Platform Black, a leading online business finance marketplace, have today announced a market leading move that will see them underwrite the first 10% of every auction on its platform, thus taking the first 10% of any capital loss suffered by an investor on their platform.
Caroline Langron, MD of Platform Black says “Interestingly when you look around the industry, it is apparent that most marketplace lenders are intermediaries, not principles and therefore do not retain any credit risk. We feel there comes a time when we as an industry need to man up and put some skin in the game! As all good credit teams do, we treat all trades as if they were our own money.
“This demonstrates our belief in our own underwriting and our commitment to treating investors fairly. Given that we have funding lines from as little as £5k to as high as £10 million, this could potentially be a considerable sum and has not been a decision taken lightly”.
The move means that with effect from 1 June, Platform Black will underwrite the first 10% of every auction on its Platform, thus taking the first capital loss from any bad debt. So for example a client default with a capital exposure of £500k, would see Platform Black put its hand in its pocket and contribute £50k to the investor’s capital loss on a % investment per investor. Naturally in the event of non-recovery, the investor would still experience some loss appropriate to the risk but at least they can take some comfort that Platform Black will be considered in its approach to due diligence.
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In addition to this, the business has also announced that it will also contribute a 1% financial interest in every single invoice auctioned on their platform. As Caroline commented “I stand by my belief that if I wouldn’t put my own money into an auction, then I wouldn’t expect an investor to do so either, so from 1 July we will be the first to invest in every auction”.
The move follows a period of renewed focus by Platform Black on credit risk and processes introduced 18 months ago aimed at delivering a transparent and professional service to both their investors and clients. To facilitate this change, Platform Black have recruited and retain one of the most experienced credit teams in the industry with over 150 years of credit experience.
Results speak for themselves. The impact of Platform Blacks philosophy and attitude is a marked improvement in bad debts. Over the last 15 months, Platform Black has only suffered one bad debt of £65k in January 2015 against a turnover of £44 million.
The following table demonstrates the success of Platform Blacks renewed credit risk focus:
As Caroline comments “Our parent GLI Finance Plc will underwrite our position in these trades adding further commitment and its considerable financial weight to this undertaking. Coupled with their recent issue of £5 million of preference shares to Platform Black, it clearly demonstrates GLI Finance Plc’s ongoing support for the business.
“Whilst this change provides comfort to our investors, it also is a benefit to our Clients who in turn benefit from continuity of funds that investor confidence brings and knowing that they are dealing with a sensible diligent investor with the capability and knowledge to support them in their ongoing working capital needs”.