Investing can be an exciting way to grow your wealth and reach your financial goals, but it’s not without risks. At HeavyFinance, we believe that transparency and knowledge are essential to making informed investment decisions. That’s why we’ve developed a comprehensive risk evaluation system that gives our investors the information they need to invest with confidence. In this article, we’ll take a closer look at how our risk evaluation process works and how it can help you make smart investment choices.
The Importance of Risk Evaluation
Evaluating risk is critical to making informed investment decisions. By understanding the level of risk involved in a particular investment, investors can make better decisions about how to allocate their funds. This information can also help investors diversify their portfolio and manage risk more effectively.
At HeavyFinance, we take a thorough and transparent approach to evaluating risk. By providing investors with a comprehensive rating system and detailed information on each project, we empower investors to make informed decisions about their investments.
HeavyFinance Rating System
The HeavyFinance rating is a scoring measure expressed in letters ranging from A+ to DRisk Evaluation. This rating helps investors compare and understand the risk of different investment projects on our platform. A+ indicates the least risky projects, while letter D represents the riskiest. Rating D is considered too risky to list on the platform.
To determine a project’s risk rating, we evaluate a variety of data points. These include the borrower’s years in business, loan and liabilities to revenue ratio, change in revenue, net profitability ratio, equity ratio, current liquidity ratio, credit history in days, and loan-to-value (LTV) ratio. We also evaluate the borrower’s sustainability practices, such as no-till and equipment modernization, during the underwriting process.
Data Points for Risk Evaluation
When assessing the reliability and creditworthiness of the debtor, HeavyFinance applies the assessment of the information on the borrower itself and also the representative of the project owner (in case of the legal entity) from the following sources:
- Proof of identity and farm certificate
- The project owner must complete the PEP/AML questionnaires providing their reputation information
- Credit history information acquired automatically from credit bureaus – CreditInfo (Lithuania), APIS (Bulgaria), CRBP (Portugal), Lursoft (Latvia), and BIK (Poland)
- Crop declaration (if any)
- Any other public information
At HeavyFinance, we leave no stone unturned when it comes to assessing borrower eligibility. We delve deep into the financial history of the debtor, taking into account factors such as default, fraud, insolvency, and even farming experience. Our rigorous evaluation process ensures that only the most qualified borrowers are able to access our platform, giving our investors the peace of mind they need to invest with confidence.
In order to assess the financial situation and the ability to meet the obligations of the debtors, HeavyFinance collects the two most recent years of financial statements and/or tax declarations of the debtors. Together with the credit history information, HeavyFinance evaluates the amount and source of income, information on current and past financial obligations, and existing liabilities. After collecting and verifying the information, the risk rating from A+ to D is assigned to each debtor based on the same criteria and standards.
The exclusion criteria include:
- The borrower is not related to farming
- The borrower has been operating for less than one year
- The borrower has a negative reputation
- Borrower’s risk rating is D
Additionally, the evaluation of borrowers’ sustainability practices (no-till, strip-till, equipment modernisation) is done during the underwriting process. If a borrower is engaged in the aforementioned sustainable practices, a reduction in interest rate is applied.
Collateral Evaluation
Collateral is an essential component of any secure lending agreement, providing lenders with the confidence and protection needed in case borrowers default on their loans. However, the type of collateral offered can significantly impact the lender’s level of confidence, with certain types being more favoured than others.
Collateral is evaluated by an independent certified evaluator, trusted equipment vendors for new and used equipment, and national registers to define the value of the land. The company issues loans with LTV depending on the collateral type, age, and value:
Type | Max value (%) | Age (at the end of loan period) | Min value (€) |
Land | 90% | – | € – |
Real estate (all kind) | 70% | – | € – |
Self-propelled machine | 70% | 25 | € 10 000,00 |
Attachments | 50% | 15 | € 5 000,00 |
Ready to invest with confidence and make a positive impact?
Join the growing community of responsible investors and start investing in sustainable agriculture projects with HeavyFinance today. Our rigorous risk evaluation system and commitment to transparency and sustainability give you the tools and knowledge to make informed investment decisions. Don’t miss out on the opportunity to earn attractive returns while supporting responsible agriculture practices. Sign up now and invest in a better future.
