Introducing a new product: Forward Flow

12.03.2020

mintosblog

We’re happy to announce a new investment product on Mintos – Forward Flow.

Forward Flow is a new and unique product in the crowdlending market. A Forward Flow represents a commitment to invest in a set of pre-agreed underlying loans, at a predetermined rate for a set period of time.

For the duration of the Forward Flow agreement, investors receive weekly interest payments based on the performance of the underlying loans. Principal is paid back when the Forward Flow matures.

A Forward Flow is presented as a single loan with the loan type Forward Flow on Mintos. Investors can invest in it just like in any other loan. For each Forward Flow, investors can see all the underlying loans in the loan details and monitor their performance.

We’re convinced Forward Flow will bring more value to investors on Mintos.

– Principal invested in a Forward Flow will keep working for the duration of the agreement, hence investors can reduce their reinvestment risk compared to buying individual loans.

– Investors can lock in interest rates for a longer time, and hence reduce their exposure to changes in the interest rates on Mintos.

– On average, investors can expect to earn higher interest rates compared to similar individual loans on the market, as they commit their money for a longer period.

 

Check back soon for an update on the first lending company offering Forward Flow.

Forward Flow in Detail

 

What’s in a Forward Flow?

Each Forward Flow contains many smaller underlying loans. These loans usually have a shorter maturity, and hence will be replaced over the period of the Forward Flow agreement. All loans in a Forward Flow have the same interest rate, amortization, and loan type, and similar term and amount (in a pre-agreed range). Investors can see the details in the loan view at any time, and follow all loans on an individual level.

The underlying loans will be replaced by the lending company when they mature, are repaid, or go more than 60 days late. The underlying loans need to meet the same quality and performance standards as other loans on Mintos, and the lending company will keep its usual skin in the game.

How can investors invest in a Forward Flow?

Investors can invest in a Forward Flow like in other loans on Mintos: on the Primary and Secondary Market, using Auto Invest, and also through Invest & Access. Forward Flow will also be added to the loan type filter. Investors can only invest in the underlying loans through the Forward Flow, they can’t invest in or sell individual underlying loans.

How does a Forward Flow work?

To obtain exposure to a Forward Flow, investors will be able to invest in a loan issued by Mintos Finance to the respective lending company. It is secured by a pledge over all or part of the claim receivables of the lending company to its borrowers.

Mintos Finance is a Mintos group company. A detailed description of the structure is available in the Mintos Finance loan agreement and assignment agreement.

How do the underlying loans work?

The underlying loans generate the cash flow for investors – based on their performance, investors receive weekly interest payments. When an underlying loan matures, gets repaid, or becomes more than 60 days late, it will be replaced with a new loan. If the lending company can’t replace the underlying loan, it will repay the entire Forward Flow, and the money will be returned to investors.

How do repayments work for a Forward Flow?

Investors receive weekly interest payments based on the performance of the underlying loans. Principal will stay invested in underlying loans under the Forward Flow agreement until the Forward Flow matures.

Example: An investor has invested under a Forward Flow agreement that contains 3 underlying loans. For the last week, loan 1 has received €10 principal and €2 interest. Loan 2 has received €5 principal and €1 interest. Loan 3 has not received interest or principal. For this week, the investor will be credited €3 in interest, and €15 principal will remain in the Forward Flow.

Does Forward Flow pay interest on late loans?

Investors receive the agreed interest for any late days. If a loan goes more than 60 days late and is replaced with a new one, investors will keep accumulated interest.

What happens if an underlying loan defaults?

The lending company will replace it with a new loan that meets the criteria. If the lending company is unable to do so, it will repay the entire Forward Flow.

Does Forward Flow come with a buyback guarantee?

Forward Flow works in a slightly different way. If an underlying loan becomes more than 60 days late, the lending company is obliged to replace it with a new one, and the investment remains in the Forward Flow in accordance with the Forward Flow agreement. If the lending company is unable to do so, it must repay the entire Forward Flow.

Is the interest rate guaranteed?

No. The effective interest rate is subject to regular repayments on the underlying loans. However, overall the effective interest rate will be very close to the pre-agreed interest rate.

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