Here’s some information that might encourage you to take another look at some of our 3-year, fixed-rate loans…We’ve been getting some questions from lenders in relation to how borrowers qualify for fixed-rate loans and whether or not fixed-rate loans are ‘more secure’ than other loans. Here’s a brief explanation of our plans for fixed-rate loans and our current process.
We are currently working on a new credit grading system that will allow us to asssign each loan request with a credit grade. For fixed-rate loans this grade will determine the interest rate. We plan on launching this new system in the coming weeks. When it’s live, every loan you see on Linked Finance will have a credit grade. This will give you an idea of how different businesses performed during our credit approval process.
At the moment, every business that you see on Linked Finance has undergone a rigourous credit review and our credit team have deemed them to be creditworthy. That has not changed nor will it.
We work hard to ensure that only creditworthy businesses make it on to our platform and that work is reflected in the extremely low rate of non-performing loans on our book.
As it stands, fixed-rate loans are only being offered to businesses that meet certain additional credit criteria. Once those criteria are met, the business is approved for the finance at the fixed-rates of either 8.5% or 8.8%.
Not every business that meets these criteria however will opt for a fixed-rate loan. So just because a business is not ‘fixed-rate’ does not necessarily mean that it has performed less favourably during our credit approval process.
As mentioned, we use a comprehensive credit approval process for every business that goes live on the website.
When you see a fixed-rate loan, however, you know that not only has the business met our normal criteria, but it has also exceeded a range of additional requirements relating to balance sheet, repayment capacity, turnover and credit history metrics.
Many of our high-interest lenders might balk at the 8.8% interest available on 3-year, fixed-rate loans but we feel that based on the strength of the businesses that qualify for these loans, this is a fair rate of return that refelcts the lower level of risk associated with these stronger businesses.
Right now we have two 3-year, fixed rate loans on the website. NRG Indian Imports and Howley’s Family Butchers are two businesses that performed very well during our credit review and as such they qualified for the finance at 8.8%.
As always it’s your call but we would hate you to miss out on the opportunity to support some really strong businesses.