“We’ve seen this model before. A lender advances money to borrowers. It then sells, or assigns, some or all of those loans to other investors. The model enables the overall business to grow more quickly. It also gives the ‘bank’ some flexibility about managing its obligations to different groups of funders. If it needs capital to meet one tranche of maturing bonds, it can raise money through the sale of loans to another group. Could it go horribly wrong? Absolutely, yes. Wellesley hopes to raise £100m through these ‘savings bonds’ so you have an idea of just how big – and potentially complex – this business could quickly become.”
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