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Post by patricko on Sept 18, 2014 12:54:20 GMT
Is it just me or are there a lot more A+ rated loans recently. I have not done any detailed counting, just an impression.
What worries me is whether FC are rating loans as A+ just to get borrowers in with lower rates.
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fasty
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Post by fasty on Sept 18, 2014 13:03:04 GMT
Precisely the same thought ocurred to me yesterday.
I wondered whether FC were taking advantage of the fact that the recent statistics seemed to show lower losses than predictions, so perhaps they were "recalibrating" their risk grading process to take that into account.
Has last year's "B" become todays "A+" ?
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blender
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Post by blender on Sept 18, 2014 13:25:11 GMT
Oh dear, I just bought a B. To test the theory you would look for the turning of C- into C, the objective being to get more loans in at the risky end within the 15% max bid.
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Post by davee39 on Sept 18, 2014 14:01:01 GMT
How about the whole loans taking the A's to C's, leaving us with proportionately more A+ and C-'.
The Blog claims record number of loans listed, but we are not seeing them!
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blender
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Post by blender on Sept 19, 2014 8:51:49 GMT
Take a look at 7811 – working capital for a budget retail optician with several high street practices – who is A+ and wants £208k unsecured over five years. OK it is long established and with a near perfect credit score, but the new loan principal is 10% of turnover and 200% of profits. This loan is on top of £234k of bank loans secured on a debenture, and the borrower either cannot or will not increase the bank finance.
The current ratio is 1.05, so some cash would help the business. The net worth is stated as £247k but that is diminished, IMO, by intangible assets of over £300k book value. Fixed assets (filed) book value just £131K to back up £442k of loans?
I have difficulty reconciling this with the A+ risk profile as presented by FC. And there was the loan which we thought was C with the wrong MBR, but which turned out to be A+ with the wrong risk band.
The ‘traditional’ A+ company can probably get better rates elsewhere.
Autobidders – nothing for you to worry about.
Edit. Have had to edit a few numbers - no substantial difference.
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merlin
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Post by merlin on Sept 19, 2014 9:02:20 GMT
Take a look at 7811 – working capital for a budget retail optician with several high street practices – who is A+ and wants £208k unsecured over five years. OK it is long established and with a near perfect credit score, but the new loan principal is 10% of turnover and 200% of filed profits. This loan is on top of £320k of bank loans secured on a debenture, and the borrower either cannot or will not increase the bank finance. The (filed) current ratio is 1.05, so some cash would help the business. The net worth is stated as £247k but that is diminished, IMO, by intangible assets of £342k book value. Fixed assets book value just £131K to back up £528k of loans? I have difficulty reconciling this with the A+ risk profile as presented by FC. And there was the loan which we thought was C with the wrong MBR, but which turned out to be A+ with the wrong risk band. The ‘traditional’ A+ company can probably get better rates elsewhere. Autobidders – nothing for you to worry about. I agree. Despite past history this loan taken on the facts presented, IMHO actually really only rates as a C-. Far too risky for my taste! My guess is that if Crappy Scrappy came to the market now it too would be an A+!
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oldgrumpy
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Post by oldgrumpy on Sept 19, 2014 9:04:00 GMT
Try 7802!
A+
Healthy Experian Credit Report? NO CHANCE!!! And absolutely bizarre responses from the borrower when questioned on this. 7804 is also A+ with a diabolical credit report, despite FC STILL insisting ALL businesses have a healthy Experian report. And 7858*. Yes, other factors are considered in deciding on a risk rating, but surely a poor report MUST stop any intelligent assessor rating a business A+. Not FC though.
I've stuck cash in the B grade 7796 rather than take any notice whatsoever of FC's risk bands these days.
*ooo 'eck ........... I'm already lending to them!! Must check that out sharpish.
edit: ah! both previous loans RBR to repay both with the new loan. Business surviving on credit??? A+ ?
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blender
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Post by blender on Sept 19, 2014 9:26:51 GMT
Try 7802!A+
Healthy Experian Credit Report? NO CHANCE!!! And absolutely bizarre responses from the borrower when questioned on this. 7804 is also A+ with a diabolical credit report, despite FC STILL insisting ALL businesses have a healthy Experian report. And 7858*. Yes, other factors are considered in deciding on a risk rating, but surely a poor report MUST stop any intelligent assessor rating a business A+. Not FC though. ... You are right about 7802 Grumps - I only examine the best looking ones! Edit: Borrower now reports Experian has raised score to 80. Still looks more like a venture capital opportunity to me.
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wysiati
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Post by wysiati on Sept 19, 2014 12:55:58 GMT
Oh dear, I just bought a B. To test the theory you would look for the turning of C- into C, the objective being to get more loans in at the risky end within the 15% max bid. Part of the answer relates to the macro inputs into the FC credit assessment model. A quote from from the recent investor evening helps to illustrate this (although what we are currently observing is just the reverse of the situation in the example given the improvements seen to the economic conditions since the inception of the platform): "Q: Are you prepared for another economic downturn? A: The answer to this is two fold. In terms of listing new loans on the marketplace, our risk bands are calibrated to target the expected annual loss rates that we publish on the site and this would not change in the event of a downturn. Loans that might have previously been listed as A+ would simply be listed as a B, for example, and loans that might have been listed as C- would be rejected." At this stage in the cycle an increasing proportion of business failures seem likely to arise from businesses simply expanding too fast/over-extending themselves (borrowing too much in the process) rather than a dire economic backdrop.
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blender
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Post by blender on Sept 19, 2014 16:03:33 GMT
Oh dear, I just bought a B. To test the theory you would look for the turning of C- into C, the objective being to get more loans in at the risky end within the 15% max bid. Part of the answer relates to the macro inputs into the FC credit assessment model. A quote from from the recent investor evening helps to illustrate this (although what we are currently observing is just the reverse of the situation in the example given the improvements seen to the economic conditions since the inception of the platform): "Q: Are you prepared for another economic downturn? A: The answer to this is two fold. In terms of listing new loans on the marketplace, our risk bands are calibrated to target the expected annual loss rates that we publish on the site and this would not change in the event of a downturn. Loans that might have previously been listed as A+ would simply be listed as a B, for example, and loans that might have been listed as C- would be rejected." At this stage in the cycle an increasing proportion of business failures seem likely to arise from businesses simply expanding too fast/over-extending themselves (borrowing too much in the process) rather than a dire economic backdrop. A small part of the answer, yes, but a second order effect. We must remember that Gordon Brown abolished boom and bust and so there is no need to factor in anything other than a steadily improving business environment - which would have some effect in reducing forecast losses and therefore allowing greater risk in each of the bands. The fact that the actual losses are on trend to be less than FC had allowed for will also allow more risk in each band, as Fasty has said. The additional point which strikes me, developing PatrickO's point, is that the compounded rate for A+ loans being funded at present (1 Sep 14) is 8.8% where as a year before that it was 6.8%. The reasons must be complex - competition, all these A+ secured property loans at higher fixed rates. Whatever the reason, nothing fundamental has changed - except base rate forecast to rise - and maybe the expectations of A+ businesses in the increasingly benign business climate do not match the increasing rates on FC. If A+ businesses are paying 25% higher rates than a year ago, then decisions made at the macro level about band qualification based on projected losses must be influenced by the higher rates being charged. FC cannot really set the rate according to the risk, so maybe it has to set the risk band qualification according to the rate we offer. These all work one way, consistent with the requirement to grow the lending volume.
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