What does responsible business lending look like?

7 September 2017 by Odette Bester

Responsible lending means putting the customer first

Businesses turn to all sorts of places or people for business lending. Often first to family, friends or their banks. But when that doesn’t work out, especially for SMEs, they look to alternative options for assistance. The problem is that there are some alternative lenders out there that don’t act in the customer’s best interests.

At Lulalend we believe that responsible lending is to act in a customer’s best interest. This means ensuring affordability, transparency of terms and conditions and supporting the borrower. As a business lender, we understand that we have a responsibility to make sure our borrowers are clear on the details of the loan and that we carry out thorough checks on any of our borrowers so that they can be confident that what they receive will be suitable for their circumstances.

Our technology assists with confident decision making

The best way to provide responsible lending is by understanding that a business’s creditworthiness and affordability is essential when it comes to offering the right product. We rely on technology and data to help make accurate decisions that allow us to quickly and easily assess a business’s true health. By drawing on our extensive range of data sources, our unique scoring-technology delivers a real-time decision that recommends the optimal funding a business can afford together with the most suitable/flexible repayment profile. Over and above this we ensure that we are held accountable by bodies such as the South African SME Finance Association (SASFA) that promotes transparent and responsible lending to SME’s.

We avoid bad practices such as stacking

Unlike other lenders, we also take this a step further by avoiding what is known as ‘stacking’. Many lenders will provide funding even when a business has more than one short-term lender already funding their business. Having several loans open with a number of lenders can cause a business’s demise instead of their prosperity. This is because their indebtedness is over extended and it becomes difficult for them to manage and maintain all their debt.

Because we want SMEs to succeed we believe in lending that assists the business and its financial needs instead of adding to or creating a financial burden. Essentially, we seek to save our customers from themselves – we do this by protecting the position of the lender and ensuring that they can comply with the obligations that they agree to.

We develop our customer relationships

We also seek to develop long lasting relationships with our clients who show good payment behaviour. A positive track record helps us builds trust and allows us, over time, to reduce the cost of their funding and place them in a better risk band. This practice allows us to continue assisting small businesses as opposed to being a one stop shop. With fluctuations in our economy and the ebbs and flows of business, an established relationship with our customers allows us to understand the overall health of the business and take into consideration the circumstances at the time in order to make responsible decisions on an ongoing basis.

You need to be responsible too

Before entering into a relationship with any lender it’s important to be honest with yourself and ensure that you are making a wise decision for your business.

It can be helpful to ask yourself the following questions as you consider business funding with us or other lenders:

Can I afford the repayments?

What happens if circumstances change and I find my business bringing in less income and having more costs?

Are the interest rates fixed and if not what happens if they increase over time?

If you want to find out more about Lulalend you can read about our core values here. Should you have any questions concerning our terms and conditions, repayment structure or product offerings you can contact us on 087 943 2381 or support@lulalend.co.za.

You can also hear more about how we’ve helped businesses grow by taking a look at our customer success stories on our website.

Source: blog.lulalend.co.za