Assessing more businesses on a case by case basis
Last month we revisited how we assess the types of security required for business loans, and removed the £150k threshold for loans without asset security. As mentioned, this will give our credit team more flexibility to assess the security required on a case by case basis.
As part of our ongoing work to improve and innovate the service we provide to both borrowers and investors, we will also start to review loan applications where the business has a turnover between £50k and £100k.
Previously we have considered loans for businesses who have around £100k turnover. However, as the marketplace grows, we are seeing an increasing number of businesses with a lower turnover and a high profit margin, that would pass our affordability check and our credit assessment.
These kinds of businesses are typically service companies, such as accountants or consultants, who have previously not been able to borrow through Funding Circle due to their lower turnover figure.
It’s important to note that we will always assess a business’s ability to repay a loan, and only list those that pass our credit assessment. Having the flexibility to consider businesses with a lower turnover will allow us to look at companies who have performed consistently well.
Company A has been trading for 6 years, consistently turning over £60k with a profit of £25k.
Company B has 2 years filed accounts. The first shows a turnover of £6k with a loss of £100k, and the second year shows a turnover of £51k and a profit of £2k.
Company A is much more likely to be approved than Company B.