Linked Finance – Experiences with Irish SME loans

Today I would like to introduce Linked Finance from Ireland to you. The platform was launched during March 2013 and had celebrated its anniversary some days ago. According to the platform Linked Finance was the first and is the biggest p2p platform in Ireland.

Loan types and interest rates

All loans are equipped with a prefixed rate of interest and come with a duration of 12 to 36 months and can therefor be considered short to midterm.
Borrowers are Irish SME’s only. The interest rates range between 8.5 to 15 percent, varying from duration and credit grade (see image on the right). A grade of Y means that the borrowing company is active for less then two years. The loans have amounts from 5k to 250k Euro. The loans are set up as annuities, this means they pay fixed monthly installments which contain a capital and a interest (re)payment.

Low default rates and nice stats

Linked Finance publishes its loanbook every three months. You find it within the stats section, but you need to be logged in to have access. At the end of 2016 the default figure was only 1.14 percent (higher then Lendix, although fantastic). This figure was calculated while excluding loans which are less then 120 days old. That’s fair as these new loans would have sugercoated the default rate . Strong loan growth would have had the same effect on the default rate. With the exclusion of these loans Linked Finance creates a solid and reliable data basis.

Registration, Deposit/Withdrawal and Investor fees

Registration is a fast and easy process which doesn’t take more then 2 minutes. Additionally to the password a 6 digit code is set, which is partially mandatory with every login attempt. During registration there is no need to upload identification documents. But they need to be sent to the support before a withdrawal is possible. My advice is to send the docs short after registration, to be fully prepared.

Free deposits can be made through bank transfers and debit card payments. There is a two percent service fee for credit card payments. Four withdrawals per calendar year are free. Every additional withdrawal will cost you 10 Euro. I consider this fee effrontery, but it should be manageable to survive a year with four withdrawals only. As we are speaking about fees, there is another one I would like to direct your attention to. Linked Finance charges a 1.2 percent annual investor fee, and it will be taken automatically off every repayment. So keep in mind that a gross 10.5 interest rate will net only 9.3 percent annually (without compounding).

Conclusion

Although I don’t like the investor’s fee I like Linked Finance. The low rate of defaults and the very good supply of new loans let me stay. Further I have to admit that they are transparent about all fees and default rates.