The picture above is a quick snap-shot of where Canadian businesses can go to get loans to support their continued growth. From left to right we can measure how quickly businesses can access financing, from month-long processes down to funding in a few days or even hours. And from the bottom up, we measure the interest rates offered by lenders to Canadian businesses ranging from very high interest rates to the lowest rates lenders can offer.
On the top left side of the chart is the segment of the market classified as Super Prime to Prime. This is where Canadian banks/credit unions generally operate. While banks and credit unions today offer the lowest rates in the market, they also typically have a slow and cumbersome process. On the bottom right side of the spectrum is the Sub-Prime space, those alternative lenders have the fastest process (i.e. lowest requirements) typically advancing funds in as little as one day, but charging the highest rates ranging on average 40-60% Annual Percentage Rate “APR”.
As you can see, Canadian businesses have been forced to choose between long, complicated processes or very high rates.
We believe there should be a better option.
At Lending Loop, we focus on Prime & Near Prime clients where we offer a streamlined, efficient, and transparent process (think bank-like requirements with the efficiency and power of modern technology) while offering competitive and fair rates.
After completing the application and document collection process, Lending Loop’s proprietary loan underwriting system goes to work, analyzing over 100+ different data points to arrive at a preliminary loan grade (A+ to E). These data points are sourced from the business’s financial statements, bank statements, CRA data, the credit reports of the business and the guarantors/owners, online searches, and much more. From there, the file is handed over to our human credit officers for their in-depth review. Our tech-enabled credit process results in a finalized loan grade from A+ to E which corresponds to a loan’s interest rate, but more importantly, the risk involved in that particular loan. We think you should be appropriately compensated for the level of risk you are taking.
Now that you know where Lending Loop fits in the Canadian credit lending market, it’s time to dive deeper into our risk grades and how they match up to Prime or Near-Prime borrowers.
A+ to B: Prime Loan Grades
Loans in the A+ to B grades fit the Prime heading, meaning they are likely able to receive competing offers from traditional financial institutions. Within this segment of the market, Lending Loop competes for these clients with our process. Our online application and streamlined underwriting allows us to process loan applications more efficiently, attracting Prime borrowers to the platform. Where traditional institutions take weeks if not several months to provide offers, Lending Loop is able to turn around decisions in a matter of days.
For businesses with competitive financials and a desire to grow, we’re able to offer streamlined access to capital, and our lenders are able to invest in solid investment opportunities that were previously only available to financial institutions.
C+ to E: Near Prime Loan Grades
The C+ to E grades fit into the Near-Prime heading, which are often businesses that have positive cash flow to support a loan but for a number of possible reasons, may not qualify today as Prime. While they build upon strong foundations for their business, Near-Prime borrowers may find more limited sources of capital despite sound business financials.
From here, an opportunity is clear, Lending Loop’s community of lenders supplies capital to help finance these borrowers today and support their journey into the Prime category while offering attractive returns to lenders for funding businesses in the higher end of our risk spectrum. Our proprietary cash-flow-based underwriting model allows us to accurately price the business’ risk while compensating lenders with a suite of loans to build a diversified portfolio.
Which Ones Should I Pick?
When reviewing which loans to add to your portfolio, consider reflecting on your level of risk tolerance. If you tend to check your other portfolios on a daily basis and get the sweats when politicians send Twitter messages threatening a trade war, sticking with the A+ to B loans through our Conservative Auto-Lend plan may be a great way to include Lending Loop in your overall portfolio. We’ll help build your portfolio for you by investing exclusively in these Prime borrowers to establish a well-diversified portfolio.
If on the other hand, you are looking for potentially higher returns and have a higher risk tolerance, our Balanced Auto-Lend plan invests across the full spectrum of loans offering a greater level of diversification.
Stay tuned for future articles and if you would like to speak about your portfolio or if Lending Loop may be right for you, feel free to contact our team at firstname.lastname@example.org or 1-888-223-5667.