Repayment delays and defaults are part and parcel of debt investment, especially in the SME lending space. Delays in receivables, loss of revenue and other factors that may be outside of the SME's control can result in delays in repayments, and even defaults.
What actions are taken when repayment is delayed?
We begin negotiations with the SME to understand the position they are in, and find practical ways of recovering the debt. Investors will be updated about the process of negotiations through repayment notes made available in their portfolios, which are updated to reflect the latest progress and changes.
What is a default?
If a repayment remains unpaid 90 days past the due date, we consider the note to be in default. This does not mean that the SME will never pay, but that the non-payment is serious enough to consider recourse against them.
In this event, what recourse may you pursue?
If an SME misses a repayment, and no other methods of recovery and negotiation are successful, we may recommend to all investors who had invested to start the legal process to execute the recourse, which we will execute on behalf of all investors.
The legal process could include issuing a Letter of Demand (LOD), Writ of Summons (WOS), Statutory Demand (SD), Bankruptcy Petition (BP), Enforcement Proceedings, Writ of Seizure and Sale (WSS) and Company Winding Up Proceedings depending on the SME's situation and cooperation in the process.
Personal / Corporate Guarantors (where applicable)
The issuer is required to provide personal / corporate guarantees as part of the condition of the facility taken (unless otherwise provided by Funding Societies). In the event of non-payment from the issuer, the personal / corporate guarantors are jointly and severally liable to repay the note.