The Insured Capital lending solution is utilised to fund Community Schemes with arrear levy debtor problems, where a portion of unit owners have not paid their levies.
BC Funding Solutions insures the lender’s capital, against non-payment at the end of the fifth year of the loan advance.
Insured Capital lending solution features:
|Minimum amount||:||R250 000.00|
|Interest rate||:||Prime plus 3.0% per annum, compounded monthly
Interest is capped at 18.0% per annum, compounded monthly, due to legislative and industry restrictions imposed on interest chargeable to levy debtors
|Interest payment||:||Interest is capitalised and repaid “as and when” the Community Scheme collects its arrear levies|
|Repayment||:||Loans are generally repaid “as and when” the Community Scheme collects its arrear levies, typically within an average of five years
Capital is however insured through Hollard Insurance Ltd, for repayment on the fifth anniversary of the loan advance
|Underlying legislation and security||:||The Sectional Titles Schemes Management Act 8 of 2011, the Sectional Titles Act 95 of 1986, and the Community Schemes Ombud Service Act 9 of 2011, including important case law|
|Liquidity||:||Loans to Community Schemes are illiquid
The secondary market for this asset class is, however, well established and sales can be facilitated by BC Funding Solutions, to willing buyers
The Insured Capital lending solution is ideal for individuals, corporate entities and Trusts who are risk averse and do not require monthly interest income but are looking to grow their wealth base through compounding of interest but also require certainty that their capital will be repaid by the fifth anniversary of the loan advance.