Huddle Capital Review – An Investors Experience (Updated March 2021)

Summary of Huddle Capital Review: By P2P standards, Huddle Capital are still very new. Their track record is scant relative to other platforms with regards to the volume of business completed. They seem to have more focus and concentrate on the loans to small businesses (instead of branching out into property loans). Interest rates reflect that these are some of the more riskier loans to invest in.

The performance of the loan book has been good so far, although the relative small size means that it is easy to skew either way. However, deal flow is slow to the point where nothing happens for months. Additionally there appears to be a relationship with other P2P lenders (Ablrate and Rebuildingsociety), so may suffer if an adverse event occured to either of these.

As of March 2021, the website has been closed to new investors, although existing investors may still withdraw. Supposedly the platform will be coming back with new opportunities but with so few happening in the past year it could be the case that it does not come back.

Here is how Huddle Capital compares to my other investments specialising in P2P business loans:

PlatformLinkTarget Rate (%)My XIRR (%)StatusLive Rating
ReviewUp to 15%11.36%OPEN4/5
ReviewUp to 7%5.68%OPEN2.5/5
ReviewUp to 5.3%5.04%CLOSED3/5
http://www.huddlecapital.comReviewUp to 16%8.0%OPEN3/5

What is Huddle Capital?

Originally setup in 2014, Huddle are an interesting mix of other players in the scene. It has used ‘Authorised Representative’ status of Rebuildingsociety as a justification tor gaining FCA approval. This allows an entry to the market in a much quicker time than otherwise would have taken. Potentially this may be a source of trouble in future if the FCA decide that this shortcut is detrimental to quality of authorised firms.

Instead of developing its own back-end, Huddle have simply become a white-label of the Ablrate site. As such most of it is almost identical bar the content. This obviously saves cash, but also reveals a slightly cosy arrangement. Huddle are a subsidiary of Access Commercial Finance, who in turn are a long-standing client of Ablrate. Should there be a fall-out in the future it might be difficult to get another platform at short notice as the practice of generic sites is quite rare in the industry.

Huddle Capital specialise in small business loans. Predominantly to the type of small business that anyone investing in Funding Circle would be familiar with: not household names. At present, they have not deviated from the plan and as such there remains a relatively small amount of loans on the platform.

Here is a summary of Huddle Capital’s features:

Advertised ReturnsUp to 16%
Loan TypesBusiness
Loan SecurityGuarantees/Debenture
Minimum Investment£5
Cash DragSome
Secondary Market?Yes
Provision Fund?No
Auto Invest?Yes
Available in ISA?No
FCA Authorised?Yes
Active on forum?No
Sign-up offers?None

Are Huddle Capital profitable?

Huddle Capital was incorporated in 2016. The last accounts covered the period of 12 months to 31 December 2019. These accounts are only micro-accounts from which limited information can be gleaned. The accounts also precede the pandemic. One thing we can surmise with some degree of certainty is that Huddle are a very small player in this field.

Operating Model

This will be familiar to anyone who has lent on Ablrate before. The look is almost identical, although it should be said that the typical size of loan is smaller. Loans become available for funding and on most the ‘Instant Returns’ feature is enabled. This ensures that investors earn interest from the time they place their bid, and not on loan draw-down. There have been cases where loans have not drawn down but investors still earned interest.

Huddle Capital also inherits one of the benefits of Ablrate in that documentation of loans is strong. Whilst not as comprehensive as Ablrates (in my own opinion), this area has become weak industry-wide. The glut of funds going through Funding Circle and the change of stance to disallow users the choice of picking loans has meant that loans are pushed out without almost any information at all. This isn’t the case here. This is just as well because many of the businesses are small.

Many (not all) the loans are amortising which is realistic enough for business loans. This offers large advantages over interest only loans as a portion of capital is paid back every month, thus reducing your exposure every month.

The secondary market on Huddle works in exactly the same way as Ablrate. Bids and offers can be entered onto the system at appropriate premiums or discounts making it very flexible.

How are funds protected?

As with most sites in this field, there is no FSCS protection for funds. There is no provision fund here either for loans, which is compensated by much higher rates than other platforms (up to 16%). Security on loans varies, ranging from unsecured business loans, to loans secured by motor vehicles. I would expect that should there be a problem with a loan, there chance of loss is quite high.

Huddle Capital Review: Pros

There are a few things to like about Huddle. Some of them are:

Higher Interest Rates: All loans on Huddle pay a good rate of interest – ahead of what may be realised at Funding Circle for an equivalent loan.
Good due diligence: The investment case for each loan is clearly spelt out.
Small Minimum Investment: The minimum investment starts at just £5.
Amortising Loans: Some loans repay interest and capital every month which helps to reduce exposure.
Flexible Secondary Market: Huddle inherits the Ablrate secondary market which is one of the best in the business.

Huddle Capital Review: Cons

There are some downsides as well, most of them being built in to the business as it is:

Sector Concentration: Huddle only lend to small businesses, and a downturn may put pressure on the current loanbook to perform.
Low Diversification: Deal flow is quite slow, and there are a limited amount of deals available on the secondary market, meaning it is hard for new investors to diversify.
Weaker security: There are a fair amount of second charge and unsecured loans on the platform, as well as company debentures and personal guarantees which tend to be fairly worthless in an insolvency situation.
Related parties: It should be the case that Huddle are independent, but those with heavy investments in Rebuildingsociety/Ablrate may feel investing here is not a diversification. Furthermore it appears that Rebuildingsociety’s permissions are used in order to be functional, so the platform’s future is (at the moment) dependent on them.

My Huddle Capital Investing Strategy

As a current investor in the Ablrate platform, navigating around the Huddle site is fairly easy and familiar as many components are the same. Because of its much smaller size, investing here is made quite a lot easier as loans do not appear often. My advice:

Read Documentation: We must not be seduced by the high interest rates: they are high for a reason because they carry a lot of risk. Thankfully documentation is supplied with every loan, including a proposal. This should be read carefully.
Keep it small: I am mindful of the connections between platforms, and this only represents a smaller investment for me. At present I am more inclined to trust Ablrate.
Wait for further updates: Not a lot has gone on platform-wise; it may be more telling to see how they operate when a loan does go wrong.

CONCLUSION: Huddle appear to have a clean track record so far, and they offer business loans at very high rates of return. It is important to bear in mind the risks involved. Potentially the return to investors can be very good if the due diligence performed by the platform turns out to be good. Another latent source of risk is the connection with other platforms which may present some hidden danger.

Disclaimer: This Huddle Capital 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. There are no guarantees that you will receive the returns advertised (or even a return at all).

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