John Smith
Smith's Artisan Café Ltd
Recommend Approve
Credit Score
780
DSCR
2.27×
Default Risk
2.1%
Loan Amount
£150,000
Credit Bureau Results
Experian UK
EXPERIAN
780
out of 999
Credit Grade
Excellent
Payment History
100% On-time
Credit Utilization
12%
Adverse Records
None
Credit Age
12 years
Equifax UK
EQUIFAX
775
out of 999
Credit Grade
Excellent
Payment History
100% On-time
Credit Utilization
15%
Adverse Records
None
Active Accounts
3
Risk Grading & Expected Loss
PD (Probability of Default)
2.1%
12-month horizon
LGD (Loss Given Default)
45%
Secured lending
EL (Expected Loss)
0.95%
£1,425 exposure
AI Risk Model Reasoning
The credit risk model assigns a low probability of default (2.1%) based on the following key factors:
Excellent Credit History
780+ credit score, 100% on-time payments, no adverse records
Strong Business Performance
18% revenue growth, 30.6% net margin, consistent profitability
Healthy Cashflow
£6,240/month net cashflow, low volatility, 1.73 months reserves
Low Leverage
No existing debt, post-loan D/E of 1.2× (within policy)
Stable Industry Position
Established location, 44 months trading, diverse revenue streams
DSCR Analysis & Stress Testing
2.27×
Debt Service Coverage Ratio
Operating income covers debt service by 2.27×, significantly exceeding the minimum policy requirement of 1.25×. This provides a strong buffer against revenue fluctuations.
| Scenario | Revenue Impact | New DSCR | Affordability | Risk Assessment |
|---|---|---|---|---|
| Base Case | £450,000 (current) | 2.27× | 71% | Low Risk |
| Revenue -10% | £405,000 | 1.89× | 58% | Low Risk |
| Revenue -20% | £360,000 | 1.51× | 46% | Medium Risk |
| Revenue -30% | £315,000 | 1.13× | 33% | High Risk |
| Expenses +15% | £450,000 (revenue stable) | 1.72× | 52% | Medium Risk |
| Interest Rate +2% | £450,000 (revenue stable) | 2.01× | 65% | Low Risk |
Stress Test Analysis
Key Finding: The business maintains adequate DSCR coverage even under moderate stress scenarios. Revenue can decline by up to 20% before approaching policy minimum thresholds.
Recommendation: Loan structure is appropriate for risk profile. Strong resilience to economic headwinds.
Policy Compliance Checklist
Minimum DSCR (1.25×)
✓ Passed: 2.27× (exceeds by 82%)
Credit Score (700+)
✓ Passed: 780 (exceeds by 11%)
Trading History (24m min)
✓ Passed: 44 months (exceeds by 83%)
KYC/AML Verification
✓ Passed: All checks clear
Maximum LTV (80%)
✓ Passed: 65% (buffer of 15%)
Adverse Records
✓ Passed: No adverse findings