Profit – Atriunfar http://atriunfar.net/ Thu, 01 Sep 2022 14:12:24 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://atriunfar.net/wp-content/uploads/2021/06/icon-3-150x150.png Profit – Atriunfar http://atriunfar.net/ 32 32 (FINV), (LX) – Credit, anyone? Chinese online lending platforms stalled as quality borrowers dwindle https://atriunfar.net/finv-lx-credit-anyone-chinese-online-lending-platforms-stalled-as-quality-borrowers-dwindle/ Thu, 01 Sep 2022 13:48:17 +0000 https://atriunfar.net/finv-lx-credit-anyone-chinese-online-lending-platforms-stalled-as-quality-borrowers-dwindle/ Key points to remember: FinVolution’s revenue growth slowed to around 12% in the second quarter, from 16% and 32% in the previous two quarters, while its latest quarterly net profit fell around 6%. 360 DigiTech and Lexin saw little to no revenue growth for the quarter, with profits dropping 37% and 80%, respectively, […]]]>

Key points to remember:

  • FinVolution’s revenue growth slowed to around 12% in the second quarter, from 16% and 32% in the previous two quarters, while its latest quarterly net profit fell around 6%.
  • 360 DigiTech and Lexin saw little to no revenue growth for the quarter, with profits dropping 37% and 80%, respectively, over the period.

By Warren Yang

It’s hard for a lender to grow its business in a slowing economy, and Chinese fintechs that once lured investors with their rapid growth by doling out funds to hungry consumers and small businesses are no exception.

The latest quarterly results from three of China’s leading lending facilitators – FinVolution Group FINV, 360 Digitech QFIN and Lexin Fintech Holdings Ltd. LX – show how the group bears the weight of a slowing Chinese economy in the same way as direct lenders.

An economic downturn can hit lenders in two ways. When things are going well, many people and businesses rush to borrow on the assumption that their future income will be enough to pay off their debt. But when things go wrong, many of these same entities fold and suspend their borrowings. Those who continue to borrow also become more likely to default on their debt. In such situations, lenders can be hit hard by a slowdown in lending activity and an increase in bad debts.

Last Monday, FinVolution – a former direct lender that turned itself into an intermediary between banks and borrowers to survive a severe regulatory crackdown on the fintech sector – reported a roughly 6% year-on-year drop in profit. net in the second quarter to 585 million yuan ($87.4 million). Its net revenue growth slowed to around 12% from 16% and 32% respectively in the previous two quarters.

China’s economic slump has put the company, along with other loan facilitators and direct lenders, in crisis. As general credit demand weakens, lenders could perhaps achieve more impressive revenue growth by aggressively pursuing consumers or small businesses in desperate need of funds as their business collapses.

But at times like these, these borrowers are exactly the type that any lender should avoid due to the higher likelihood of default on their loans. Even though companies like FinVolution act as loan brokers for the banks, they have provisions to return some or all of the funds to the original lenders in the event of default, exposing them to the same credit risks to which direct lenders face.

This means online loan providers would have to sacrifice revenue growth for the time being, which they appear to be doing. The higher quality borrowers they manage to find ultimately generate less revenue and lower fees because they pay lower interest rates due to their better creditworthiness.

What’s worse for fintech lending companies is that they typically lend to consumers or smaller private sector clients who are inherently riskier than large, stable companies that borrow from traditional public banks. This can be seen in FinVolution’s ratio of loans over 90 days past due, which climbed to 1.6% at the end of June from around 1% a year earlier despite its efforts to be more careful in selecting customers.

The provisions the company is setting aside to repay its lending partners in the event of default more than doubled year-on-year in the second quarter, far outpacing a 44% increase in its total outstanding loans. This hit FinVolution’s results hard.

Provisions swell

360 DigiTech, which also became a loan facilitator with a direct lender, saw even slower revenue growth and a much larger decline in net income than FinVolution for the quarter. 360 DigiTech’s total net revenue for the three months rose only 4.5% to 4.2 billion yuan from a year earlier, while its net profit fell by around 37% to around 980 million yuan, according to its latest quarterly results published a few days before those of FinVolution.

Similar to FinVolution, 360 DigiTech recorded significantly larger provisions against possible defaults in the quarter, increasing the amount by almost 160% to around 1.2 billion yuan. In addition to earning fees in its role as an intermediary for banks, 360 DigiTech also derives income from loans distributed through trusts and asset management plans and records them as loans on its balance sheet. It describes these loans as “capital heavy”, but does not specify in its results or annual reports who is actually providing the funds for them. Nevertheless, the company has increased provisions for these assets by approximately 70%.

While FinVolution and 360 DigiTech have at least seen revenue growth, Lexin, which uses a hybrid model that mixes lending facilitation and direct lending, saw revenue decline 26% year-over-year in the second quarter. Lexin was also the only one of the three to see a decline in lending facilitation revenue, which eclipsed increases in its revenue from other businesses, such as interest from direct lending and software services for customers. tradespeople. As a result, Lexin’s net profit fell the most among the three fintechs, by almost 80%.

FinVolution likely held up better than the other two due to its focus on building capacity to target relatively high-quality borrowers before the onset of the current economic downturn, positioning itself better for the current climate. By comparison, 360 DigiTech and Lexin likely prioritized growth over risk management and are now paying the price as they strive to focus on less risky borrowers. These two still have much higher delinquency rates than FinVolution even after the latter’s metric deteriorated in Q2.

Investors apparently recognize all of this. FinVolution trades at a price-to-earnings (P/E) ratio of around 4, compared to 3.5 for 360 DigiTech and 2.6 for Lexin. FinVolution stock also had the best performance of the trio this year, roughly unchanged from its 2022 debut. In comparison, 360 DigiTech and Lexin are down 29% and 46%, respectively.

Still, that’s not to say the rest of the year looks too rosy for FinVolution, or any other lender for that matter. The worst for the Chinese economy may have passed after a difficult first half, when the arrival of the Omicron variant led to prolonged shutdowns in cities like Shanghai. But Beijing’s tough Covid-19 policies could lead to further disruption at any time, and there’s also a real estate slump and recent power shortages that have collectively prompted global investment banks to reduce their already weak projections for China’s economic growth for this year.

All of this means that the days of skyrocketing growth are unlikely to return anytime soon for these fintech companies, certainly not this year.

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Average Auto Loan Interest Rates by Credit Score https://atriunfar.net/average-auto-loan-interest-rates-by-credit-score/ Mon, 29 Aug 2022 22:19:30 +0000 https://atriunfar.net/average-auto-loan-interest-rates-by-credit-score/ Auto loan interest rates are determined by your credit score. The lower your score, the higher your interest rate will be. However, you don’t need a perfect score to get a good rate. To find the best auto loan rate, it’s wise to shop around and work to improve your credit score if it’s not […]]]>

Auto loan interest rates are determined by your credit score. The lower your score, the higher your interest rate will be. However, you don’t need a perfect score to get a good rate. To find the best auto loan rate, it’s wise to shop around and work to improve your credit score if it’s not in top shape.

Average auto loan interest rates by credit score

Auto loan interest rates are directly related to your credit score. That said, you can still get a decent rate without having top-notch credit.

To get a better idea of ​​the difference a higher credit score can make, and an idea of ​​where your interest rate might land, it’s worth looking at average rates by credit score.

Credit score Average interest rate for new car loans Average interest rate for used car loans
781 to 850 2.96% 3.68%
661 to 780 4.03% 5.53%
601 to 660 6.57% 10.33%
501 to 600 9.75% 16.85%
300 to 500 12.84% 20.43%

Source: Experian State of the automotive financing market Q2 2022

Factors That Affect Auto Loan Interest Rates

Although your credit score plays an important role in determining how much interest you pay, there are other factors to consider.

Credit score

The two most common scores used when taking out auto loans are FICO and VantageScore. The two represent several measures of financial well-being, including payment history, credit usage, credit mix, and average account age.

There are some differences in the number of metrics used and how they are weighted. But both scores are between 300 and 850.

Lender

Different lenders will have different credit underwriting criteria. Besides the credit score, your income and your debt to income ratio are going to be taken into account. Some may take your education or work experience into account or weigh it more heavily than others.

Apart from qualification and underwriting standards, some lenders also offer lower rates in general than others. Just be aware that the lowest APRs — those typically listed on lenders’ websites — go to borrowers with excellent credit.

Amount borrowed

The price of the vehicle and your down payment are taken into account in the amount borrowed. If you’re not ready to put down more than the required amount, the lender may view it as an increased risk and raise the interest rate to compensate.

term of the loan

The longer your loan term, the more interest you will pay. But, aside from the additional accrued interest, lenders may charge higher interest rates for longer loans.

How to get a better auto loan interest rate

There are several ways to improve your chances of getting a competitive interest rate, regardless of your credit score.

Compare the prices

Shop around with multiple lenders, including banks and credit unions, and compare car loan interest rates. Not all lenders report to the credit bureaus, so if you’re trying to boost your credit, be sure to choose one that does.

Request pre-approval

It’s a good idea to get pre-approved from at least three lenders before choosing a lender. You will be asked to provide personal and professional information, but not all quotes will require a thorough credit check. Because some require a hard pull, it’s best to keep your application window to around two weeks.

Make a larger down payment

A down payment decreases the amount you need to borrow. By reducing the amount borrowed, the lender takes less risk. Less risk translates into lower interest rates.

Get a co-signer

If you have a lower credit score, consider asking a trusted family member or friend who has a great credit score to co-sign your car loan. Your co-signer will assume the debt if you can’t repay it, which means there’s less risk for the lender. Keep in mind that it can strain a relationship if you are unable to pay.

Where to find the best auto loans

There are many different avenues you can use to find the best auto loan.

  • Banks. If you already have a relationship with a bank and have a high credit rating, your bank may offer you one of the most competitive interest rates. But read the entire agreement before signing – some banks write a clause that allows them to draw on your checks or savings.
  • Credit unions. Like a bank, if you are a member of a credit union, they may offer a competitive interest rate. And if you have less than perfect credit, a credit union may be willing to look beyond that and still offer a reasonable rate.
  • Online lenders. There are several online lenders that offer auto loans that you can prequalify for. As with most direct lenders, you’ll likely get a better rate than applying through a dealership.
  • Car dealerships. This is one of the main ways to end up with a higher interest rate. Dealerships add markups to the interest rates provided, which means you will have to pay more than if you went directly to the lender. Check with several different lenders before heading to a dealership to get the best deal possible.

The bottom line

Low auto loan rates are usually reserved for borrowers with near-perfect credit scores. And while it’s good to know the average rates, you’re not guaranteed to get the number for the credit bracket you’re in.

Whether or not you know your credit score, you can prequalify with online and offline lenders to see what kind of rates you qualify for.

Learn more

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Is it difficult for the self-employed to get a mortgage? https://atriunfar.net/is-it-difficult-for-the-self-employed-to-get-a-mortgage/ Sat, 27 Aug 2022 14:00:00 +0000 https://atriunfar.net/is-it-difficult-for-the-self-employed-to-get-a-mortgage/ Independent Mortgage Applicants Many people dream of being their own boss. And for good reason, several studies establish a link between self-employment and greater job satisfaction and better physical well-being. In July 2022, 16.4 million out of 158.1 million Americans were self-employed, representing 10% of the workforce, according to the US Bureau of Labor Statistics. […]]]>

Independent Mortgage Applicants

Many people dream of being their own boss. And for good reason, several studies establish a link between self-employment and greater job satisfaction and better physical well-being.

In July 2022, 16.4 million out of 158.1 million Americans were self-employed, representing 10% of the workforce, according to the US Bureau of Labor Statistics. And that percentage is likely to rise as self-employment among Americans has increased over the past decade.

However, self-employment is not without difficulties. Getting loans can be difficult, especially home loans. However, this should not deter self-employed mortgage seekers. Getting a loan can seem daunting, but it’s easier than ever for self-employed people to find mortgages with competitive rates and customizable options.

Here are some steps self-employed people can take to find suitable mortgages.

After: Looking to buy soon? Prepare to get your offer on a home accepted by getting pre-approved for a mortgage before your home search.

Find a lender specializing in self-employment income

With a stable job and a W-2, it is not difficult to qualify for loans, provided the borrower meets income and credit requirements.

Self-employed people may have more difficulty due to the variability of their income.

Using a lender familiar with self-employment is the number one factor in finding a suitable loan, John Ammar, senior executive loan consultant for Caliber Home Loans, said in an interview. Caliber Loans is a direct lender specializing in self-employment income.

“Finding a competent lender to handle self-employment income is probably the most critical thing,” Ammar said. “There are so many things that come into play when it comes to your income, whether or not you provide positive or negative income on tax returns.”

Start here:Check your self-employed mortgage eligibility

Obtain a conventional loan

Self-employed borrowers can get conventional loans with the lowest rates when the adjusted gross income (AGI) on their federal tax return meets the lender’s requirements. Mortgage lenders like Caliber qualify borrowers for loans based on their AGI.

But with the prevalence of business deductions, many borrowers will not show a high AGI.

“What your bank statements show and what your tax return shows is going to be very different for people claiming small business exemptions on their tax return,” Ammar said. “It’s not what you bring into the bank account, it’s what you file and pay taxes, and that’s why taxable income is what we use to qualify borrowers for our self-employment loans. .”

Self-employed people with higher taxable income are eligible for conventional loans, provided they have a well-established history of self-employment income. For W-2 employees, lenders can look at past three months’ income to assess a borrower’s credit risk. On the other hand, for the independents, they go back much further.

“We average your income over two years to qualify you for your purchase,” Ammar said. “If you’ve been self-employed for seven years, you only have to submit one year of tax returns.”

Seek non-traditional financing

To benefit from the lower rates, some self-employed workers could increase their taxable income by refusing the available deductions. But these deductions help many businesses grow efficiently, so leaving that money on the table can hinder small business growth.

Instead, entrepreneurs can leverage unconventional lending options to secure a mortgage.

Self-employed people can get mortgages based on cash flow instead of AGI on their tax returns, Ray Williams, president of Mortgage Maestro Group, said in an interview. Williams said her company routinely finds loans for the self-employed with payments that are several times their taxable income.

Generally, small business owners can use bank statements to prove their income. Others might use 1099 forms, profit and loss statements, or other business documents to prove what Williams called “verified income.”

Pay higher rates

Granted, there’s a trade-off with bank statement mortgages: you don’t have to give up lucrative tax deductions, but you’ll pay higher rates.

“The tax code is written to reduce what we pay to the IRS, not increase it,” Williams said. “Business owners are not doing anything wrong using the tax code, but they are being penalized by the traditional mortgage industry for buying a home.”

But pricing isn’t everything, and as Wiliams points out, this trade-off makes sense for many entrepreneurs.

“You might pay a higher interest rate for a fix, but it allows you to continue running your business the way you always have,” Williams said.

But is paying that higher interest rate worth it?

“For many business owners, it comes down to determination,” Williams said. “Am I putting money into marketing, growing, and hiring someone? Or do I claim the income, forgo deductions, pay lots of money to the IRS in taxes and not growing my business?”

And even when self-employed borrowers pay a higher rate, they may not be paying as much as they think.

“Those who use these programs understand one thing: higher interest rates mean bigger mortgage deductions,” Williams said.

Business owners can also deduct certain other housing expenses when using their home for business purposes.

After:Check your self-employed mortgage options

Keep your debt low

So how much revenue do lenders want to see? As with other mortgages, it depends on the borrower’s recurring monthly debt payments (credit cards, car payments, and house payments) that show up on the borrower’s credit report.

“You definitely want to keep your monthly debt-to-income ratio below 45%, ideally below 40%,” Caliber’s Ammar said. Lenders are more likely to approve mortgage applications within those ranges, he said.

So, if a self-employed person earns $5,000 in monthly income, lenders would like their total monthly debt payments to be less than $2,000 per month.

Low personal debt can help self-employed borrowers qualify for higher monthly mortgage payments.

Hire a mortgage broker

Finding a broker that specializes in self-employed mortgages can also be a big plus when comparing different types of loans. By using a broker, borrowers typically only need to complete one loan application for multiple options, making it easier to select an optimal solution.

Mortgage brokers can increase the closing costs of a loan if they take a commission from the borrower at closing. However, many brokers can access wholesale lending products, which may have lower rates than those offered by retail lenders.

For the self-employed, a broker who understands business ownership is ideal. Self-employed people should seek “a qualified professional who understands business, taxes and cash flow” in addition to mortgage-related topics, said Mr. Williams of Mortgage Maestro.

Don’t miss: Thinking of buying a house, but want to get a good rate? Find a lender that gives you the power to lock in an interest rate for an extended period of time so you can comfortably shop for a home knowing your rate is safe and won’t go up. Find out what you are entitled to today.

More mortgage research news:

Can I get a Jumbo Loan with 10% down payment? How about 5% less?

Can cannabis industry workers get mortgages? Surprisingly, yes.

Questions to ask each mortgage broker or lender on your list

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India’s digital lending rules cause disruption, companies plan to push back https://atriunfar.net/indias-digital-lending-rules-cause-disruption-companies-plan-to-push-back/ Fri, 26 Aug 2022 08:47:00 +0000 https://atriunfar.net/indias-digital-lending-rules-cause-disruption-companies-plan-to-push-back/ Amazon and Flipkart logos are seen near mockups of Slice and Uni credit cards in this illustration taken August 25, 2022. REUTERS/Dado Ruvic/Illustration Join now for FREE unlimited access to Reuters.com Register India’s booming digital lending industry faces tougher regulations India wants borrowers to deal with banks, not middlemen Fintech firms acting as loan facilitators […]]]>

Amazon and Flipkart logos are seen near mockups of Slice and Uni credit cards in this illustration taken August 25, 2022. REUTERS/Dado Ruvic/Illustration

Join now for FREE unlimited access to Reuters.com

  • India’s booming digital lending industry faces tougher regulations
  • India wants borrowers to deal with banks, not middlemen
  • Fintech firms acting as loan facilitators affected by move
  • Seen Rules Hit Amazon, Flipkart Loan Deals – Sources
  • Firms plan to lobby India’s central bank over source changes

MUMBAI, Aug 26 (Reuters) – India’s tougher digital lending rules have disrupted card services from foreign-backed fintech firms and jeopardized lending offers from Amazon, prompting firms to organize a pushback on lobbying, according to industry sources and a document seen by Reuters. .

Citing concerns over high rates and unfair practices, the Reserve Bank of India (RBI) said this month that a borrower must deal directly with a bank, dealing a blow to prepaid card providers and payment websites. who act as intermediaries and instantly process deferred loan payments. . Read more

India’s digital lending market has grown rapidly and facilitated $2.2 billion in digital lending in 2021-22, with startups attracting foreign backers and giving traditional banks a run for their money in the banking sector. credit.

Join now for FREE unlimited access to Reuters.com

The new rules have already hit prepaid card offers from Tiger Global, backed by Slice and Accel, startup Uni, which has partnered with banks and allowed users to split purchases into easy interest-free repayments, a feature not available with conventional credit cards.

Solving “urgent money problems” made Uni popular: its cards were swiped for an average of $67 million per month, far more than the use of credit cards from some small private and state-owned banks in India.

The RBI said the new rules should be implemented immediately, but added that “detailed instructions will be issued separately”.

Yet Uni suspended card services this week due to RBI rules, affecting hundreds of thousands of users, while Slice suspended new card issuance.

Concerns are also growing that the rules will limit plans by bigger players Amazon.com Inc (AMZN.O) and Walmart (WMT.N) Flipkart to expand their popular buy-it-now and pay-later programs that have exploited millions of users, three industry sources said.

This is because currently Amazon and Flipkart facilitate loans for their buyers. The bank pays the online merchant, while the borrower then makes the loan payments to the lender. The new RBI rules, sources say, could impact this route if online merchants cannot receive payments directly.

“It is likely that the smoothness of credit usage by the customer will be severely affected,” the Internet and Mobile Association of India, a leading industry group representing Amazon and Flipkart, said in a draft lobbying document. internal developed in collaboration with the PwC consulting group.

The group plans to push the RBI to make direct payments to merchants an exception under the new rules.

Flipkart was bullish on buy-it-now-pay-later activity, saying that in May it had doubled its user base for the service to more than 6 million in seven months.

Sources said two other groups representing payments businesses and digital lenders also plan to lobby RBI to reconsider certain provisions.

Slice said in a statement that it was committed to complying with Indian regulations, which it said were a recognition of the industry’s rapid growth. He did not comment on business challenges.

The RBI, IAMAI and PwC, and none of the other companies responded to questions from Reuters.

PROTECT CONSUMERS

Among other new rules, the RBI said fintech firms should recoup the fees for facilitating a digital loan from their banking partners, not the borrowers. And companies also need to appoint nodal agents and better control user data.

Rahul Sasi, a cybersecurity expert who was on an RBI panel that helped draft the new regulations, told Reuters that while some disruption from the new rules is inevitable, the ultimate goal is to protect consumers.

“The idea was to always let the companies operate, it wasn’t about killing the fintechs,” he said.

Nevertheless, fintech companies are worried and concerned that more regulations are on the way. Swapnil Bhaskar, chief strategy officer at Indian digital banking solutions provider “Niyo”, said the rules could lead to industry consolidation and slow an industry that has grown at a rapid pace.

The disruptions disappointed some users.

Athul Bhadran, a 28-year-old engineer, said he happily uses his Uni prepaid card to manage his budget by splitting his biggest purchases, like the 19,000 rupees ($238) he spent on a machine. wash. Now he can’t.

“I always had peace of mind if I wanted to spend a lot of money,” he said.

Join now for FREE unlimited access to Reuters.com

Reporting by Nupur Anand in Mumbai and Aditya Kalra in New Delhi; Additional reporting by Mr. Sriram; Editing by Kim Coghill

Our standards: The Thomson Reuters Trust Principles.

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BofA deceived Small Cos. on PPP loan forgiveness, according to a suit https://atriunfar.net/bofa-deceived-small-cos-on-ppp-loan-forgiveness-according-to-a-suit/ Tue, 23 Aug 2022 20:29:00 +0000 https://atriunfar.net/bofa-deceived-small-cos-on-ppp-loan-forgiveness-according-to-a-suit/ By Katryna Perera (August 23, 2022, 4:29 p.m. EDT) — Bank of America has been hit by a proposed class action lawsuit accusing it of misleading small businesses about the Paycheck Protection Program, which forced these companies to pay for thousands of dollars when their pandemic-era loans were later deemed ineligible for forgiveness. Modern Perfection […]]]>
By Katryna Perera (August 23, 2022, 4:29 p.m. EDT) — Bank of America has been hit by a proposed class action lawsuit accusing it of misleading small businesses about the Paycheck Protection Program, which forced these companies to pay for thousands of dollars when their pandemic-era loans were later deemed ineligible for forgiveness.

Modern Perfection LLC, a Maryland-based home improvement company, and Fruitful Bear LLC, a Washington-based home improvement company, filed their lawsuit Monday in federal court in Maryland on behalf of U.S. borrowers who received a loan PPP from Bank of America but were refused. loan forgiveness because they used the loan proceeds to pay the so-called 1099 workers, or because…

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RBI Press Release on Digital Loans https://atriunfar.net/rbi-press-release-on-digital-loans/ Mon, 22 Aug 2022 09:51:29 +0000 https://atriunfar.net/rbi-press-release-on-digital-loans/ To address regulatory concerns arising from the offering of various digital lending and credit products and services, the Reserve Bank of India issued a press release on August 10, 2022 to immediately implement certain recommendations made by the task force on the digital loan. Detailed instructions are expected to be issued separately by the Reserve […]]]>

To address regulatory concerns arising from the offering of various digital lending and credit products and services, the Reserve Bank of India issued a press release on August 10, 2022 to immediately implement certain recommendations made by the task force on the digital loan. Detailed instructions are expected to be issued separately by the Reserve Bank of India.

1. Introduction

Given the dynamic innovations in financial lending products and services and its perceived risks, the Reserve Bank of India (RBI) set up a working group on January 13, 2021 (Work group) to study the digital lending landscape in India and recommend a regulatory framework to address concerns arising from unregulated lending activities. Along with various recommendations, the task force, in its report dated November 18, 2021, identified the key digital lending stakeholders, namely a lending service provider (PSL) and one ‘balance sheet lender’. The task force noted that a PSL is “an on-balance sheet lender’s agent” that assists with, among other things, customer acquisition, underwriting or pricing, disbursement, monitoring, collection or liquidation of specific loans. Its role is limited to a loan originator, unlike a ‘balance sheet lender’ which is classified as an entity in the lending industry which is equipped to bear credit risk, and to whom the LSP transfers the loan. Our detailed analysis of this report can be accessed here.

Further to the above, on August 10, 2022, RBI issued a press release (Press release) requiring the immediate implementation of certain recommendations of the working group, detailed in Annex I of the press release. The press release also sets out the recommendations of the task force that are accepted in principle but require further consideration, under Annex II of the press release, and recommendations requiring engagements with the government and other parties. stakeholders, under Annex III of the press release. The press release is intended to curb unregulated lending activities, protect consumer interests and ensure data privacy and, therefore, is likely to impact pre-existing agreements between RBI-regulated entities (RE) and LSPs for digital lending.

2. Key considerations for stakeholders

2.1 Funds flow process

To address concerns arising from the lack of transparency in the disbursement and repayment of loans through an LSP, REs are prohibited from using pool or transfer accounts for the disbursement or repayment of loans . The limited exemption to this rule is: (i) disbursements covered by statutory or regulatory mandates; (ii) co-lending transactions inter se Res; and (iii) disbursements for a specified end use in accordance with applicable regulatory guidelines. While this mandate ostensibly prevents unregulated entities from participating in the process of disbursing or reimbursing funds, the reasons for introducing this exemption are unclear. Further instructions under the press release may possibly outline this exemption.

In particular, although an express prohibition has not been introduced, REs are instructed to ensure that any third-party guarantees (such as first-loss default guarantee) to offset defaults in a loan portfolio of the ER adheres to the Master Direction – Reserve Bank of India (Securitization of Standard Assets) Instructions, 2021 dated 24 September 2021. Since the role of an LSP is limited to a ‘loan originator’and the adoption of credit risk is a core function of RE, the reasons for the lack of an express bar remain unclear.

2.2 Pricing Implications

The press release prohibits a language service provider from charging fees directly to borrowers. These charges shall be accrued by the SO at the annual percentage rate (i.e. all-in cost) (APR) of the loan. In practice, fees are usually charged by LSPs for support services on a lump sum basis and it is common for these to be borne by the borrower. Given this, it remains to be seen whether the net effect of this ban would change the price exposure for the borrower, since it only changes how the borrower is charged the LSP fee.

In addition to the APR, the press release demands disclosure of the terms and conditions of the collection mechanism and the contact details of the designated complaints officer to handle “digital loans or related matters”, under the statement of key facts (KFS) provided to borrowers. Any charges not specified in the KFS cannot be charged to the borrower at any time during the term of the loan. Also, an express restriction was introduced on increasing credit limits without the consent of the borrower.

Considering the above and the mandate given to all REs (instead of only banks and NBFCs as previously stipulated by the RBI) to disclose the list of LSPs engaged by them and the role envisaged for LSPs, the commercial viability of the relationship between the LSP, RE and a borrower will need to be reconsidered.

2.3 Protective measures

2.3.1 Transparency

To ensure transparency, several measures such as direct communication between the RE and the borrowers of the loan product, due diligence to be undertaken by the REs to assess the technical capabilities of the LSP, adherence to outsourcing guidelines by the LSPs and guidance to LSPs when acting as collection agents have been introduced. Although exhaustive, these requirements prevailed in spirit prior to the press release.

To combat regressive collection practices, the press release requires an RE to disclose details of the LSP responsible for collecting the loan from the borrower, at various stages of the loan sanctioning process.

As market practices differed, the press release specifically states that regardless of the nature or duration of the loan, including whether it is taken out through digital lending apps (DLA) operated by ERs or LSPs, details of all funding must be reported to credit reporting companies.

2.3.2 Handling grievances

REs should ensure that they and their LSPs appoint Grievance Officers to deal with FinTech, digital lending issues (such as complaints or issues raised by borrowers) or issues with a DLA. Contact details for the Grievance Officer, as well as details regarding the method of filing complaints should also be provided in the DLA, RE or LSP website (as applicable), as well as in the KFS. For language service providers, an assessment may be undertaken to determine whether a grievance officer appointed under the eCommerce Rules 2020 would suffice.

The press release also acknowledges the borrower’s right of recourse to the Reserve Bank – Integrated Ombudsman Scheme, 2021 if the ER fails to address the complaint within the stipulated time (currently 30 days).

2.3.3 Cooling off period

REs are required to provide borrowers with a cooling-off or search period (as determined by the RE’s Board of Directors) to exit the loan by paying only the principal amount and prorated APR, without incurring any penalty. Borrowers will also be allowed to make advance payments beyond the cooling-off period. Arguably, this recommendation would make digital loans preferable to traditional loans for similar amounts. However, different disbursement mechanisms may require different cooling-off periods.

2.4 Data location and data protection

REs are required to store all data relating to digital lending activities on servers located in India (Location requirement). This location requirement is akin to the direction prescribed by the RBI on payment system providers and P2P lenders of the NBFC (Payments Circular), reflecting the continued attempt to favor localization. However, unlike the circular on payments locating payment data, this mandate extends the scope to all data. In practice, LSPs may also have to restructure their functions related to processing and storage, as this could be contractually imposed by REs.

In addition, language service providers are only permitted to collect and store borrower information to the extent necessary to carry out their operations. However, since its data logs are auditable, language service providers may need to demonstrate this necessity at the time of the audit.

The RBI has also indicated that it may require REs to disclose proprietary algorithms used for loan underwriting in a bid to balance transparency with innovation and adopt ethical artificial intelligence standards (AI) to protect the interests of customers. These requirements are likely imposed to assess the bias in these algorithms and ensure that the welfare of the borrower is taken into account. Stakeholders may, however, continue to resist these measures to protect their proprietary interests in their algorithms.

The RBI has also strongly emphasized the need for a consent-driven framework for digital lending. Greater autonomy is sought to be extended to borrowers, requiring language service providers to obtain explicit consent to access phone features, allowing borrowers to revoke their consent or limit the disclosure of certain data, and by explicitly requiring language service providers to develop comprehensive privacy policies. This requirement therefore goes beyond the requirements set out in the existing rules of the Information Technology Act 2000.

2.5 Other proposals

While we can expect the Annex II recommendations to be implemented within a reasonable timeframe, the Annex III recommendations require significant structural and governance changes. The thrust of these recommendations is to monitor suspicious transactions and introduce accountability for actions on DLAs. Crucially, the RBI can greenlight the proposed self-regulatory organization for digital lending to frame various codes of conduct, standard agreements, maintain a negative list of LSPs, and more.

On top of that, the government is also considering legislation to ban unregulated lending and set up an independent DLA verification body. It remains to be seen how the regulators will interact with each other and resolve overlapping functions, if any.

3 keys to take away

According to the press release, it is clear that the role of a language service provider is similar to that of a commercial correspondent – to function as an agent of the CR. In light of this, as an immediate step, all language service providers should consider the nature of the deployment and integration of their services while engaging with REs (including any pre-existing relationships with REs) to assess whether such arrangements, fund flow structures and data processing practices are permitted.

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IMF charges on war-torn countries near elimination https://atriunfar.net/imf-charges-on-war-torn-countries-near-elimination/ Sat, 20 Aug 2022 04:54:45 +0000 https://atriunfar.net/imf-charges-on-war-torn-countries-near-elimination/ WASHINGTON (AP) — The International Monetary Fund is facing pressure to reassess how it charges fees on the loans it distributes to needy countries like war-torn Ukraine — which is one of the biggest fund borrowers. The move comes as more countries will have to turn to the IMF as global food prices and inflation […]]]>

WASHINGTON (AP) — The International Monetary Fund is facing pressure to reassess how it charges fees on the loans it distributes to needy countries like war-torn Ukraine — which is one of the biggest fund borrowers.

The move comes as more countries will have to turn to the IMF as global food prices and inflation continue to rise.

Surcharges are additional charges on loans imposed on countries that are heavily indebted to the IMF.

Deputy Treasury Secretary Wally Adeyemo said last month in Aspen that finance ministers from several countries realized they had to pay the price for Russia’s war in Ukraine, especially with rising prices. foodstuffs.

“They’re going to have to go to the IMF, they’re going to need to find help,” Adeyemo said.

However, the IMF fee system could change through US legislation. An amendment to the National Defense Authorization Act, otherwise known as the Defense Spending Bill, would suspend IMF surcharges while their effectiveness and burden on indebted countries are studied.

This was passed by the US House of Representatives in July. The Senate is expected to vote on its defense bill in September. A representative of the Senate Armed Services Committee said an amendment could be proposed in the coming weeks or even on the Senate floor.

As the IMF’s largest shareholder and member of the Fund’s board, the United States can lobby for policy decisions and unilaterally veto certain board decisions.

Citing the worsening financial crises in Sri Lanka and Pakistan as examples, some accuse China of engaging in debt-trap diplomacy – or of having countries so deeply indebted that they owe it over international issues.

Advocates and civil rights organizations are filing the same complaint against the Fund, which say the organization is undermining its primary role as a lender of last resort to countries in vulnerable positions to repay debt.

With an increasingly serious risk of a global debt crisis and rising interest rates, the issue has become more pressing for countries looking to reduce their deficits.

However, some economists and fund officials say the surcharges are consistent with responsible lending behavior, as they incentivize members with large outstanding balances to repay their loans quickly. This applies in particular to countries that might otherwise not be able to secure financing from private lenders.

Maurice Obstfeld, a Berkeley economics professor and former director of the IMF’s research department, said that as a lender of last resort, the Fund’s ability to lend is important as low- and middle-income countries face a rise in interest rates.

“The Fund’s staff is reduced and in times of crisis its efforts are better directed to meet the needs of member countries,” he said in an email to The Associated Press. “Surcharges could be temporarily relaxed in the face of intense pressure on borrowing countries, but at the expense of the Fund’s ability to serve its members over the longer term.

Illinois Congressman Jesús “Chuy” García, who proposed the defense spending amendment, told The Associated Press “it’s unfair for the IMF to require countries like the Ukraine, already heavily indebted, are paying additional fees.These surcharges increase poverty and impede our global economic recovery.

According to IMF data, Ukraine’s projected real GDP is expected to fall by 35%, largely due to Russia’s invasion of Ukraine.

The country, locked in a planned endless war, has an outstanding balance of 7.5 billion SDRs – an IMF accounting unit valued at around $9.8 billion according to Ukrainian central bankers. The latest figures estimate that Ukraine will owe the IMF $360 million in surcharges between 2021 and 2023.

Economists Joseph Stiglitz of Columbia University and Kevin P. Gallagher of Boston University wrote earlier this year that “forcing excessive repayments reduces the productive potential of the borrowing country, but also harms creditors” and forces borrowers “to pay more exactly when they are most squeezed out of market access in any other form”.

Serhiy Nikolaychuk, deputy chairman of the National Bank of Ukraine, said Ukraine continued to pay its debts “despite Russia’s full-scale war against Ukraine”.

“Our country will pay its debt and surcharges under previous programs and fulfill its obligations to the IMF,” Nikolaychuk said. “It will be difficult, but we will pay.”

For years lawmakers, economists and civil rights organizations have called on the IMF, which for decades has lent billions to low-income countries, to end its surcharge policy.

In January, 18 left-leaning lawmakers wrote to the Treasury calling for the surtax policy to be eliminated. And in April, a group of 150 civil society groups and individuals signed an open letter to the IMF, demanding the same, calling the surcharges “regressive”.

A spokesperson for the fund said the surcharges are designed to discourage large and prolonged use of IMF resources.

“They only apply to countries with particularly large outstanding loans,” Mayada Ghazala said in an emailed statement, adding that poorer countries are exempt from the surcharges.

The fund’s board met in December 2021 and discussed the role of surcharges – it ultimately decided not to change the fees, but said it would review them in the future.

The IMF was created in 1944 at the United Nations Conference in Bretton Woods – one of its missions is to lend to maintain the financial stability of countries. Among its 190 countries, it lends about $1 trillion, according to the organization’s website.

An April review of the fund’s financial health for fiscal years 2022 and 2023 indicates that revenue from pre-surcharge loans “remains strong and is expected to outpace expenditures in fiscal year 2023-24.”

Andrés Arauz, a senior fellow at the liberal Center for Economic and Policy Research, says the IMF’s financial situation shows that “surcharges are not necessary for sound finances.”

“There is no excuse for the IMF to punish countries under debt stress with surcharges,” he said. “There is also no logic in it, the amount of money the IMF raises from surcharges is insignificant compared to its income and capacity.”

Garcia said, “I’m proud the House passed my amendment to support a pause and review of surtaxes at the IMF, and I will continue the fight until the president signs it into law.”

Separately, the United States has sent about $7.3 billion in aid to Ukraine since the war began in late February, including a new $775 million defense assistance program announced on Friday.

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Buyout issue leads the way despite choppy M&A market | White & Case srl https://atriunfar.net/buyout-issue-leads-the-way-despite-choppy-ma-market-white-case-srl/ Thu, 18 Aug 2022 20:16:10 +0000 https://atriunfar.net/buyout-issue-leads-the-way-despite-choppy-ma-market-white-case-srl/ Key points to remember 01 In the United States, redemptions totaling $235 billion were announced in the first half of 2022, well above pre-pandemic levels, year-over-year, dating back to 2007 02 Loan issuance for buyouts increased in the first half of the year, reaching US$94.5 billion 03 High-yield buyouts had a strong first quarter, hitting […]]]>

Key points to remember

01

In the United States, redemptions totaling $235 billion were announced in the first half of 2022, well above pre-pandemic levels, year-over-year, dating back to 2007

02

Loan issuance for buyouts increased in the first half of the year, reaching US$94.5 billion

03

High-yield buyouts had a strong first quarter, hitting US$7.4 billion, before bond market activity waned in the second quarter

Lenders’ appetite for buyout opportunities in the United States remained resilient in the first half of 2022 despite a volatile macroeconomic backdrop and lower activity across the leveraged financial market.

Loan issuance for buyouts was US$94.5 billion in the first half of 2022, compared to US$79 billion secured in what was already considered a hot market in the first half of 2021.

The high-yield bond universe did not fare as well, as inflation and rising interest rates pushed many investors to seek safer alternatives. After a very strong first quarter, in which there were $7.4 billion in high yield bond buyback issues, up more than 80% year-on-year, the second quarter saw no only $1.7 billion in additional issuance for these purposes.

Despite a tougher market, sizable buyout deals were completed in the first half of 2022. In February, 3G Capital priced a US$5.36 billion equivalent loan package to fund its acquisition of window covering manufacturer Hunter Douglas.

In the same month, government contractor Amentum secured a US$2.26 billion term loan facility to fund its purchase of another PAE contractor from Platinum Equity and the Gores Group.

The market is looking for direction

20% Loan issuance for buyouts reached $94.5 billion in the first half of 2022, up 20% year-on-year

Loan and bond issuance related to buyouts, however, were not immune to the market uncertainty created by events in Ukraine and rising inflation and interest rates. While the buyback issuance figures recorded in the first half of 2022 look good, they benefited from a pipeline of deals launched in 2021 that closed in the first three months of 2022.

However, as geopolitical and macroeconomic risks intensified, it became more difficult to push through buyout debt packages. Underwriting banks and institutional investors, as a whole, have taken a somewhat more cautious stance on funding high-leverage, lower-investment-grade buyout credits.

Investors in leveraged and high-yield loans, meanwhile, demand higher prices and wider initial issue discounts (OIDs) to gain comfort in a changing risk environment.

According to Debtwire Par, average OIDs and lending spreads have widened significantly since the start of the year, and this pricing pressure can be seen in several deals completed in the first half of the year. For example, Syniverse Technologies entered into a US$1.025 billion Term Loan B (TLB) to refinance debt in connection with Twilio’s acquisition of the company’s minority stake. The TLB, expected in 2027, has a price of SOFR +700 bps, up from the initial guidance of SOFR + 500–525 bps.

Lightstone Generation has completed the modification and extension of its US$1.463 billion TLB, pricing TLB at SOFR +575 bps, up 200 bps on existing loans, which were priced of LIBOR + 375 basis points in 2018.

View Full Image: Use of US Leveraged Loan Proceeds (H1 2022) (PDF)

Dry powder can support redemption appetite

According to Bain & Co., private equity dry powder is still at record highs, forcing buyout firms to keep rolling. This has supported buyout transaction volumes even as the broader M&A markets have cooled and could well lead to additional buyout issuances in the second half of 2022 if funding sources come to the table.

While the value of US M&A deals, excluding buyouts, fell more than 20% in the first half of 2022, year-over-year buyouts worth $235 billion were announced during of the same period, according to Mergermarket, still well above pre-pandemic levels. dates back to 2007.

Even though leveraged financial markets have cooled, investors are still seeking high-quality credits backed by familiar sponsors. Transactions can still be funded, but the quality bar is higher and funding is likely to be more expensive.

Use of US High Yield Bond Proceeds (H1 2022)

View full image “Use of US High Yield Bond Proceeds (H1 2022)” PDF

Direct lenders are gaining in importance

However, the most significant change in buyout financing since the start of the year has been the growing importance of direct lenders on increasingly large deals.

The roots of direct lending lie in smaller and mid-sized offerings and packages characterized by higher prices and tighter covenant packages. For jumbo deals, sponsors historically almost always defaulted in the cheaper and more liquid leveraged loan and high-yield bond markets, which also offered looser covenants.

Over the past two years, however, the direct lending option has become increasingly attractive to financial sponsors in a volatile market, and this trend has accelerated in 2022.

Unlike leveraged financial markets, where banks take out loans and then resell tranches to investors, direct lenders take out and hold credit. For sponsors, this removes syndication risk and delays, with direct lenders providing greater certainty of execution and terms.

The sponsors also noted that the price gap between the two products has narrowed. Direct lenders may charge a higher price upfront, but once OID and price flexibility in syndication are taken into account, the price difference is often minimal, with many sponsors finding that any premium direct loan is worth paying to eliminate the risk of syndication.

Direct lenders have also increased their assets under management over the past decade. With Preqin putting the private debt dry powder above US$1 trillion (up from US$400 billion in 2008), these lenders have more firepower at their disposal and are able to digest far more credit. important.

It has become increasingly common for financial sponsors to run dual-track processes by looking at both leveraged and bond loan options alongside what direct lenders can offer.

In some cases, buyout companies completely bypass the syndicated loan and high-yield bond markets. In 2021, Thoma Bravo funded 16 of its 19 buyouts with direct lenders, according to Reuters. It secured a $2.6 billion debt financing deal in March from a club of direct lenders, including Owl Rock Capital, Apollo Global Management, Golub Capital and Blackstone Credit, to fund its takeover of 10.7 billion from Bay Area software company Anaplan.

Direct lenders have also become more comfortable providing financing on softer and more flexible terms tailored to borrowers’ needs for larger transactions. Sponsors pursuing buy-and-build strategies, for example, can turn to direct lenders for deferred term loans that allow borrowers to draw cash over a long holding period to fund follow-on acquisitions.

Despite a volatile and uncertain market, financial sponsors are finding that they still have several options available when it comes to funding arrangements.

[View source.]

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Monroe Capital Supports Recapitalization of Premiere Digital Services by Clarion Capital Partners https://atriunfar.net/monroe-capital-supports-recapitalization-of-premiere-digital-services-by-clarion-capital-partners/ Wed, 17 Aug 2022 10:00:00 +0000 https://atriunfar.net/monroe-capital-supports-recapitalization-of-premiere-digital-services-by-clarion-capital-partners/ CHICAGO–(BUSINESS WIRE)–Monroe Capital LLC announced that it has acted as sole lead arranger and administrative agent for the financing of a senior credit facility to support the recapitalization of Premiere Digital Services (“PDS”), a portfolio company of Clarion Capital Partners. Founded in 2008, PDS is a global digital media services, distribution and technology solutions company […]]]>

CHICAGO–(BUSINESS WIRE)–Monroe Capital LLC announced that it has acted as sole lead arranger and administrative agent for the financing of a senior credit facility to support the recapitalization of Premiere Digital Services (“PDS”), a portfolio company of Clarion Capital Partners.

Founded in 2008, PDS is a global digital media services, distribution and technology solutions company based in Los Angeles, California. The Company is a provider of cloud-based digital asset delivery, supply chain management and content optimization solutions for customers in the media and entertainment industry.

About Monroe Capital

Monroe Capital LLC (“Monroe”) is a leading asset management firm specializing in the private credit markets through various strategies, including direct lending, asset-based lending, specialty finance, opportunistic lending and structured and equity. Since 2004, the company has successfully provided capital solutions to clients in the United States and Canada. Monroe prides itself on being a value-added, friendly partner for business owners, management, and private and independent sponsors. Monroe’s platform offers a wide variety of investment products for institutional and high net worth investors, with a focus on generating high-quality ‘alpha’ returns regardless of economic or business cycles. The company is headquartered in Chicago and has offices in Atlanta, Boston, Los Angeles, Miami, Naples, New York, San Francisco and Seoul.

Monroe has been recognized by both peers and investors with various awards, including Global M&A Network as 2022 Small Midsize Business Lender of the Year, Americas; Private Debt Investor as 2021 Senior Lender of the Year, 2021 Lower Middle Market Lender of the Year, Americas; Creditflux as Best US Direct Lending Fund 2021; and Pension Bridge as Private Credit Strategy of the Year 2020. For more information, visit www.monroecap.com.

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IBORROW PROVIDES FINANCING FOR ACQUISITION AND RENOVATION OF FAMOUS HAMPTONS BOUTIQUE HOTEL ON LONG ISLAND, NEW YORK https://atriunfar.net/iborrow-provides-financing-for-acquisition-and-renovation-of-famous-hamptons-boutique-hotel-on-long-island-new-york/ Sun, 14 Aug 2022 21:48:36 +0000 https://atriunfar.net/iborrow-provides-financing-for-acquisition-and-renovation-of-famous-hamptons-boutique-hotel-on-long-island-new-york/ iBorrow, a nationwide private direct lender for commercial real estate, provided financing to a well-known boutique hotel owner and operator to support the acquisition and renovation of Wainscott Inn, a boutique inn in 30 rooms located at the east end of Long Island in Sagaponack, New York. The funding comes at a time when travel […]]]>

iBorrow, a nationwide private direct lender for commercial real estate, provided financing to a well-known boutique hotel owner and operator to support the acquisition and renovation of Wainscott Inn, a boutique inn in 30 rooms located at the east end of Long Island in Sagaponack, New York.

The funding comes at a time when travel is picking up after the pandemic and hotel industry fundamentals are improving, according to Brian Good, CEO of iBorrow.

“As people start to travel again, the hospitality industry is benefiting from the rebound from the effects of the pandemic,” Good says. “As of the fourth quarter of 2021, hotel occupancy had increased to 63.2% across the country, from 48.9% a year earlier. As a result, hotel investors are increasingly pouring capital into assets like Wainscott Inn, which is located in an ideal destination for business and leisure stays.

iBorrow’s $3.3 million financing of this asset helps the borrower add the property to their portfolio and will serve as a bridge loan while the sponsor seeks building permits and city approvals.

“iBorrow has always been a reliable source to help us fund projects we have invested in over the years,” says Jon Heoing of Atlantic Equity Partners. “This particular investment shows strong potential as tourism and travel recovers. The financing that iBorrow helped secure is structured to help us execute our business plan to acquire the asset and implement comprehensive renovations. »

Lenders will likely be more open to underwriting hotel deals as industry fundamentals improve, Good says.

“While hospitality has been one of the slowest asset classes to rebound from the pandemic, it is expected to fully recover by 2025. In fact, the year ahead shows a positive trend, with hotel occupancy rates and revenue per available room (RevPAR) are expected to approach 2019 levels,” Good said. “These metrics reinforce our confidence in the long-term success of this investment.”

Wainscott Inn is located at 3720 Montauk Hwy in Sagaponack, New York.

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