FV: Can you walk us through the journey that led to the creation of Factored? What specific experiences or insights highlighted the need for alternative finance solutions in the landlord market?
The idea for Factored came from my own personal experience when trying to improve the energy efficiency of my own rental property. I was quoted over £10,000 for works that would increase my apartment’s EPC rating from an E to a C, and there was no way to pay for this with financing.
FV: Factored's solution empowers landlords to fund retrofit costs using future rental income. How does this financing model work in detail, and what makes it accessible and appealing compared to traditional credit systems?
Essentially, landlords sell their future rent to Factored, in return for a lump sum payment. We’re more inclusive in our financing, meaning we can service landlords of all ages and circumstances, and all rental properties, not just ones that can get mortgages. We’re appealing to landlords because we offer quick turnaround and our financing protects a landlord’s credit score.
FV: What are the key technical and financial features of your solution? How does it ensure a fast, secure, and efficient transaction process for landlords?
Our platform allows landlords to quickly and easily onboard and request finance in a streamlined and efficient process. Our proprietary underwriting methodology allows us to rapidly approve landlords and disburse funds in a single working day, sometimes within hours.
FV: Who exactly is your target market within the landlord demographic? Are there specific types of properties or landlord profiles that would benefit most from your solution?
Our target market is known as non-portfolio landlords. These are landlords who own 1-4 rental properties, and luckily for us, represent more than half the landlord population. With regards to properties, it’s older and leaky housing stock (e.g. Victorian terraced housing) which has the most to gain from retrofit, as they are the most energy inefficient, and much of the UK rental market fits into this category, with roughly two-thirds of rental properties below EPC grade C.
FV: Could you provide data or estimates on the potential environmental impact of widespread adoption of your financing solution? How does improving energy efficiency in rental properties contribute to broader climate goals?
The average UK property emits 6t of CO2e annually. Retrofitting can reduce this by up to 50%, so based on the 3.4M UK rental properties that are energy inefficient, our financing solution has the potential to prevent up to 10Mt of CO2e being emitted each year (and much more globally), significantly contributing to achieving net zero 2050.
FV: How does Factored's solution create value for different stakeholders involved, including landlords, tenants, and the environment?
Our solution benefits landlords, as it allows them to comply with future government mandates on minimum energy efficiencies of rental properties. The environment benefits from reduced CO2e emissions and tenants benefit from warmer homes with cheaper running costs. Also, retrofits are often conducted simultaneously with property refurbishment and maintenance, so the tenants also benefit from greatly improved living standards and health outcomes. Secondary benefits include increased property and rental value.
FV: What sets your solution apart from existing finance options available to landlords? How do you ensure competitiveness in a market with potentially emerging similar solutions?
We purchase future rental income, so we’re quicker and more inclusive than existing finance. We’ll maintain our competitiveness by offering propositions outside of pure financing, where we’re able to add value across the whole retrofit journey, and not just the upfront financing.
FV: Do you have any success stories or case studies where your solution has already been implemented? What were the outcomes for the landlords and properties involved?
Yes, we’ve successfully financed a number of retrofits already. In one case, the landlord had already begun the retrofit, but had run out of money to finish it completely. Our financing enabled him to complete the works and see significant uplift in the property’s energy efficiency.
FV: Can you share some of the main hurdles you've encountered and how you overcame them?
One of the biggest challenges we faced was securing lending capital to give out our funding to landlords. Thankfully, we found a strategic lending partner who shares the same values we have towards green landlord financing.
FV: What are the next steps for Factored in terms of product development, market expansion, and sustainability goals?
Next steps, we aim to grow our lending book and scale the business. We’re also raising a seed round which will allow us to explore other markets and invest in our product.
