Loan Grading

What is loan grading?

All loans listed on ThinCats are issued with a Credit and Security Grade, represented by a series of “stars” and “padlocks” respectively. These are assigned based on in-depth analysis performed on the company requesting the loan, its directors, and the security pledged against the loan.

ThinCats prides itself on its hands-on approach to loans and their security, and each loan is assessed on an individual basis.

Credit Grades range from five stars (lowest risk of default) through to one star (highest risk of default).

Security Grades range from five padlocks (highest security in relation to recovery of investment upon default) through to one star (lowest security in relation to recovery of investment upon default).

The gradings support your investment choice, they do not replace it. The decision as to whether or not to invest in an individual loan will always rest with the investor.
Lenders are encouraged to perform their own due diligence on each lending opportunity before any investment is made.

Award winning

Highly Commended in Innovation in the SME Finance sector, awarded at the Business Moneyfacts awards 2017 Our loan grading system came highly commended at the 2017 Business Moneyfacts Awards for “Innovation in the SME Finance Sector”

Download the guide

We have prepared a comprehensive pdf guide compiling all the information here plus additional screenshots and details of how loan grading will look on the ThinCats platform.

Download pdf guide

Why does ThinCats issue credit and security grades?

Alongside the existing loan documentation, which gives an in-depth overview of each loan, credit and security grading provides a methodical assessment of risks associated with each lending opportunity that can be consistently applied.

The gradings will facilitate further transparency in pricing, providing lenders with better understanding of each loan offering.

How does loan grading work?

Table showing the credit and security grading ratings breakdown
The two-tiered grading system assesses each loan based on:

Credit quality: The ability of a company to service and repay its loan, represented by stars.

Security quality: The value of the borrower’s assets available in a default scenario relative to the size of loan, represented by padlocks.

Credit Grading for corporate loans

Credit grades assigned to corporate borrowers represent ThinCats’ assessment of the risks associated with the company requesting the loan. The grading is based on factors including (but not limited to):

(i) a ThinCats-proprietary enhanced blend of credit reference agency scores

(ii) recent growth performance (again unique to ThinCats’ model)

(iii) other characteristics of the company and its directors

It is indicative of a company’s ability to service the debt, as well as to grow successfully.

Each component used to construct the credit grade has been subjected to extensive testing against proprietary analysis and the wider UK SME universe – some 3,000,000 firms, of which 500,000 are borrowers.

Credit Grading for property and project financing

Credit scores for property and project finance focus on the borrower’s ability to repay the loan through the property or project.

For investment property, the focus is on the rental demand and resulting cash flows, both now and in the future. Where the property is already occupied, ThinCats will consider the type and concentration of the tenants as well as the terms of the lease agreements. For vacant properties, the focus will be on the local market and how the rental demand will be serviced or how the value will improve.

Property bridging is credit scored based on the likeliness of the property being refinanced or sold at the end of the term. Where there is a key event to take place in the bridging phase, for example planning consent to be granted in order to reduce the overall risk of the project, importance will be placed on the likeliness of this event occurring.
We quantify the key risks inherent in property development and project finance which include construction, operational and sale/refinancing risks.

In all instances, these loans are assessed on a case-by-case basis.

Security Grading

The padlocks represent the level of security that has been pledged against each loan. Assets pledged as security are valued assuming their estimated value in a formal insolvency scenario, which is conservative by nature to recognise the likely reduced valuation during a distressed sale. Pledged assets come in many different forms, and are individually valued for each loan.

Loans with five padlocks represent the highest grade of assets available relative to the loan on the platform, (more than 100%). Loans with a security grade of one padlock represents a low assets to loan ratio (below 25%). The exception to this being the unique offering of unsecured community loans by Community Chest, which will be listed with zero padlocks. This does not mean that these companies do not have any assets, it is a reflection of the fact that no security will be taken over the company’s assets.

Frequently Asked Questions

  • What gradings are ThinCats introducing?
    • We have introduced a two-tiered grading systems for all loans on the ThinCats platform:

      – Credit quality, represented by a one-to-five-star grading
      – Security quality, represented by a one-to-five-padlock grading

      This provides two ways of judging any loan: the ability of a company to service its loan obligations, and the value of the underlying security relative to the size of loan.

  • Why have you introduced this grading?
    • We are introducing loan grading to provide our lenders with another way to evaluate a loan. Alongside the existing loan documentation, which gives an in-depth overview of each loan, these two gradings are there to support your investment decision. The decision as to whether or not to invest in an individual loan will always rest with the investor.

  • How reliable are these gradings?
    • Each component used to construct the credit grade has been subjected to extensive testing against proprietary analysis and the wider UK SME universe – some 3,000,000 firms, of which 500,000 are borrowers. While the grading system has been proven to represent relative risk accurately over multiple datasets, lenders must make their own judgement when lending on the platform. The grades do not represent recommendation of specific loans by ThinCats.

  • What do the credit grading Stars signify?
    • The Stars signify the relative likelihood of the rated company to default, and therefore of the riskiness of the loan- five Stars being the highest grading and one Star the lowest.

  • What is the credit grading methodology?
    • This model combines a financial perspective on each borrower, which is driven by leading credit-agency scores, with additional and non-financial proprietary metrics, proven over 25 years of analysis to add an additional layer of insight and predictivity of default.  The methodologies used to separately refine both the financial and the non-financial perspectives from the original inputs, and then to combine the two perspectives, have been validated by observing the actual patterns of insolvencies across very large datasets (3m UK firms, of which 0.5m are SME borrowers).

  • What do the Padlocks signify?
    • The security grading is represented by Padlocks and is based on the ratio of loan amount to the value of secured assets, at the time of valuation. The highest level of grading (five Padlocks) runs to considerably more than 100% security value over the loan and one Padlock below 25% security value over the loan. These ratings take into consideration certain industry factors and the ability to recover those assets subject to the security, in the event of a default.

  • Will the gradings be periodically revised over the loan term?
    • There are currently no plans to do this.

  • Will these apply to loans on the Secondary Market?
    • Gradings are applied to each loan at the time of the original auction. We have no plans, as yet, to periodically update each loan following the initial grading. Therefore, you will see that only new loans will carry the grading and the assessment of loans on the Secondary market will remain as before.

      All the safeguards from before are still in place: if ThinCats believes that there is any cause for concern with a loan, we will not allow it to be traded on the Secondary Market. If it is already being traded on the Secondary Market, we will suspend its trading until any concerns are resolved.

      All loans (old and new) will continue to be prefixed with a secondary market loan status code.


  2. Credit and Security Grades are issued at the time of the original loan listing. Company profiles and security valuation are subjected to change during the term of the loan. Credit and Security grades are NOT periodically updated to reflect new information.
  3. Neither the credit grading, nor the security grading should be viewed as advice or recommendation.