News Article

Asset Based Lending

ThinCats launches revolutionary new form of SME loan grading

By CreditMan Friday, August 12, 2016

Peer to peer lender ThinCats is today launching a revolutionary new two-tiered grading system for all loans on the platform’s primary market. The new system will allow investors to quickly determine two key factors that determine the quality of a loan: credit quality and security quality.

Credit quality, the ability of a company to service its loan obligations, will be represented by a one-to-five-star grading. Security quality, the value of the underlying assets relative to the size of loan, will be represented by a one-to-five-padlock grading.

Alongside the existing loan information pack, which provides an in-depth overview of each loan, the new grading system will give quick-to-reference additional guidance to help investors decide whether to lend to a company, and the interest rate they would like to receive.

John Mould, Chief Executive of ThinCats, said: “As peer to peer rapidly becomes a mainstream investment proposition, it’s even more vital that investors are armed to make sound decisions about the credit-worthiness of the businesses they choose to lend to. We’ve invested heavily in this part of the business, and will continue to introduce developments that improve service, and make peer to peer lending a reliable and rewarding mainstay for investors.”

“Investor demand is driving the market toward even greater transparency and ease of use for the end user, and this grading system is an important piece of that puzzle. I’m confident that our method is among the most robust and reliable approaches to doing so.

Rolf Hickmann, Head of Credit Analytics at ESF Capital, ThinCats’ parent company, has been instrumental in developing the Star grading. A specialist in the analysis of SMEs, he has a reputation for deep analysis of business demographics, growth prospects, and sources of finance.

Rolf commented: “The star grading system developed for SME loans combines proven credit analytics with overlays of factors which our analysis has shown have a significant impact on insolvency rates. We believe that the resulting grading is the most accurate predictor available of an SME’s ability to service its debt across the cycle.”

Each component used to construct both grades has been subjected to extensive testing against proprietary analysis, both previous loans issued on the ThinCats platform and the wider UK SME market – some three million firms, of which 0.5 million are borrowers.

While the new grading system provides invaluable guidance for lenders, ThinCats emphasises strongly that lenders must make their own judgement when lending on the platform. The grades do not represent recommendation of specific loans by ThinCats.

About ThinCats
Founded in 2010, ThinCats (so named because it is the opposite of “fat cats”) cuts out the banks and connects experienced investors directly with established UK business borrowers, providing a real alternative for both investors who are seeking decent returns on their investment (currently averaging 9% before tax) and for companies who need funding to develop their business. It has lent almost £200m to UK SMEs since its foundation. Investors registering on the platform are able to bid directly on loans to UK businesses. The platform is uniquely placed to meet the needs of anyone managing an investment portfolio (including individuals, pension fund managers, and companies with cash deposits) by providing direct access to a low risk market sector traditionally occupied by high street banks.

Rolf Hickmann
Rolf is a specialist in the analysis of SMEs. He was founder and CEO of the pH Group, now part of Experian, where he pioneered the use of extensive databases enabling a detailed drill down into SME behaviour. The pH systems have been used by all the UK’s major banks, along with many utilities and telco companies, and the UK government (similarly in France). Prior to this, Rolf was a strategy consultant at the Boston Consulting Group. He has a BSc in Physics from the University of Texas and an MBA from University of California, Berkeley. Rolf is also a consultant at financial asset specialist AGFE.

John Mould
John has spent nearly 30 years in financial services. Prior to joining ThinCats, he was chief operating and financial officer at Hermes Fund Managers and BT Pension Scheme Management, and before this served as chief operating officer at New Star Asset Management. John has held various senior European financial and risk management roles at Morgan Stanley, and has held a series of board positions both in fund companies and in main operating companies. He is a Fellow of the Institute of Chartered Accountants in England and Wales.