The credit analysis and underwriting for standard projects is performed by our credit analysts and based on financial results, management and market outlook.
The analysis consists of 5 steps and yields the credit score of a project, that ranges from A+ to C-.
The interest rate of a project depends on its credit score and the duration.
The risk analysis is performed in-house by our local Credit teams. The October financial analysts are in charge of collecting the quantitative and qualitative information necessary to assess the risk of the company and decide of the risk rating (i.e. interest rate) before its presentation to the October Credit Committee. In this tutorial, we will walk you through the credit analysis step by step.
Step 1: the eligibility test
The process starts with the borrowing company’s CFO (or the CEO, the accountant, etc.) doing the eligibility test (checking if the company matches the risk criteria of October) directly online. Within seconds (and just by typing in the name of the company and answering a couple of questions), the borrower knows whether its company is potentially eligible to a loan on October!
Our risk scoring algorithm by gathering public and private data on companies is able to automatically make a risk selection based on turnover, profitability and time of existence of the company in a few seconds.
Step 2: first analysis and meeting
If the borrower passes through the eligibility test, we ask to send us relevant files, such as financial statements, investment memorandums and bank statements. Our ‘X-ray’ internal tool automatically extracts relevant financial ratios and information from these documents and fills them in our scoring model that allows for a solid credit analysis.
The scoring model is filled with information about the loan, a reflection and a projection of the revenues, management fees and so on. This adds up to a total of 70 financial indicators, such as cash position, debt, accounts receivable, etc., that go back 3 years in time and 1 year into the future. This way, the scoring model shows the development of these financial indicators and gives insight in the financial performance. The financial performance of the borrower makes up for 60% of the credit score.
We always interview the borrower to ask any remaining questions. The interview serves another purpose as well: we do an assessment of the management qualities and relevant experience of the entrepreneur. 20% of the credit score is based on the management qualities of the borrower and its team.
Furthermore, we review the market outlook of the borrower and distinguish if the market is growing, stable or shrinking. Obviously, when the market outlook is negative, it also has a negative effect on the score. We also review what the position of the borrower is in the market and look at it’s marketshare. 20% of the credit score is dependent on the market and the borrower’s position in the market.
This scoring model is then combined with information from our huge database with all our past loans. Together with the financial elements, the team and the market outlook, it makes up the credit score.
Step 3: the credit score
The scoring model determines if the company project is doable or not. If a project is not doable, the project will be denied and it will not be presented to the lenders.
If a project is doable, our scoring model shows immediately what the credit score of this project will be. The credit score is not calculated on past performance but rather on a forecast of the company situation after receiving the October loan. The credit score ranges from A+ to C- (from high to low creditworthiness). The interest rate, is determined by the credit score and the duration of loan. That is why interest rates within a credit score category can differ sometimes:
* Please note that French state-guaranteed loans always have an interest rate of 2%, which can be increased if the loan is extended.
Step 4: the credit committee
We then present the project to the October Credit Committee, where a minimum of 3 international Credit Directors have to approve the loan. When they give their go-ahead, the borrower will be presented an offer. When the borrower accepts the offer, the project will be presented to the lenders.
Step 5: fraud prevention
To prevent fraud we cross-reference the information that we have available from the borrower with external databases. Also, we compare financial flows and data from the financial account with each other, to see if they align. To be able to check this, we always ask for the company's bank statements. Furthermore, we check who are the main customers and suppliers of the borrower and check whether the amount requested makes sense in light of the purpose of the loan. The final stage includes a background check on the entrepreneur and a check of the company’s statutes.
And that’s it! Our process from start to end. It is a substantial process that gathers a lot of information from a lot of different sources. We constantly monitor our loan portfolio and the economic context to adjust and improve our credit analysis.You are always encouraged to read the project description and review the financial ratios yourself as well. With the 48 hour preview of projects you have time to discover the borrowers you will support!
Fast track analysis
The fast track is a variant of the project analysis for standard projects. We perform a standardised credit analysis, using our semi-automated scoring model to assess the repayment capacity of a company and provide a credit decision within 24 hours. In the table below we indicate the main differences between the standard and fast track project analysis.
Up to €250,000 and maximum 15% of yearly turnover
Up to €5,000,000
B or C
From A+ to C
From 5.5% to 7.5% dependent on credit score and duration*
From 2.5% to 9.9% dependent on credit score and duration
12, 24 or 36 months
From 3 to 84 months
Aligned with borrower
Free after 9 months*
Aligned with borrower
100% of loan amount
Dependent on analysis
Focus on neutral and growth sectors
Time in business
More than 5 years
More than 3 years
Net debt / EBITDA
Net debt / Equity
Borrower video call
*From the end of May, flexible repayment is possible with a Fast track loan and the maximum interest rate has been adjusted to 7.5%.
You can recognise a fast track project because it's indicated in the project description. Borrowers that fall outside the scope of the fast track will go through the standard credit analysis and will receive a custom offer or will be rejected.
We remind you that a personal guarantee does not mean that the company cannot default. Instead, it means that the guarantor will assume personal responsibility for the debt. If the guarantor is not solvent when the guarantee is called, you might lose the capital invested.
The fast track was first introduced to finance Dutch companies that were hit by the COVID-19 crisis and were covered by a Dutch state guarantee. The general fast track is for companies that were not affected by the COVID-19 crisis. To compare and for more information about the Dutch state guarantee specific fast track we direct you to the tutorial about the Dutch state guarantee.