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There is a lot of work which goes on behind the scenes from the point when an application is first submitted until the point at when it goes live on the marketplace. To give you an idea of the time involved, the borrower team spend an average of nine days on the assessment phase of an application, from the initial submission to listing. This time is spent analysing the prospective borrower’s submissions, assessing the accounts and security submitted, asking pertinent questions about the business, liaising with the applicant to get more information on their business or additional security to support their application and, when identified, requesting amended accounts in circumstances where accounting errors are spotted, to ensure that the figures presented to lenders are as fair and accurate as possible. First and foremost, however, a listing must meet our basic lending criteria, and we filter out those that don’t at the first instance. Our five basic criteria are as follows:

1) The applicant must be a limited company.

We do not offer loans to partnerships, sole traders or individuals. Limited companies are by law separate legal entities from their directors or shareholders. This means that there is a clear legal distinction between personal finances and the finances of the business. We can assess the strength of the business purely on its own merits and look at the personal finances of any directors or shareholders separately to assess the suitability of security. A Limited company is required by law to produce fair and accurate accounts to be filed at Companies House available to the public record every year, along with an Annual Return listing directors and shareholders. This allows us to cross-reference accounts submitted by applicants with those filed at Companies House, an important security check we conduct on every application before listing.

2) The company must have two years or more of trading history.

Recent statistics suggest that up to nine out of every ten start-up businesses will not survive past the first two years. The risk of failure usually reduces after each year of successful trading. We require all businesses we list to have at least two years of prior trading history. This allows us to mitigate the risk of failure by only listing businesses which have already survived the most risky period. It also gives us at least two years of business accounts to assess, and lets our underwriting team get a more accurate idea of the business, adjusting for one unusually good or bad trading year.

3) The business must be profitable and must have a turnover sufficient for our affordability criteria.

As part of our lending criteria, we require that every business we list must have made a profit in the last two years of trading. On top of this, we also use our bespoke risk tool to calculate whether the loan repayments are affordable, taking into account factors such as the business’ turnover, net profit, liquidity and the equity/debt ratio.

4) The business must meet our risk rating requirements.

Along with affordability calculations, our bespoke risk tool also gives each application a risk grade from A+ to F-, factoring in a myriad of criteria from turnover, profitability and growth to liquidity, credit rating, repayment history and creditworthiness. Any business which scores a D+ or below is rejected. If a business scores C- or higher, should it also meet our security and affordability criteria, it is listed on the marketplace with the appropriate risk rating.

5) The business must also meet our security requirements

Before making it on to the marketplace, businesses must fully satisfy our security requirements, which are considerably higher than most of our competitors. Firstly, unlike some other platforms, all of our loans are backed by Personal Guarantees as a minimum. For any loan request in excess of £50,000, we also require additional security in the form of a Debenture or a Legal Charge over Property. In addition, in order to try and ensure the greatest prospect of recovery should a loan default, we also require that the total value of all security offered must cover the full loan amount requested. Our underwriters determine the value of each form of security offered by a prospective borrower and should the sum be less than the full loan amount, the borrower will be notified that additional security will be required in order to list. The above 5 steps are just the first part of underwriting process. Once these initial checks have been done, the application is then pre-approved to undergo further, more stringent assessment.