A case has come to our attention for potential assistance on a loan provided to a farmer by Asset Finance Partners (AFP Assets). The structure and redemption costs look very much like those handed out by UK Acorn Finance, a lender that closed down after examination by both the UK Treasury Select Committee, and the Serious Fraud Office.
Under the AFP Assets loan, which is “unregulated” there has been little, or no appraisal that we have seen of ability to service the loan, the loan is short in tenor compared to size, and there is a very large balloon payment at the end. Quite how the lender expected the borrower to pay off the loan at maturity is unknown, unless that is (and we are not suggesting it to be necessarily the case), the lender expects to help itself to the value of the security held, the first charge.
A further sting in the loan agreement, is that a borrower has to pay the total interest due under the loan, regardless of whether the loan has been prepaid. In other words, if the loan was for 10 years, and 10 year’s interest equals £300,000 and the borrower wants to pay off the loan after 3 years, having paid £90,000, they still have to pay the remaining £210,000 regardless. The clause containing this requirement is not clear, and it is somewhat “hidden” in the small print.
Potential borrower should think long and hard before entering unregulated loan agreements on this type, and with this borrower, without taking advice beforehand.
