Here is how Kuflink compares to my other investments:
|Platform||Link||Target Rate (%)||My XIRR (%)||Status||Live Rating|
|Review||Up to 16%||-7.9% (estimate)||CLOSED||1.5/5|
|Review||Up to 7.2%||7.23%||OPEN||4/5|
|Review||Up to 11%||5.40%||OPEN||4/5|
|Review||Up to 13%||1.04% (estimate)||CLOSED||2.5/5|
|Review||Up to 8%||1.89%||OPEN||3.5/5|
|Review||Up to 8%||TBC||OPEN||3/5|
What is Kuflink?
Kuflink are a P2P lender focused on property as the asset security of choice. It was stablished slightly later than many of the other platforms (in 2016). But this late entry to the market allowed it to see where things were going wrong for others and to correct that in their own offering. One of the ways this was evident was in the choice of loans – these were mainly smaller residential loans. By also taking a 25% ‘first loss’ stake in each loan, this gave investors a margin of safety on top of the maximum LTV of 70%. However, this was soon scrapped and replaced by a 5% stake (with Kuflink bizarrely trying to spin this as a benefit to investors). I suspect this was presumably in order to finance more deals.
With rates starting at 6%, Kuflink pay about the lowest rates of return a P2P investor can get from these types of loans. In mitigation, these types of loans in theory should be safer. The ambitious developments requiring tranches of funding are quite rare here (although do exist), and the average loan is for a much shorter period.
Here is a table showing Kuflink’s features:
|Advertised Returns||to 7.2%|
|Loan Types||Bridging/Development, Assets|
|Loan Security||Property, Debenture, Assets|
|Minimum Investment||Earn £1 interest|
|Available in ISA?||Yes|
|Active on forum?||No|
|Sign-up offers?||Up to £250|
Are Kuflink profitable?
Kuflink Ltd have been incorporated since 2013. Their last filed accounts were filed on February 24, 2021 and cover the year to 30 June 2019. The company made a loss of £456k in this year which is a slight improvement on the year before (£581k).
Helpfully there is a managerial commentary which details the increase in loan applications from the previous reporting period. However, there is also caution for the future as the directors have chosen to highlight that there is a material uncertainty to operate as a going concern.
Some of the core reasons are straightforward. The company is loss-making; past years losses have been covered by proceeds from issues of shares. The last accounts showed that the business was cashflow positive, but this was by means of working capital (debtors increased, creditors increased). With c.£150k of cash on hand at the last report date it is almost certain that more money will be required either by debt or equity.
There is a rather more ominous item as the auditors have qualifed part of their report with respect to VAT calculations. Whether this is accurate or not is not known but not resolving the issues to the satisfaction of the auditor is not a good sign.
The route to self-sustainability for all these companies is straight-forward: they need increased volumes. This seems to have been written off this year, due to the pandemic.
Kuflink Sign Up Offer
The current signing up offer is potentially large but requires some caution. Firstly, the basic rate of cashback is up to 4% and is tiered as follows:
£1,000 – £5,000 – 2.5% cashback
£5,000.01 – £25,000 – 3% cashback
£25,000.01 – £50,000 – 3.5% cashback
£50,000.01 – £99,9999 – 3.75% cashback
£100,000+ – 4% cashback
Cashback is capped at £4,000.
There are some conditions applied to this. You do not need to invest the sum required straightaway. Instead cumulative investments in the first 14 days are counted. Secondly, the investment must be into deals with a duration for at least 12 months. Quite often deals on Kuflink are not for this period (or are repaid early). This is still fine, although you will have to re-invest funds from shorter/terminated loans back on the platform within 1 month.
Investments which are subsequently sold on the secondary market before the 12 months is up also do not qualify for the cashback.
Cashback is paid after 12 months, so there can be a long wait for it.
Kuflink Operating Model
Kuflink is fairly straightforward. Money can be added to your account via bank transfer. You will get email notification of new deals that come on to the website. This is where you can read further information about the proposition, the security and invest your chosen amount of funds. There are both self-select, auto-invest and ISA options. The auto invest model is more of a black-box (you do not select your investments) and pays a fixed amount of interest at a rate slightly lower than the self-select model.
The loans tend to be for mostly residential properties and are secured by first legal charges. On rare occasions I have seen loans which are second charge and development loans on the platform. The time period for loans tends to be shorter, as bridging finance (as the name implies) simply fills a gap between two lenders. Loan interest is paid monthly and the loans are non-amortising, meaning that the principal of the loan is only repaid on maturity.
How are funds protected?
There is no provision fund to compensate lenders on losses. Instead, Kuflink take a first-loss 5% stake in every loan. Combined with a max LTV of 75%, this would need a 30% loss before lenders saw any loss to their capital in the event of a default (assuming no fees and first charge held). Currently there are no previous cases to show how a loan default might play out. It could be argued that we are crossing into bear market territory as far as property is concerned. Many of the loans I have seen are for residential properties at the lower end of the market. Valuation for these should be far more accurate than for a larger one that needs redevelopment.
Kuflink Review: Pros
There are a few nice things about Kuflink:
Good deal flow: New deals are fairly regular across the platform, with at least one per week. If you are patient, some good diversification can be had fairly quickly, assuming that the rate of deals keeps up.
Good track record: Investors have not suffered a single loss as yet. Some of the reasons for this are Kuflink lending alongside (for the older loans where the stake was 20%) but that many of the projects are smaller with valuations that can easily be verified.
Clean website and communications: The website is set out well, with all the relevant information easy to find. Loans are graded into risk categories and these are meaningful.
Good sign up incentive: A variety of incentives exist to sign up to new accounts at various levels of investment.
Kuflink Review: Cons
There are also some bad things:
No secondary market: There is no mechanism to sell out loans should you require the money. As such your investment has to stay the course.
Degraded co-invest offer: The prior first-loss investment of 20% was a meaningful buffer against bad loans. This has been reduced to 5% and of course increases risks to the investor without an increase of interest.
Lower interest rates: The interest rates on offer are lower than many other platforms, although this is mostly a reflection of the type of loan
No debit card payment: Funds need to be added via bank transfer which takes time to clear into your account. If you’re only depositing because of a new loan, the demand is such that the loan may have got filled by the time your transfer clears.
ISA only available with Auto-invest: You cannot have an ISA with self-select loans and are forced into the auto product, which also pays slightly less interest and that comes yearly instead of monthly.
My Kuflink Investing Strategy
This is not too complicated. I would favour the self-select product here, because this would allow selection of what (in my opinion) are the better loans. Under an auto-invest you will be exposed to some of the not so good ones, and gain a lower level of interest to boot. Some things I would do:
Modest investment size: There are regular new loans, so there is no need to hit every loan heavily. A small investment per loan can easily give you a larger portfolio over the course of a year.
Keep some money in the account: Because deposits take time to clear it may be prudent to keep a small amount of cash. Currently loans can be filled very quickly, especially the smaller ones.
Read the loans carefully: It is not enough to take Kuflink’s risk ratings at face value. Read through the reports and decide for yourself whether the valuation stacks up, cross-referencing with Rightmove to see if the property can realistically be disposed of for the required price.
Avoid second charge loans: These have started to appear on the platform, and given the uplift in interest is quite modest (typically 1%) I would not invest in these given that rate.
Avoid subsequent tranches: There are some development loans on the site. I would regard these as more risky than standard bridging loans, but investing in multiple tranches increases exposure.
CONCLUSION OF KUFLINK REVIEW
Kuflink is a relatively new company with a good track record – there have been no investor losses as yet. But it should be cautioned that many losses occur further into a platforms life when the loans reach maturity. On average Kuflink’s loans look a lot more safer than others, but pay a decreased amount of interest, almost as low as 6%. That being said, more of a track record should be built up before making a better assessment. Currently they have a generous sign up offer, especially those with more to invest but caution needs to be taken into the potential longevity of the compnay.
Disclaimer: This Kuflink review represents my own opinions and should not be substituted for investment advice. Please research before you invest with any firm. Typically P2P investments are not covered by the Financial Services Compensation Scheme (FSCS) in the way bank deposits are, and there are no guarantees that you will receive the returns advertised (or even a return at all).