easyMoney undertakes comprehensive due diligence and underwriting for each and every loan.
We have developed a proprietary Risk Model in conjunction with our Lending Policy to further aid our ability to assess potential lending opportunities and risk score our loans.
Inputs into our Risk Model include but are not limited to:
- Loan-to-Value (LTV) - The value of the loan against the value of the security property on a bridge loan. For example, a loan of £200,000 against a house worth £400,000 would give a 50% Loan-to-Value.
- Liquidity - The length of time it would take to sell the underlying property given normal market conditions.
- Proposed Exit - Borrowers need to demonstrate to easyMoney they have a clear and realistic plan to exit / repay the loan. This can take place through a sale of the underlying security property by refinancing our loan with another lender.
- The developer experience delivering similar development schemes in comparable locations
- Credit Worthiness of the Borrower - Can the Borrower demonstrate they have either savings or income to service the loan interest / repay the loan? Can they provide a company debenture or personal guarantee? The better the Credit Worthiness the better the Borrower.
- Construction Complexity - If the loan is a development loan we assess the risk associated with the proposed construction. On the whole a small residential refurbishment will have less construction risk compared with a small new build development of six houses.
- Loan Term - The longer the loan the more susceptible it is to changing market conditions.
Each loan is assigned a risk score A through to J.
Loans Graded A have lower risk; Loans Graded J have more risk.
As conservative lenders, we generally only lend against loans that score A through C.