How we assess risk

At FOLK2FOLK, assessing risk is one of the most important things we do. It’s how we decide whether a loan is fundable, how we set appropriate terms, and how we help protect our investors — all while supporting businesses to access the capital they need to thrive.

We don’t use algorithms, automated credit scoring systems, or one-size-fits-all lending criteria. Instead, we take a considered, case-by-case view of every deal.

Here’s what that looks like.

What our risk assessment process involves

Each loan opportunity we assess is subject to several key layers of due diligence:

• Borrower assessment:
  We gather various documents, for example: financial accounts, cash flow forecasts, statements of assets and liabilities, business plans and other documents to understand the borrower’s financial position, track record, and purpose for borrowing.
• Security assessment:
  All loans are secured against UK land or property. We appoint a RICS-qualified surveyor to provide an independent open market valuation of the security asset. We then determine the proposed Loan-to-Value (LTV), which is typically a maximum of 60%.
• Legal checks:
  Our legal partners carry out full title checks on the property to identify any restrictions, charges, planning issues or other material considerations.
• Affordability review:
  Where appropriate we assess the borrower’s ability to service interest payments and repay the capital at the end of the term — whether through business revenues, sale of an asset, refinance or another clear route to repayment.
• Red flags or unusual complexity:
  Where needed, we raise clarifying questions, request further documentation, and ensure risks are properly understood by all parties before proceeding.

Who makes the final decision?

Unlike some P2P platforms, our lending decisions aren’t made by machines or automatically approved if criteria are met.

Every loan is reviewed by our experienced Credit Committee — a team of individuals with extensive lending, property, and financial backgrounds. They weigh up all aspects of the loan application and decide whether to approve, decline, or request further clarification.

Our Credit Committee’s decision is final, and no loans go live on the platform without this approval.

How we view risk at FOLK2FOLK

We understand that lending is about balancing potential return with risk. We also recognise that not all businesses fit into the narrow criteria of traditional lenders — which is why we take a more holistic approach.

That means we’ll sometimes consider complex deals, new businesses, or borrowers with variable income, provided the loan is well-secured and the route to repayment is clear.

It doesn’t mean we accept excessive risk. It means we look beyond rigid tick-boxes to assess the full picture — something our investors value, and our borrowers often rely on.

Ongoing monitoring

Our risk assessment doesn’t end once a loan is approved:

• We keep in regular contact with borrowers and monitor repayment performance.
• We review key milestones and keep an eye on changing circumstances.
• If issues arise, our team acts promptly — often identifying concerns before they escalate.

This hands-on approach helps us protect investors and support borrowers throughout the life of the loan.