Irish Alt-Lender Has Interest Rate Change Of Heart

An Irish marketplace lender has decided to change its business model in favor of fixed interest rates.

Reports on Friday (Sept. 2) revealed Linked Finance would be offering SME borrowers fixed interest rates. This is in contrast to the company’s initial model, which saw lenders bidding on interest rates they could offer to small businesses.

According to Linked Finance, fixed interest rates that are determined at the beginning of the loan application process reduce uncertainty for borrowers. They also accelerate the time it takes for SMEs to finish the application process.

The new loan product may not be the only change Linked Finance will introduce. The company is also looking to expand via joint ventures, reports said.

“With our ambitious plans to grow lending to over €350 million [$390 million] by the end of 2019, we are now looking at the involvement of strategic partners onto the platform,” said Linked Finance Chief Executive Officer Niall Dorrian in a statement. “Possible partnerships include international and domestic institutions lending to the platform and government entities looking to drive the growth of Ireland’s SME sector.”

Linked Finance said that its fixed interest rate loans are part of its next phase of growth to reach its lending target by 2019. The firm said the loan product will be appealing to a broader borrowing base, as well as to institutional and individual lenders on the platform.

The financing firm generates a credit score for its small business borrowers via its own algorithm that takes credit history, repayment ability and stability into account, reports said.

Small business lending has been on the upswing in the last few years. But analysis from the Irish Small and Medium Enterprise Association (ISMEA) in 2015 also found that wait times for small business borrowers were increasing, too. That finding could explain Linked Finance’s focus on reducing the loan application time for small business borrowers; according to ISMEA, decision times for SMEs applying for a bank loan stood at more than four weeks.