Online lender October, which is one of Europe’s leading business financing platforms, has issued over €479 million worth of loans to 1097 different projects since it began offering services around 6 years ago. October has attracted 22,813 investors, which reportedly includes tier-one institutions as well.
The October team confirmed that they recently launched Fast Track projects in the Netherlands. According to the online lender, the “unique” combination of the Dutch State Guarantee (BMKB-C) and their technology allows October to make offers to a firm “within 24 hours.” They claim that it’s “a quick and easy solution for businesses, which will increase the number of Dutch State-guaranteed loans on the platform.”
The October team further noted that the Dutch government has been offering the State guarantee in order to support local SMEs during the COVID-19 pandemic. As confirmed by October, under this guarantee scheme (BMKB-C), the Dutch government offers “a partial guarantee for loans to companies in need of liquidity following this crisis, having previously benefited from other support measures.”
As noted in a blog post by October, in this way, the State government in France “covers part of the loss in the event of default.” What this means is that “if a company is unable to repay the loan, the state will partially repay the company,” October explains. It adds that it’s for this reason that it can be “safer” for lenders to issue loans. Around 67.5% of a lender’s remaining amount “will be covered at any one time.”
As confirmed by the online lender:
“October was authorized to make loans covered by the state guarantee in April 2020 and introduced fast track projects to support even more businesses. We used our experience and technology from French and Italian Instant Projects to design a standardized credit analysis, using our semi-automatic scoring model. As a result, we are able to tell a company within 24 hours if it can get a loan.”
The October team claims that this process is a lot faster than their standard credit analysis. October aims to reduce the time by skipping the video call with the business or company and “combining the standardized analysis with a standardized proposal for every company that needs a loan of up to 200,000 euros with a duration of 24 or 48 months.” There’s also a pre-amortization period of 6-12 months. Any loans issued over € 200,000 are reportedly covered by a Dutch guarantee and they go through October’s standard credit analysis.
The October team notes that their quick credit analysis is “only done for companies that were profitable in 2019 and that experienced a decline in turnover due to the Covid crisis.” But if you choose to issue loans to these initiatives, then “be aware that no one can predict how the company will emerge from the Coronavirus crisis and that the project could default,” October notes.
They also mention that “to compensate for the higher risk, these projects always have a B or C credit rating, based on credit analysis.” So if the company “has a ‘B’ rating, the interest rate is 7% and if the company has a ‘C’ rating, the interest rate is 8%.” The French State guarantee covers around 65% of the risk, “but alongside this we always ask for a personal guarantee from shareholders equal to 30% of the amount to cover an even larger part of the loan.”
October further notes that with fast track projects, they’ve created a balanced offer, which can be attractive to companies and lenders. Businesses or firms impacted by COVID can expect to receive a proposal “within 24 hours,” October claims.
They added that lenders can get an “attractive return, with part of the risk covered by a state guarantee and a personal guarantee from shareholders.” But as with any October project, “there is a risk of losing part of the capital,” and the October team always recommends that investors diversify and keep their portfolio “balanced” in order to “limit the impact of a default on the overall return.”