On October, we connect borrowers and lenders. Lenders invest their savings usefully and profitably to facilitate the funding of the real economy whilst businesses find new, simple and effective sources of finance independently of banks.
Supporting companies’ growth and boost your savings at the same time. The thought of that feels good, right? But what happens after you have made your first investment? How does the repayment process work?
In this article, we explain all about repayments: when they are paid, how to monitor them, who are the teams involved in the repayment process, what can be the cause of a late repayment and, of course, how we solve the issues.
The “what” and “when” of your repayments
Repayments are the capital and interest that lenders obtain from supporting companies’ growth projects with their savings.
Repayments are made on a regular basis, depending on the amortisation schedule of their loan. October offers amortisable loans, for which you will receive capital and interest each month, and deferred loans, for which you will receive repayments after a period of time, such as the French state-guaranteed loans.
On the 5th of each month, October orders its payment service provider to charge the borrowers’ bank account for the amount of the monthly instalment. This direct debit is made following the Single Euro Payment Area (SEPA) standards. According to this standard, payment rejections can occur up to 5 business days after the operation date. Therefore, a delay is taken into account to confirm the transfer, after which your October account is credited, between the 15th and the 20th.
The date of your next repayments can be checked from the Transaction tab in the portfolio. The date showed is indicative and there may be a lag of 1 to 2 days between the predicted and actual repayment date. This lag can be due to a a bank holiday during that period or due to an exceptional technical issue, but you will always be repaid by the 20th of the month.
It takes a village
Every month, our teams work together to ensure that you receive your repayments on your October account. It is an organised process where each team has a task to perform.
- The Operations team
At the beginning of the month, the Operations team monitors if the direct debit for the monthly instalment has been processed successfully. This team is also responsible for recovering the late payments in case of incident and sharing information to the Lenders team to communicate on a payment delay to lenders.
During all the repayment process, the Operations team works hand in hand with our payment service provider, Lemon Way. Lemon Way is a financial entity approved and supervised by the French financial regulator, that manages all the financial transactions on the platform. Lemon Way authorises the direct debits and assigns the funds to the right borrower wallet. Once the funds have been assigned, October will organise the repayments by ordering a peer-to-peer transfer from the borrowers’ wallets to the lenders’ wallets.
- The Lenders Relations team
Once the Operations team knows the final status of each direct debit, the Lenders Relations team comes into play. The Lenders team gathers the information regarding late or rescheduled projects and early repayments from the Operations team and prepare the communication that lenders will receive on the repayments day.
To do so, they add a message prepared in all languages on the Activity page of the project and change the status of the project. Note that every time the project status is updated, a provision (ie. a loss estimation) will be applied to your outstanding capital and your net IRR will be adjusted.
- The Tech team
Finally, when the Operations and Lenders Relations teams are done with their tasks, the Tech team processes the repayment transactions and monitors them in case of errors. More than one million transactions are processed every month by the team! Besides, they are responsible for generating the new repayment schedules and managing the credit paybacks and early repayments.
Repayments running late
Even when all the teams coordinate their efforts, repayments can suffer a delay. Why? There are 3 main reasons that can explain a late payment on your October account.
- Mandate issue:
The mandate is an authorisation granted by the borrower, when formalizing the loan agreement, which allows October to charge their bank account every month. The bank of the borrower then has to register this mandate so October can process the direct debit.
Mandate issues occur normally when the registration by the bank fails. For example, if the mandate is registered with a wrong reference. In that case, there will be a mismatch between the mandate reference and the information at the bank, which will lead to the failure of the direct debit. Direct debits being done at the beginning of the month, October usually has enough margin to solve the mandate issue and charge the instalment before the date of the repayments.
- Technical Issue
Technical issues can be related to a third party problem or be internal.
October does not manage the money from our clients directly. Every borrower and lender has a wallet on Lemon Way and it is where October monitors the financial transactions. At the same time, Lemon Way is backed by banks. If any of these actors experiences a technical issue (which origin can be diverse), even temporary, that may create a time lag on our refund processes.
The same is true for October. Any technical issue, on our system can delay the repayment slightly, for example an unplanned server maintenance by our hosting provider or an overload of the servers. If that occurs, our Tech team will make its best to solve the issue as quickly as possible.
- Liquidity issue:
The company has insufficient funds on the bank account to repay their loan and the bank declines the direct debit. This means that we do not receive the money.
In this case, our Operations team is the one that reaches out to the company to understand why the direct debit was declined and to find a solution. Depending on the situation, there are two possibilities:
- The company is able to regularise the situation and transfer the money before the repayment day or close to the repayment date. The repayments are credited to your October account.
- The company really has a liquidity problem. In this case, it is not possible to repay lenders. The Lenders Relation team communicates the late payment to the lenders of the project and the recovery actions will start.
When a borrower has liquidity issues and is in default, our Operations team reaches out to understand the situation of the company. Together with the borrower they will try to find ways to recover the outstanding debt.
If the company collaborates with October, we will lead amicable recovery actions. An amicable recovery can goes from a quick regularisation of the instalment to a rescheduling process if the company experiences more structural difficulties.
On the contrary, if the company is not willing to collaborate with October or if the company is in insolvency proceeding, we will start the judicial recovery actions. In this case, we will handle the judicial procedures along with the external recovery agency and external partners (attorneys, receiver, etc). Judicial procedures are usually long processes and the recovery updates might become less frequent during that period. Lending to companies represents a risk of losing capital, but our mission is to defend your interest at anytime.
At October, we believe in transparency. By sharing about our processes, we aim at building a trustful relationship with our community of borrowers, lenders and partners. We hope that the repayment process is now crystal clear for you. If you have any questions about the repayments after reading this article, please do not hesitate to contact us via the chat of via [email protected].