5 Sep 2022

Dear Matched Lenders,

Over the past three months, BRDGE has restructured its business on multiple fronts. The main aims are to address the apparent weaknesses, and concurrently enhance the other areas.

During this short but intense period, we have committed to a few key elements that would take BRDGE to a level that we can be proud of. The ultimate goal is to create a strong and comprehensive marketplace for our Matched Lenders, SME Borrowers, and all stakeholders. These key elements that have been restructured include: Credit Selection Process, Recovery, Standard Operating Procedures and Tech.

We have launched The Pledge Fund, and Secured Loans as two tangible outcomes of this restructuring exercise. This article focuses on Recovery, an integral yet not that visible part of any lending business.

1. The first step in Recovery is the Credit Selection Process. A better Credit Selection Process will reduce the amount of Recovery required. Our enhanced Credit Selection Process today is robust, similar to the banks. This allows us to secure various charges on the borrower’s assets which reduces the risks of lending. Some of the improvements to the credit scoring process include taking into account numerous additional data points, including qualitative ones like business model and relative strengths and weaknesses of various aspects of the business etc. A better credit algorithm enabled a more robust analysis of the financial figures. An overall enhanced credit engine helped to ensure that funding gaps were identified and funded with the most appropriate structure. BRDGE has enhanced its Credit Selection Process significantly over the past three months. Our enhanced process closely mimics the banks processes and this allows us to secure various charges on the borrower’s assets which reduces the risks of lending.
2. Another critical part to Recovery is prioritised legal rights to some of the Borrower’s or Guarantor’s assets. This part ensures that legally, said assets are ringfenced, and BRDGE (on behalf of Matched Lenders) have first or prioritised rights ahead of other lenders/creditors. Secured Loans have helped to achieve this to a large extent. Historically, other than personal guarantees, SME Borrowers borrowed unsecured through BRDGE. Over the past three months, every new loan disbursed were with personal guarantees and some additional form of prioritised legal rights.
3. One other less straightforward part to Recovery is other lenders/creditors of the borrower/guarantor. Where does BRDGE (on behalf of Matched Lenders) rank in the priority of pay out if the borrower/guarantor undergoes a winding up process? The simplest of examples would be a parri passu one, where all lenders/creditors have equal pro-rata rights. The most complex would be when there are numerous lenders/creditors, each with different rights. Can BRDGE strategically through experience and skilful negotiations manage to help Matched Lenders obtain a palatable recovery percentage over time?

There are many moving parts to most Recovery scenarios. If the Credit Selection Process (A) is poorer, and BRDGE (on behalf of its Matched Lenders) do not have prioritised legal rights to Borrower’s/Guarantor’s assets, the navigation of these complex situations is best left to BRDGE. The focus would be to assess the potential value of assets, the liquidity of assets, if there are other lenders/creditors, and if there are, where does every lender/creditor rank. The aim is to recover a larger percentage of the loan amount outstanding, over time. The experience in BRDGE’s team will give Matched Lenders confidence that BRDGE is best placed to navigate these scenarios on your behalf.

Since June 2022, the Credit Selection Process has been greatly enhanced. All loans have been secured to a large extent. The number of recoveries would stay at a very low number, even during recessions.