Risk Based Pricing: the cost (interest rate) of a loan assigned to a certain customer is based on the perceived risk profile of that particular customer.
Most banks don’t use risk based pricing and many finance companies don’t use it either. Why? Well, many lenders, particularly in commercial lending, tend to focus on only the highest quality customers – super prime credit scores and outstanding debt service capacity. Therefore, the lending decision tends to become a) YES and here is our current rate and terms for this specific product, or b) NO THANK YOU.
Small balance commercial lending uses a risk based pricing model because small commercial customers, much like individuals, are very heterogeneous in terms of their risk profile, meaning the difference in risk from one business to another is dramatic. Some are very low risk and some present a higher level of risk. Risk based pricing simply means we have to price the higher risk customers high and the lower risk customers lower.
Fundation combines the benefits of a bank loan with the ease and efficiency of an online lender. We offer conventional loans with competitive rates to businesses with varying credit profiles. Our technology allows us to deliver capital in as few as 3 business days through streamlining the collection and evaluation of customer information and conducting the majority of the lending process electronically. As a direct lender, we use our own capital to originate and hold the loans we make, so that we can focus on building relationships with our customers. Our dedicated customer relationship model enables us to understand each unique borrower’s business. This level of service, coupled with our best-in-class products, is why many of our customers come back to us repeatedly for more capital.