Peer to Business Lending
Alternative Finance Sector Report - October 2014 27
PEER TO BUSINESS LENDING
ALTERNATIVE FINANCE SECTOR REPORT
PUBLISHED
November 14
AUTHOR
Luke Jackson
Samantha Goins
THE LOAN ORIGINATION
PROCESS
1.
A borrower approaches the platform
to request a loan.
2.
The platform assesses the credit
worthiness of the borrower and (if asset
backed) ensures that the borrower has
sufficient assets to use as security. There
should be an official credit policy in
place that has been market tested and
based upon the substantial experience of
professional lenders and principals.
3.
The platform undertakes their own
due diligence and usually provides a
credit report and risk profile on the
borrower. This should provide lenders
with information to aide their own due
diligence to assess the risks involved
and decide whether the loan
is appropriate for them.
4.
Investors decide how much they want
to invest and they make this available
through the platform. It should be
noted that some platforms do not allow
investors to choose individual loans to
participate in and instead their money is
pooled and automatically invested in one
or several loans.
5.
Investors’ money up to the value of the
loan is pooled in a client account.
6.
The platform issues the loan note,
takes any security in exchange and
transfers the money to the borrower.
7.
The loan and security is held on trust,
or by an independent third party, on
behalf of investors.
LOAN
REQUESTED
START
FINISH
SECURITY
IN PLACE
FUNDS
RELEASED
INVESTMENT
SECURED
REPAYMENT
PLAN
FINANCIAL
ASSESSMENT
INVESTMENT
RECEIVED
CREDIT
CHECK
LOAN
APPROVED
