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Fixed Rate

Since the launch of Beehive in 2014, one of our primary goals has been to provide investors with attractive, stable returns, which in turn supports local SME’s with access to fast, low cost finance.

As part of our ongoing strategy to make improvements that help benefit both investors and businesses, Beehive will be introducing some updates to provide you with a greater experience using the Beehive platform.

From Sunday 5 August 2018, we will be adjusting our auction model from the reverse auction method to fixed rates for Business Finance requests. Below we have outlined what changes will be made and how it will impact you:

 

Our Auction Model
Since Beehive launched in 2014, our auction model has worked as a reverse auction, which has enabled investors to bid on the businesses with a 14-day auction. Whilst this model worked well when Beehive started, it has recently resulted in varying returns for investors for similarly-risked requests due to factors not directly related to the risk weighting of the request.  As such, we have decided to fix the interest/profit rates by risk band and tenure so that investors can be certain of the return they will receive.

 

How do fixed rate requests work?
Fixed rate Business Finance requests are where Beehive sets the rate based on the risk and tenure of the request and all investors achieve the same rate of return. We already operate fixed rates for Invoice Finance, therefore some of you will already be familiar with how it works.

 

The rate is based according to the risk of the request, rather than the availability of investor funds. Therefore, the rate is set before a business is listed and it is published on the marketplace for all investors to view. Rates will be set according to the risk band and length of the Business Finance request.

By setting the rate before a request is listed on the marketplace, there is no need for the traditional auction. Requests will fund and be accepted by businesses quicker, which means your money will work better for you.

 

The Benefits of Fixed Rate:

  • Simple and easy to understand: if you like a business you can bid knowing the exact rate you will achieve.
  • Fixed risk-reward: you know that the return you bid at will match our assessment of risk.
  • Bids are final: once a bid has been placed, another investor cannot knock you out.
  • Your money works more for you: once a request is full, the funds will be dispersed, which means the requests will close earlier and your money will get better returns.
  • Attract more businesses: certainty of cost means more businesses will apply to Beehive, creating more lending opportunities for you.

 

How will this change affect me?
We believe that this move is in the best interests for the Beehive marketplace, which for most investors will deliver a better service and higher returns.

 

Move to Net Rate of Return
At the same time as moving to fixed rate, we will also be moving to net rates for investors.  Currently, we show, and you choose, the gross rate that businesses pay.  For Business Finance, we then deduct our 2% fee to give you the net rate, and for Invoice Finance, we deduct 20% of the gross rate.  Based upon feedback, we feel that it is more appropriate and transparent to show you the net rate so that you understand fully the forecast return that you will achieve.

It’s important to note that the net return will be before any bad debts and defaults.

 

Selling Parts of Your Investments on the Secondary Market
We will also be introducing the concept of “units” from 5 August 2018.  When you make a bid, you will receive the bid in AED100 units.  For example, if you make a bid of AED1,000, you will receive ten AED100 units.

We have introduced this to enable investors to make larger bids, safe in the knowledge that they can easily add them to the secondary market in lower value portions to increase the breadth of potential investors who may buy the parts.

Please note, that this will only be available for requests issued post 5 August 2018 and will not be available for requests written pre-5 August 2018.

We recognize that these are some significant changes to how Beehive operates. We believe, however, that making these important changes to improve the process for both investors and businesses will help Beehive further support the local SME ecosystem and improve returns to you.

Should you have any questions, please do not hesitate to get in touch. You can email us at team@beehive.ae or call us directly on +971 4 550 6700.  Alternatively, you can view our FAQ’s online. We look forward to answering any queries you may have.

 

Q & A

Why are we making this change now?
Beehive is focused on providing a high-quality marketplace that works effectively for all our customers. Therefore, implementing this change will help us to continue to scale the business in a stable way to deliver a platform that is better, easier and more efficient for our customer base.  It will also more accurately match the risk-reward for requests, so investors can make direct comparisons.

 

How will fixed rate request work?
Requests will fill on a first-come, first-served basis. Once you bid there is no way other investors can knock your bid out with a lower rate, which means you do not have to bid multiple times on a request. Subject to the business accepting the final request once full, your bid will always be successful.

 

When will fixed rates launch on the marketplace?
Fixed rates will launch on the platform from Sunday 5 August 2018.

 

What will the new fixed rates be?
Rates will be set depending on the risk band and the term of the loans. By participating, investors on the same loan will earn the same return as each other.

The new net fixed rates are set out below.  Note that these are net of our 2% fee

 

6-12 months 18 and 24 months 36 months
A+
A
B
C
C-

 

How are the interest rates set?
The rates have been based on several inputs, including legacy rates from the Beehive platform, macroeconomic trends, expected loss rates, volatility of returns and comparisons with the wider market.

Will fixed rates be subject to change?
We will review the rates on a regular basis and you will be notified on any changes.

 

Will fixed rates mean more businesses use Beehive?
Fixed rates for all request will ensure we can help a wider variety of businesses and assist owners understand fully the expected cost. Furthermore, the change will ensure we can issue the financing faster, and this is a key issue for business owners.

 

Will I need to adjust my Diversification+ settings?
If you use Diversification+, then you may wish to update your settings when fixed rates launch on 5 August 2018. For those who have Diversification+ enabled, we will automatically map your existing choices to the new matrix.

 

What impact will there be on existing Business Finance requests that written before 5 August 2018?
There will be no changes made to legacy loans and all terms will remain the same. From a presentational point, we will show your net returns on your dashboard, but you will still be able to see the gross and net rates on your statements.