One question we’re asked a lot of at Lending Loop is how are businesses and their loan applications evaluated? In this post, we’ll walk through the behind the scenes work that goes into evaluating each application at Lending Loop.
There are 4 steps that a business goes through to be listed on the marketplace.
Step 1: Discovery
There are a number of ways a business can find Lending Loop, but the most important part is that they do. Often times a business will have an initial call with one of our representatives to discuss their borrowing needs and ensure that they meet the minimum criteria.
- Operating at least 1 year
- Minimum $100,000 in annual revenue
If the borrower meets the minimum criteria, we’ll capture other important information such as who the owners are (and their personal credit information), how many employees the business has, some details about their operation, the use of funds and more. We’ll also outline the documents required to submit a completed application. Most commonly this will include:
- Past 2 years of accountant prepared financials
- Year to date statements (income statement and balance sheet)
Once the application is complete, an account manager is assigned to handle the file.
Step 2: Account Management
Once a file is sent to an account manager, the file is reviewed for completeness and accuracy. The account manager performs company related searches on things such as the business’ online presence, owner related searches, location searches and performs the appropriate credit checks on both the business and any significant owners.
If there are any outstanding questions, the account manager may arrange a call to speak with the borrower prior to the file being sent to the credit team.
Once all questions are answered and the application is complete, it’s sent to our credit team to be reviewed.
Step 3: Credit and Underwriting
The first step in the credit and underwriting process is to review the file. The underwriter can see all the notes left by our account management team. These notes provide the credit team with an overview of the business, as well as outline the planned use of the loan.
Using the financial statements provided by the borrower, the credit team uses a model to perform a detailed analysis on the borrower. In this process, they review the credit reports of both the business and any guarantors, paying particular attention to items such as delinquencies, recent bankruptcies, collection items, and more. Once the initial review is complete, the final amount and term of the loan is determined based on the business’ financial details, if it’s been determined that the application has been approved.
The loan is then given a risk grading (of A+ to E) and an interest rate. This loan pricing is determined using Lending loop’s proprietary models which take into consideration hundreds of factors. These factors can include key information such as the business’ industry, years in business, the number of employees, security position and more.
Step 4: Due Diligence and Listing
At this time, the preliminary rate is presented to the Borrower. On acceptance of the offer, the final due diligence items are outlined. Due diligence items may include things such as corporate bank statements, CRA Notice of Assessment, PPSA Searches, Corporate Status Reports, and any other follow up questions or items that are required depending on the specific circumstances.
Once all due diligence items are collected and reviewed, the Borrower is sent their final terms and contracts. Once all documents are signed, the loan is listed for funding on the Marketplace.
Lending Loop uses technology to assist in many facets of the process, and the time from completed application to listing is typically only 1 – 2 business days. Overall, we’ve designed the process to be simple and seamless for Borrowers, but still robust and accurate for Lenders.