Mini-bond firm may not survive, auditor warns

Auditors have raised a red flag over the finances of a peerto-peer firm that lends to property investors. The latest accounts of the company, Wellesley, published just before Christmas, contain a line from independent auditors BDO that will worry holders of its “mini-bonds”, first issued in 2014.

BDO said the company was “dependent on raising further capital to continue to operate for 12 months”. The warning came just a month after the City watchdog proposed tougher rules on peer-to-peer firms.

Graham Wellesley, the firm’s founder, told Telegraph Money the auditor’s comments had been made before a recent £2.5m fundraising round.

Mr Wellesley claimed the warning was not unusual among P2P firms, many of which are less than a decade old and regularly seek to raise new cash.

A subsidiary firm, Wellesley Finance, has raised around £36m by issuing mini-bonds, which are not protected by the Financial Services Compensation Scheme.

In 2014 it issued a five-year bond that offers investors 7pc a year, while the most recent five-year issue pays 5.2pc.

Neil Faulkner, founder of 4thWay, a peer-to-peer analyst, said Wellesley’s model increased risk to lenders. “A platform that borrows to lend is going to have extra risks to its stability and put greater pressure on its underwriting [lending] standards and ethics,” he said.

Wellesley lends to property investors via its peer-to-peer platform