Loan Profile – Key Risks

Kylie Greeff
11th July 2018

Lending to businesses requires you to carry out some due diligence before lending. As a platform we provide you with a significant amount of information on the borrowing business to help you make a lending decision. Whilst we provide a lot of information, we understand that sometimes lenders could do with a bit more of a hand in understanding the information presented. Understanding this, we’ve designed our loan profiles in a way that will help better understand the risks involved.

Each loan listed, has an Overview Page that provides key high level information on the business. This Overview page divided into four key sections, ‘About the Business’, ‘About the Loan’, About the Risks’ and ‘About the Security’.

The ‘About the Loan‘ section gives you key information about the loan they propose to borrow, such as the total loan amount (including our fee), the loan term and the interest rate at which the loan will be repaid.

The ‘About the Business‘ section provides you with the identifiable information of the borrowing business, such as the full company name, registration number and location. You can use this information to run your own checks and investigation.

The ‘About the Risk‘ section provides you with pointers as to some of the potential risks specifically associated with this loan rather than lending in general. This section is divided up into ‘Risk Rating’ and Risk Indicators’.

We assign a risk rating to each business listed, but more than that we also show you the performance of the associated risk ratings on our loan book. By hovering over the risk rating you will be presented with the historic performance of other loans funded on the platform of the same rating. The historic performance will show the default rate as well as the bad debt rate of all loans of the same rating. Why is this historic information important? As a lender, you need to make a decision on when to lend and which businesses you want to lend to. In order to make a more informed decision, you need to understand that regardless of the business or the rating assigned to it, there is a chance that the loan will fail. The Default and Bad debt rate indicate the past performance of similar loans, which you can take into account when lending.

About the risk - Default

Whilst the ‘Risk Rating’ assigned to the loan is the rating our credit risk team has assigned to the particular loan, the risk rating bands can be broad, so it’s important to understand the risks particularly relevant to the business listed, the ‘Key Risk indicators’ are designed to do just that. This section will highlight some of the key risks that we may have identified during our initial underwriting and screening process.

You can view a general description about each of the indicators by hovering over the indicator with your mouse. These indicators are made visible to help you in your lending decision by a) making you aware of risks you may have missed b) allowing you to investigate further and ask relevant questions. The key risks displayed are not necessarily the only risks associated with the business, simply those that we have identified.

Key Risk - Indicators - Hover

The ‘About Security‘ section clearly sets out for lenders the security offered in support of the loan. This section shows what type of security has been offered as well as important information about the security such as the equity in a particular asset.

 

What should you do with the information?

Where key risks have been highlighted on a loan, this does not necessarily mean that you should not lend to the business, all lending carries risk.

You should use this information to help further your own analysis of the business, use it to ask your own questions of the business or use it to rule out the business as a loan for you. All loans that are listed on the platform have been through an initial assessment by ourselves and have met our standard lending criteria and have been deemed good enough to list on the platform for your further consideration. We provide lenders with a variety of lending opportunities to suite the breadth of different lenders on the platform, a loan listed on the marketplace is not an indication of a ‘safe loan’, it represents an opportunity for you to consider.

 

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