The interest that a borrower pays (“the price”) is determined by Ablrate and calculated against the risk parameters set out in our Credit Risk Management Policy and procedures. We determine the price of a loan by performing due diligence on the business and referring to our risk policies.
There is an element of commerciality in pricing a loan, i.e should we price loans too high we would lose business to those willing to lend at lower rates. However, at Ablrate we believe that lenders need to be compensated fairly and we believe that our process of pricing loans fairly compensates for the risks being taken. If loans fall outside of these parameters we do not take the loan forward.
We use credit data from Creditsafe, the basis of the valuation of the asset securing the loan and serviceability factor in order to price the loan. We also have a view on the particular industry that may impact pricing. A traditional business with lots of competition may attract higher pricing than a company in a niche market with high growth even though their security may be similar.
It is important to know that any returns to you are subject to tax, unless you have invested via a tax-efficient product such as an Innovative Finance ISA for example. The returns may also be affected if there is a default and the full amount of funds lent is not able to be recovered by the sale of the asset.