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Enterprise lenders are more and more administrators’ private monetary information for lending choices

Corporate lenders are increasingly relying on directors' personal financial records in making lending decisions

Alternative loans

A new piece of the underwriting puzzle, say alternative lenders.

Image source: Katrin Herrling / Funding Xchange.

With trade reports falling to shreds after nearly 18 months of disruption, alternative lenders are increasingly turning to other agencies to assess borrowers and make underwriting decisions.

For some lenders, it emerges elsewhere as the directors’ personal financial records that are an important piece of the underwriting puzzle.

“In our opinion, the influence of the director on the control of the ship has become a much larger factor in the course of the crisis,” said Katrin Herrling, CEO and co-founder of Funding Xchange, the participants of AltFis Alternative Lending: What is the State of the market? Webinar last week.

“We use things like looking at key directors’ personal credit performance versus company performance to keep up with loan payments and repayments.”

“And there is absolutely strong evidence that if you were able to handle your own finances carefully, you were very likely to have performed well during the crisis.”

As part of their recently launched credit technology brand FXE Technologies, Herrling and Co. are offering the ability to overlay this with Commercial Credit Data Sharing (CCDS) data to identify companies that have performed well during the crisis and beyond.

And the funding from Xchange is not the only one. Corporate lender Just Cashflow has developed an in-house tool called PropensityPlus to rate companies based on their directors, and even goes as far as to examine directors’ social media presences.

“For example, a new business consultancy focused on the energy sector would normally not be able to get immediate financial support,” John Davies, executive chairman of Just Cashflow and chairman of the Association of Alternative Business Finance, told AltFi.

“But as Just Cashflow’s new system crawls its online materials, it would find that the lead director was once a very senior position at a major renewable energy company and is incredibly well connected and well positioned to be successful . “

As with the broader topic of open banking data, a potential concern is concerns about privacy and management’s willingness to conduct this type of personal review.

“But I think when you are a director of a company you have an incumbent responsibility,” Simon Cureton, CEO of Funding Options, told AltFi.

“There may be directors who don’t normally like to see their personal story, but that’s the nature of the beast when you’re a company director.”

And until trade normalizes for many sectors, companies and directors looking to borrow may simply need to get in touch with alternative lenders who offer new ways to prove their creditworthiness.

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