My first default

Lending to SMEs comes with a risk, learn how to handle defaults.

Matthieu de Fréminville avatar
Written by Matthieu de Fréminville
Updated over a week ago

Lending to SMEs does not go without risk: you will face default during your lender journey and there is no reason to panic. Just like the life of an individual, the life of an SME is not a long, peaceful river. There are ups and downs, periods of struggle and periods of growth. At October we support our borrowers and lenders at all times. 

Let us go through together the steps of default recovery so it does not you catch you by surprise when it happens. 

❶ How do I get informed that one of the projects I have lent has missed a payment? 

October’s monthly repayments are paid between the 15th and the 20th of each month directly on your Account. If a company does not meet this deadline, our Recovery Team updates the activity page giving information about the reason of the delay and the recovery actions taken. You will also be receiving this message update by e-mail on the day we publish updates. 

❷ Who is in charge of the recovery process? 

October’s local recovery team (2 persons in 🇫🇷, 1 in 🇪🇸, 1 in 🇮🇹 and 1 in 🇳🇱) is in charge of collecting late payments from the borrowers: you do not need to do anything. 

We follow a strict process according to the reason of default:

1. Amicable recovery

The objective is to recover the missed repayment on a bilateral basis. In this case, October’s Recovery team reaches out to the borrower to understand his/ her situation and find a solution. 

If the borrower collaborates and proactive in regulations solution, we can also agree on a debt rescheduling to give time to the company to normalize its cash flow situation, recover from its temporary issue and avoid default. 

2. Judicial Recovery

The objective is to recover the debt by actions through the competent Court. This phase is handled by our collection partner and can last several months. Two factors are really decisive: the tribunal's decision (full, partial or non-payment) and the financial solvency of the borrower. 

❸ How do I get a follow-up on the status of my loan? 

We update the information about late projects every month (except for projects in legal proceedings). In order to monitor the status of your October portfolio, or in other words, to know if repayments are up to date for each project, we have developed a monitoring tool in the portfolio / loans section. To every project that is late, we’ll apply a provision that cuts your outstanding capital in the late project. 

❹ How much can I lose? 

You cannot lose more than your initial capital investment. The recovery fees (from our collection partner, our lawyer, etc.) are at October’s cost if we do not manage to recover. If we manage to recover the late instalments, the fee is charged to the borrower according to the contract. Nevertheless, if the company is not able to face this cost, the fee is deduced from the amount recovered.
This is always indicated to you in the recovery update. 

❺ How can I be sure October will do everything to recover? 

The management of October lends automatically and systematically to all projects. Therefore we are fully aligned with lenders interests. We never give up, this is not an option. 

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