Pre-funding reviews on new lenders or renewals of funding lines have evolved significantly since the global financial crisis (‘GFC’). The reviews were superficial and extremely light touch at that point in time.
Back in the first half of the 2000s, funders believed that any failings in the processes of those they funded would be mitigated by the increasing value of the underlying assets, but the GFC exposed the risks attached to that approach.
More recently funders are more risk averse, seeking much higher and more robust confidence levels before they make decisions on funding. Every party involved in putting funding deals together is looking for a ‘can do’ approach, but that does not preclude the due diligence being probing and effective. Funders are looking for independent proof that the lenders they fund not only have the relevant policies and procedures in place, but also adopt appropriate governance and oversight principles. It is critical for all parties that effective due diligence is carried out by experts in a quick and efficient way, in support of that ‘can do’ approach.
Over several years now we have witnessed the bar being set higher as investors and regulators become more demanding. As we continue to support funders and lenders in these transactions, our engagement is shifting to earlier in the process. There are two main drivers for this; 1) Funders do not want to waste time and money on ‘no hope’ deals so they often recommend lenders obtain the Rockstead ‘tick’ before submitting their applications and 2) Lenders are recognising the reputational risk of a push back from a funder, so they seek our confidence rating to prove that their policies, procedures, and controls will satisfy the funders.
Whether a funder or lender, give us a call to see how we can help you manage and mitigate risks in funding reviews. As a fully registered FSQS supplier, you can retain our services without lengthy onboarding/procurement processes – another quick win.