Given Wellesley decided to focus on larger development finance loans last year, I wanted to talk about how we manage the structuring and approval of these transactions.
Wellesley takes security for all its lending, including build costs, interest and all fees. Wellesley will only typically lend the lower of 65% of the independent project value and 90% of the project costs. In addition, we typically expect a verified personal or corporate guarantees equal to 15% of the costs of the project. As such the security is real and tangible.
We review loan applications through a two-stage process. The “Pre-Investment Committee” looks at the borrower and their business plan (including the area, end-product and timings) versus our risk appetite and existing and forecast portfolio.
If we decide to proceed at that point, considerably more work will be done to prepare a formal submission to the “Business Acceptance Committee”, the only forum which can approve a loan. Even an approval at this stage will be subject to further due diligence and only when this is completed to our satisfaction can the loan proceed to drawdown.
In summary as well as a clear and strongly observed lending policy, there are rigorous controls over how your investments are allocated.
Stephen Bell, Chief Risk Officer