One of the UK’s more nascent peer-to-peer outfits is closing its doors to retail money.
Peer-to-peer mortgage platform Fruitful appears to be going through a major pivot. A quick visit to help.lovefruitful.com provides some colour as to the current state of the company. “Have I lost any of my money?” is the first of five pinned posts on the platform's “help” page. The answer to that question is as follows:
“No. As of writing (23rd October, 2015), we’re still working to offload the remaining mortgage balances on loan. As a bonus, you’ll continue to earn interest on these loans each month until they are settled.”
The help page also provides clarity as to whether or not the company is going bust. The answer is that Fruitful is not going bust, but rather it is “changing direction”. The company will continue to serve as a marketplace for borrowing and lending, but the contributors to the latter half of that equation will be changing shape. Retail investors will no longer be able to access the deals that are originated by the platform. Instead, Fruitful will be partnering with a small number of “long term” investors that are looking for access to low risk, low yield opportunities – the kind that the platform believes are not attractive to retail investors.
The remaining three questions are seemingly designed to address the concerns of existing retail investors. What we can glean is that some retail investor money is still out on loan, and that the secondary market has been closed off – meaning that loan parts may not be sold in the short term. The loan exchange was shut down because the platform is no longer accepting new investments. But investors will reportedly continue to receive interest until all outstanding loans have been settled, at which point all principal and interest owed should have been returned. Fruitful has indicated that it is working to have the outstanding loans fully remortgaged and repaid within the next 12 months. In other words, it would appear that Fruitful is trying to settle up all existing loans prior to their maturation – given that the platform’s borrowers are able to access loans of up to £1m for terms of between 5 and 15 years.
Can existing lenders leave their money in the platform, and continue to earn 6% per annum? They cannot. The days of retail investors putting money to work on the Fruitful platform are finished. The platform has indicated that any new deposits will be returned to the originating bank account.
Fruitful launched in late November 2014, with a view to simplifying the world of mortgages. The platform is fully regulated by the FCA. Fruitful offers a range of products, including commercial mortgages, buy-to-let mortgages and property renovation and development loans. From the outset the company marketed itself as a highly secure peer-to-peer investment proposition, featuring minimum LTVs of 65%, automatic diversification of investor money and a contingency mechanism named the “Canopy Fund”. Upon launch, Fruitful also promised that investors would be able to withdraw funds early, at no additional cost, and that such withdrawals would take on average 1 week to execute.
The Fruitful pivot is of dual relevance to the alternative finance space, in that the company raised £140k of seed stage equity via the Crowdcube platform in 2013, in exchange for an 8% slice of the business. The full amount was secured in just 2 days, and was followed by a private investment of £380k, according to Crowdfundinsider.
The platform had also forged an alliance with sendacow.org, which meant that for every £1,000 invested, Fruitful would purchase one dairy goat for an African family. So, should African families be worried?
Fruitful’s redirection is a far cry from the shady goings-on that have recently been uncovered at Swedish peer-to-peer lending platform Trustbuddy. All signs point to the Fruitful platform surviving, only in a new guise. Fruitful will no longer serve as a retail investment instrument, but the platform appears to be working hard to ensure that all loose ends (pertaining to retail money) are tied off. We'll be keeping a close eye on how the situation unfolds.
Luke Barnes, CEO of Fruitful, offered us comment:
"Over the past 10 months, Fruitful have been in a soft-launch to a select number of lenders and borrowers.
The purpose of the soft-launch was to test the product, see what customers wanted and gather data to see how we can grow a sustainable business. Once our ambitions collided with reality, we found that people lending their money wanted high-yielding (above market interest rates) and short term investments (easy access).
From our data, we could see that the frequency of customers investing their money and withdrawing would make it difficult for Fruitful to scale. And, ultimately, this type of investing wasn’t a good fit for the long-term loans people were investing in.
After thorough deliberation, we made the tough decision to stop accepting retail investments for the foreseeable future.
To that end, we’ve made a pivot. Fruitful will continue to be a marketplace for borrowing and lending — the thing that’s changing is the type of investor peers. Instead of individual retail investors, we’re partnering with a number of institutions who want long term and very low risk investments in residential mortgages.
So, although this represent a change in gears, we’re still behind our mission of democratising finance. Specifically in ways that puts money right back into the pockets of people that borrow with us — so they can do more of what they love in their life."