REBUILDINGSOCIETY is considering revising its credit risk model to favour borrowers with experience of previous recessions.
The move comes amid rising concerns of an economic downturn stemming from a no-deal Brexit as well as the prospect of global trade wars.
“We are proposing various revisions to our credit risk model, to favour companies with significant export sales, to favour companies led by a director with director-level experience during a prior recession, and to look deeper for evidence of loan stacking from high-cost, short term credit providers,” said Daniel Rajkumar, managing director of Rebuildingsociety.
“The next credit review committee meeting will consider how best to incorporate these recommendations into the credit risk model.”
Rajkumar added that the peer-to-peer business lender would treat borrowers fairly if they fell into difficulty.
“We have seen more loan applications in the last six months, and we are listing more loans than we have been in the last two years,” he added. “We are seeing an increase in demand as well as a derision in application strength.
“On aggregate all signs point to more difficult trading circumstances and a likely recession.
“We are working to manage expectations on our platform. This means lending credit control support services to our borrowers, to reduce bad debt and to help anticipate future cashflow problems.”
Borrowers are able to request an interest-only repayment period, which may be provided for up to two periods per year without lender approval, or more with lender approval, Rajkumar said.
It follows the example of Funding Circle which said in July that it had tightened lending to higher risk bands amid economic uncertainty.
Rebuildingsociety has diversified revenues due to the geographic reach of its sister company White Label Crowdfunding, which operates in multiple jurisdictions such as the Middle East and south east Asia.
“So, the risks of a domestic recession are somewhat offset by international opportunities,” said Rajkumar.