PC Co-Funding Proposition

Provides strong and fully secured returns on capital

About us

Prospect Capital has built an excellent reputation for ethical, responsible lending in the specialist finance and bridging market.

Our ongoing success from strong deal origination coupled with high quality underwriting, has created the opportunity for new co-funders to join our existing co-funders who enjoy excellent returns through participating in short term loans that are fully secured against UK or Jersey property assets.

Through our straightforward and transparent approach, we seek to forge long term relationships with all our co-funders who include high net worth individuals, private clients, family offices and institutions.

Our co-funding proposition

Prospect Capital provides attractive and secured returns for its co-funding partners, significantly derisking their position by supporting each loan with its own capital.

Prospect Capital’s co-funding programme provides an opportunity to participate in loans with your money fully secured through a first charge on a property asset. Our co-funders collectively provide a pre-agreed portion of a specific loan, and we provide the balance.

In all circumstances our loan will subordinate to yours, therefore, we must lose our entire capital before any of your loan is exposed.

How it works

Prospect Capital will originate, underwrite, and manage all loans thereby providing you with a secure income without any of the work involved.

Any loan we are considering will be subjected to an initial screening process. If it passes this initial screening, we will issue the borrower with an agreement in principle. It is important to note that this is subject to underwriting and approval by our credit committee.

At this stage we will also send all our co-funders an overview of the loan in the form of a co-funding proposal (CFP). This provides details of the loan together with a clear statement of the interest rate payable and the co-funders' combined maximum LTV, which is usually 55% or less. Any co-funder who wishes to participate in the loan simply informs us of the amount they wish to provide, the minimum amount is usually £100,000.

Once a loan has been through our underwriting process and, subject to it being approved by the Prospect Capital credit committee, a lawyer from our panel will be instructed to commence with the loan and security legal documentation.

Once the legal work has been completed, the lawyers will report back to both Prospect Capital and each co-funder individually. Both Prospect Capital and the co-funder send their portion of the loan directly to the lawyers shortly before completion is due.

In certain circumstances we may fully fund a loan ourselves initially then offer it to our co-funders post completion.

Committed facility

We can also offer a committed facility, whereby a co-funder guarantees to make a certain amount of funding available for Prospect Capital to drawdown at its sole discretion, subject to meeting certain pre-agreed criteria such as maximum LTV, interest rate payable, maximum amount per loan etc.

In return for this committed facility being provided, Prospect Capital agree to pay a minimum annual return on the entire funding made available whether it is used or not. For further information on this, please contact us.

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All loans are secured by way of a first legal charge over one or more property assets. The responsibility for perfecting the security rests with an independent team of external lawyers who are appointed to act jointly for Prospect Capital and our co-funders. The legal charge is held by our security trustee company, more details of which are provided below.

Prospect Capital continues to monitor and manage the loan throughout its term. This includes regular audits by a specialist team within Prospect Capital. The results of these are issued to our co-funders periodically and include a loan dashboard report.

In the rare event of a loan default and therefore termination of a facility, Prospect Capital will enforce the security and sell the asset, if that is what is required to ensure payment of the loan. In the unlikely event of a shortfall post recovery, Prospect Capital will carry all losses until its portion of the loan has been eroded in its entirety. Only in this event will our co-funder risk any erosion of their capital. These combined factors result in an extremely low risk environment for the co-funder.

Security trustee structure overview

Using a dedicated security trustee company to hold the first legal charge over a property, where more than one lender is participating in a loan, is both good practice and a well proven arrangement that has many benefits for all concerned. More information on the benefits of this arrangement are outlined below, but first how does it work?

Prospect Capital Security Trustees Ltd (PCST), is a UK-registered company that exists purely to hold the first legal charge on behalf of all participants in a loan. The company never has, and never will trade, as it exists purely to fulfil the role of security trustee on behalf of all funders, including Prospect Capital.

On completion of each loan a first legal charge is registered in the name of PCST (instead of each individual funder) which is held by it on behalf of all funders.

Prior to completion a deed of priority is signed by Prospect Capital which clearly states that Prospect Capital is subordinating to the other funders who all sit pari passu with each other. This is the case if the loan involves one or more co-funders. All co-funders therefore effectively share a joint first charge with Prospect Capital sitting behind them.

Benefits provided by a Security Trustee Arrangement

There is only one legal charge to be registered at the land registry which is both swift and simple. This reduces the paperwork and workload for all co-funding partners whilst affording them the same level of security and protection.

There is far less paperwork to co-ordinate and sign between all funders prior to completion, which makes the legal process more efficient and expedient. This prevents undue delays and stress among both the funders and borrower which can also be highly problematical when the loan is to fund a purchase and therefore involves a contractual commitment with a fixed deadline.

If a co-funder is unavailable due to illness, holidays or simply other commitments, matters can be dealt with on their behalf, with of course their prior written approval.

If a co-funder wishes to have their funding participation, in full or part, returned prior to the loan being repaid we can simply switch their position with another funder, subject to prior agreement. This can be effected swiftly without the need to involve the work and expense of changes to the legal documentation and registered legal charges. It also removes the uncertainty of the borrower’s cooperation which may or may not be forthcoming.

A security trustee arrangement also has the advantage of directing the borrower to deal with one entity when managing their relationship under the security documents and saves other funders the corresponding time and inconvenience.

The security trustee, through the trust structure, will owe certain additional obligations or duties to its beneficiaries, being the individual funders. Since the security trustee sits between the borrower and the funders, the security trustee provides an additional layer of protection for the funders that they would not get if they held the security directly.

The security trustee structure provides the co-funder with complete anonymity.

Whilst the above makes reference to UK lending, the same procedure applies to loans granted in Jersey.

To date no Prospect Capital co-funder has ever lost any capital or interest on their loan.

Loan Examples

Prospect Capital funded the completion and exit of an existing residential period house development, in Wimbledon. This loan was to replace a conventional development facility and provide additional funds to complete the development which included the final finishing touches to the site such as landscaping and to provide time for the properties to sell following completion of the development. ⭣

Asset value £7,600,000

Advance £4,830,724

Security 1st charge, share charge, debenture, personal guarantee

Loan provided by PCL £2,830,724

Loan provided by co–funder £2,000,000

Prospect Capital was pleased to fund the purchase of a substantial site in Kent. The main residence is a nine-bedroom residential property, recently refurbished to a high standard. The site also comprises a six-bedroom house, two four-bedroom cottages, two three-bedroom cottages, ancillary buildings and equestrian buildings including 39 boxes, fenced paddocks and woodland, set within approximately 108 acres.

On completion of the purchase, the couple intended to split the title for all individual properties. Once the titles were split the properties were marketed for rent. The clients retained the main principal residence and once Prospect Capital were redeemed, they were able to move their family into the property.

⭣ ⭣

Asset value £5,000,000

Advance £2,017,095

Security

1st charge, share charge, debenture, personal guarantee

Loan provided by PCL £547,095

Loan provided by co–funder £1,470,000

Co–funder LTV

29%

9% Term

Co–funder interest rate

12 months

Prospect Capital assisted with the purchase of an apartment just off Kensington High Street, conveniently located for the West End and central London. Prospect Capital also worked with the overseas client to refinance his UK portfolio.

charge, share charge, debenture, personal guarantee Loan provided by PCL

Prospect Capital were pleased to assist with the acquisition of a residential property on the south side of Grosvenor Street in Mayfair. The clients, an overseas family office with an existing UK property portfolio, had a strong track record of developing assets in this sector. Subject to planning, Prospect Capital agreed to provide a development facility to further enhance the property.

charge, share charge, debenture, personal guarantee

Prospect Capital assisted with the acquisition of a beautiful property in St Brelade, Jersey with one of the best 180-degree sea views on the island. The client worked with the local planning department and architects to obtain consent for a new home on the site of 8,000 sq. ft. The plot could comfortably accommodate a larger home, therefore additional planning was sought to increase the size to 12,000 sq. ft, thereby increasing the GDV to £12m.