Banking Consultancy to P2P SME Lender

Credit Risk, Financial Crime, GBRW Consulting, GBRW Group, Risk Management, SME Banking

GBRW provided technical banking support and advice to the client who was in the process of establishing a new finance company.

GBRW provided technical banking support and advice to the client who was in the process of establishing a new finance company. The business model proposed to enable lenders (private individuals and companies) to lend directly to Small- and Medium-sized Enterprises (SMEs) for working capital purposes using a P2P model. Services included the development of a SME credit rating tool based on similar risk rating models operating in mainline UK financial institutions.

This included support in transposing the credit score to the Probability of Default model (ensuring an adequate level provisioning for expected losses), proposals for insuring exceptional losses and use of Enterprise Finance Guarantees, an organisation structure for the SME marketing, credit analysis, risk management and compliance functions, job descriptions and recruitment policy for senior staff, segmentation and marketing strategy for building the client base, proposals for standard loan covenants and review of loan and security/debenture documentation, recommendations on the realistic recovery value of collateral held and NPL procedures, documentation on standard AML, CFT and KYC procedures, and company visits and comment on individual credit applications.

Deliverables included:

- A framework for the automated Scorecard with indicative weightings for sector, incorporation status, ownership model and size of borrower;

- Proposals quantitative factors for the Scorecard model for financial analysis;

- Suggestions for the qualitative aspects to be considered by the Scorecard model;

- An approach for the analysis of the quality and quantum of collateral;

- Proposals for standard facility terms and conditions;

- Development of the user experience workflow based on the loan lifecycles; and

- Suggestions for the hedging of portfolio exposures and an approach to the management of non-performing loans.