest P2P lending company in the UK against reported total lending. After 4thWay’s adjustments we estimate its the fourth largest.

No lender has ever lost any money lending through Wellesley.

P2P lending products

Wellesley offers both P2P lending and non-P2P lending investments. Let me explain.

P2P lending is when we lenders are able to lend our money directly to lots of borrowers, with the P2P lending company – in this case Wellesley – being just an agent in the middle that arranges the deals for lenders and administers the loans. Some Wellesley products offer precisely that.

This direct relationship between individual lenders and multiple borrowers reduces the risks of lending. Why? Because if Wellesley or any other P2P lending company goes under, those borrowers still owe us.

If Barclays has lent to to the P2P lending company itself and wants its money back, it still can’t get its dirty paws on our outstanding loans.

Non-P2P lending products

Wellesley’s other products – its products with the word “bond” in it – mostly involve you lending to Wellesley itself. Wellesley then lends that money to property borrowers or uses the money itself to pay its own costs or grow its business.

In other words, lenders opening these Wellesley investment products have just one borrower, Wellesley, rather than many property borrowers. (As a rule, we at 4thWay do not assess non-P2P lending products, including these Wellesley bonds.)

Depending on how a P2P lending company structures products like this, it can easily expose your loans so that banks can indeed take a cut of them off of us lenders.

Diversification features

Wellesley automatically spreads lenders’ money across its entire loan book. Currently, Wellesley’s loan book is 89 loans according to the latest data I can get hold of.

Wellesley loans are secured against real estate

If a loan goes bad, Wellesley will attempt to repossess and sell the borrower’s property that was used as security, in order to recover the debt on lenders’ behalf.

Wellesley uses its own cash to cover losses

If selling the property doesn’t cover all the losses, Wellesley offers some of its own money to cover the difference – up to a point – as a last resort.

This pot of money isn’t a truly segregated reserve fund like some other P2P lending sites offer. Instead, Wellesley says it will endeavour to cover losses out of its own pocket, which means it has to have the cash to be able to do so.

Read the Wellesley sell alert.