Improving Our Credit Model for a Post-Lockdown Economy
20th January 2021
The economic landscape has changed significantly and therefore, our Credit model and approach to investments also has to adapt. We have undertaken a number of tasks to ensure we continue to offer great investment opportunities whilst doing our best to protect your current investments.
Navdeep Arora, Crowd2Fund’s Credit Director, has been leading the implementation of new processes to ensure consistency across the credit review and new loan monitoring process. New technology is being developed to enhance the accuracy and consistency of credit reviews.
In order for us to understand the circumstances and monitor each of your investments and the status of our loan book post-COVID19, we have undertaken a re-review of every active client on the platform and will take action to support them if they show signs of distress. This is part of an in-depth review to ensure that we can be best positioned to play a role in the economic recovery ahead.
Insights gathered from this exercise inform our revised credit policy. For example, if there is a trend showing that a particular sector is resulting in more distress, then with additional external data inputs, we will actively modify the policy to associate that sector as high risk. If we deem it too risky, we will stop offering loans to businesses of that sector altogether. To further improve our model we will also be treating a perfect repayment history with higher positive weighting, especially for repeat clients.
We have also put additional loan monitoring checks on our Crowd2Fund Exchange to ensure that if you’re purchasing an investment, you can be reassured that the listing is fair and has passed some basic checks. From now on, only well-performing loans will be approved for listing on the Exchange for the price they were originally purchased at. If there are significant changes in the businesses that are listed, it will be looked into in further detail. This includes things like new county court judgements or late filing of accounts on Companies House. We will be further enhancing our Exchange pricing model as we go forwards.
This revised credit review process also takes into account a new pricing matrix, which has been re-factored for the new economic landscape and can be seen within the array of new products that are being offered soon. The emergency government stimulus has had a significant impact on the pricing of credit.
Our future Crowd2Fund plans enhance credit automation; taking the pillars of our credit policy and codifying them further so analysis can be supported with ground-breaking technology. However, the human judgement element has always been key to our approach, and we will continue to allow investors to make that final decision and empower them to use their own judgement from the information that is presented to them. Many more improvements will continue to be implemented such as further information on investment opportunities, including details around security taken with a loan.
We hope this newly re-enforced credit methodology should help keep investor returns maximised and losses to a minimum as we enter this new economic era. Despite the challenges given, we believe that this is a chance to see ample opportunities for entrepreneurs and investors in the future.
Past performance and forecasts are not reliable indicators of future results. Your capital invested is not covered for compensation in the event of a loss by the FSCS. Tax treatment will depend on the individual circumstances and may be subject to change. Please see our Risk section before making an investment decision.