In this blog article, we illustrate the October debt collection process. In fact, lending to companies allows you to use your savings profitably, but there is always a certain degree of risk. In the case of crowd-lending, a company may not be able to repay the loan, which could result in a loss of the lent capital (or part of it). Visit http://www.writergirlscorner.com/bad-credit-debt-consolidation-loans-we-provide-online-debt-consolidation-loans/ for a summary
Over the course of their lives, businesses may face liquidity problems due to late payment by customers, or face restrictions in the supply of credit. In some cases, companies may have difficulty covering all costs or may be forced to reorganize if the economic scenario changes.
Situations of this kind, completely normal during the life of companies, affect their growth capacity and therefore also their ability to cope with payments.
How do we manage the credit recovery process?
In case of default, October takes care of the recovery process on behalf of all the lenders and immediately contacts the company. We try to understand the situation in which it finds itself and to find a solution in the shortest possible time.
Starting from this moment, three scenarios can occur:
- The company immediately regulates its situation and starts repaying as expected.
If within 7 days the company does not settle its situation, October delegates the recovery to a partner specialized in debt collection.
- The partner begins the recovery amicably, during which they try to find a solution together with the company. The goal is to reach a bilateral agreement. The friendly-recovery tone is positive and actions include email, phone calls, formal notifications, etc.
- If the friendly-recovery is unsuccessful, or there is no reason/opportunity to start with the friendly-recovery, our partner will start the recovery in court. The partner sues the company in court and tries to recover the amount with the help of the procedures required by law.
Responsible for the debt collection procedure is the team from the country of origin of the loan. So, if an Italian company is in default, it will be the Italian team of October to have responsibility for the recovery of the credit, also on behalf of the French, Spanish and Dutch lenders.
How are lenders informed of the process?
Every month, on the day of crediting the repayments, we send an email to the lenders concerned with the indication of any missed repayments. The email also contains instructions on how to consult the recovery actions.
Within the Loans page of each October account, there are a series of filters that allow you to check the status of a loan and keep track of the related payments. In this way, it is easy to filter late and regular loans.
A link to a page summarizing the recovery actions is available for all projects with late payment. This page is the main source of information regarding the recovery actions implemented by October or by our external partners. This information is updated on a monthly basis.
How do defaults affect lenders?
A default by the company adversely affects the profitability of the portfolio and is reflected in a reduction in the internal rate of return (TIR). In the event of a delay in repayments, October applies a write-down on the residual capital which expresses an estimate of the potential loss and varies according to the time that the company takes to regularize the payments. In other words, the longer it takes for the firm to resume repayments, the less likely it is to settle the situation and the greater the loss forecast.
How is the devaluation calculated?
- less than 30 days late and renegotiated loans: 40% write-down
- the delay between 30 and 120 days: devaluation of 80%
- delay over 120 days: 100% write-down
This mechanism provides lenders with a more realistic view of their portfolio at all times. It is important to underline that these losses represent an estimate and are not definitive until the residual capital is not declared irrecoverable.