We receive a large number of applications for loans every week but on average we reject in excess of 90% of all applications received.
We recognise that traditional credit scoring approaches are limited, as they are largely based on historic data. Whilst the past is important in allowing us to form an opinion regarding the management’s strengths and abilities, it is the future cash that will see the loan repayments made. So we equally consider the ‘direction of travel’ of the business – where it is now and where it is going. The core consideration with any loan opportunity is our assessment of the people. The financial performance of a company is only ever the by-product of the decisions made by the people.
To achieve a rounded view of any company, we make use of a number of tools in addition to those that are used as standard by the industry such as fraud, money laundering and credit checks. These additional checks include negative media searches, cashflow forecasts and telephone interviews with every borrower, which allows us to develop our own relationship with the individual(s) that we are trusting as custodians of our Lenders’ cash.
One of the results we aim to achieve as a result of our interview is to obtain the borrower’s emotional “buy-in” to the crowdlending concept. He is not borrowing from an anonymous institution. Instead, a number of individuals are entrusting part of their savings to him. He has to respect this relationship of trust. We find this approach often has a significant impact on the borrower’s determination to respect his obligations under the loan.
Once a case is ready for consideration, we operate a credit committee comprising senior FK executives and external appointees from a financial or lending background.