KEY LENDING RISKS
Initiative Ireland does not provide financial advice to our members. At Initiative Ireland we provide our members with access to a marketplace, which offers opportunities for lending to our private members.
Although loans are carefully screen by our Internal Credit Committee, any decision to lend will purely be at the discretion of the individual members.
Although loans are managed by Initiative Ireland and secured with a 1st Legal Charge, when you lend your capital is at risk. Initiative Ireland does not guarantee repayment of your principle or any interest due to you, in the event of a loan default and/or drop in the value of the underlying security.
As such, we encourage members to seek independent financial advice before making any commitments / lending money, if in any doubt with regard to the risks involved or the suitability of a loan to their financial needs.
As a Lending Member, you agree to be bound by the prevailing Terms of Business and you indemnify Initiative Ireland against any claims relating to credit losses you may suffer, as a result of your lending via the platform.
What are the key risks?
1) Loan Default / Credit Risk
While Initiative Ireland will always take a first charge over the property comprising of the development, the underlying value of the security may fluctuate. In the event of a loan default and a material reduction in the value of the security, a client’s capital repayment may be at risk. In the event of a loss arising from a loan which we have assessed, Initiative Ireland does not accept any liability where the loan was approved in good faith however we do commit to taking all reasonable steps to minimizing any potential loss, in line with our terms of business. You should not lend more money through the platform than you can afford to lose without altering your standard of living. Lending through Initiative Ireland is not covered by the Deposit Guarantee Scheme or any other state compensation scheme.
2) Income Risk
Initiative Ireland operates a ‘Tiered Loan’ model, which means we may segment the Borrower’s overall loan requirement into different Debt Tiers based on Loan to Cost (LTC) of the loan, up to a maximum of 80% of the LTC for each Development. Tier 1 debt is comprised of debt with an LTC of up to 40%, which accrues a lower rate of interest. Tier 2 debt is comprised of debt with an LTC of 41% to 80%, which accrues a higher rate of interest. When repayment or partial repayment occurs, Tier 1 principal is paid in full before any Tier 2 principal. Similarly Tier 1 interest is repaid before any Tier 2 interest. As such Tier 2 loans have a higher risk of principal and interest repayment failure, which is why Tier 2 debt accrues a higher rate of interest relative to Tier 1 Debt. In some cases loans will be offered without being split into Tiers. This is known as Uni-Debt. In the event of a partial or full loss, arising from the loan, interest repayments are not guaranteed. Any interest recovered from the Net Proceeds of the Security shall be repaid in line with the Terms of Business and our Tiered Loan model as outlined above.
3) Liquidity Risk & Early Exit Restrictions
In the event that works on an approved property development project are delayed or accelerate ahead of expectation, the final term of the loan may vary. Clients should be aware of potential term extensions, when assessing the liquidity of their loans. If a Private Member wishes to sell all or some of their debt early, you will be required to waive the interest accrued to date on that debt. Furthermore, limitations shall apply including prior approval from Initiative Ireland prior to any such sale. A lender's ability to resell any debt early will also be subject to demand from other lenders. As such, there can be times when members will be unable to sell their debt early.
4) Currency Risk / International Investors
A person wishing to lend from outside of the EU / Eurozone may require prior approval from Initiative Ireland. It is the responsibility of the investor to confirm they are not subject to any local laws or restrictions on their use of this website. In such circumstances, the value of your investment may be affected by currency fluctuations and changes in the rates of exchange may have an adverse affect on the value of your investment, or the income generated.
If you are an overseas lender (meaning a person who is not resident in the Republic of Ireland), you will be required to warrant to us that, by entering into any Investment on the Website, neither you, we, or any of our affiliates will be in breach of any law or regulation in your home country. Neither we nor any of our affiliates will have any liability should your warranty be incorrect for whatever reason and any related risks are entirely your own.