What Due Diligence Means in P2P Lending
Due diligence is a procedure through which the borrower's credibility is evaluated before the loan is listed on the market for the investors to consider its funding. In case of P2P lending, due diligence means the review of financial statements, the considerations regarding the collateral against the loan, the assessment of managerial practices, and many other things that require scrutiny. All these factors are assessed to determine whether the borrower can realistically repay the loan.
Due diligence becomes the mechanism that protects the investors in the first stage of the loan management. Platforms, including 8lends, analyze businesses that try to list their claims for the loans on the platform. It helps the investors compare the projects and decide whether they are willing to invest. Since even highly respected businesses may face financial hurdles, it is always necessary to consider the risk factors since capital loss always remains a possibility.
Who Runs Due Diligence on 8lends?
8lends distinguishes due diligence by separating the assessment into two independent cases of the two sides who participate in the loan agreement: the lender and the borrower. Sumsub allows both the borrower's and the lender's KYC verification. The platform has several legal entities and institutional frameworks that help maintain this credibility with due diligence. Alpha Systems LLC is the system responsible for the borrower's application review, the listing of the loans, and the connection between borrowers and investors.
Another agent is Maclear AG, which acts as an independent agent for the collaterals against the loans on 8lends. The verification of borrowers, the review of the documentation surrounding the project, and the assessment of the collateral all fall within the field of Maclear AG's responsibility. Maclear AG does not have the right to operate 8lends and also does not hold the investor funds.
What Does the Collateral Agent Actually Do?
Maclear AG has the following responsibilities: review the documentation connected to the project, analyze the collateral pledged against the loan, and review the legal grounds as well as the registration of the assets potentially pledged against the loan as the collateral and the legal authority to guide the procedure of debt recovery procedures by guiding them.
The 40+ Due Diligence Criteria
8lends has over 40 criteria that help the platform assess the borrower in terms of the legal, operational, and financial aspects of their operation. The overview of the broad criteria categories is given in the table below.
| Group | What Is Checked | Why It Matters For The Investor |
|---|---|---|
| Identity and ownership | UBO verification, corporate regulation, and signatory authority | Establishes who has legal control over the borrower |
| Company history and team | Managerial experience, business model, and track record | Operational stability and experience of the team are assessed |
| Financial health | Debt-to-Equity ratio, capitalization, transparency of operations, financial statements | Helps to evaluate the borrower's capacity to repay the debt |
| Collateral assessment | The quality of the collateral, the type of the asset, valuation, LTV, legal registration | Outline recovery mechanisms in case of the borrower's default |
| Country and business risk | Regulatory environment and sector-specific risks, country exposure | External risks that affect repayment rates are measured |
Both the borrower's and the investor's verification are done through the use of Sumsub. The legal assessment and valuation of the collateral is done by Maclear AG. Both steps are done to ensure that the borrower's credibility is well established before the loan is presented to the potential investor through the market.
What Financial Metrics Are Checked?
When assessing the financial situation surrounding the borrower, 8lends uses such metrics as cash flow, capitalization, Debt-to-Equity ratio, and reports on the current and projected revenues. Overall, these metrics influence the ability of the borrower to serve the debt; therefore, the consideration of these factors helps to ensure higher credibility for both sides.
How the AAA-D Credit Rating Is Assigned
The internal credit rating on 8lends has a scale from AAA to D. Due diligence completion then follows with the assignment of a credit rating to a particular borrower, summarizing the outcome of the platform's review by considering all the factors accounted for in the table above.
The higher the credit rating, the lower the generally assessed risk. A lower risk profile can often lead to lower interest rates on the loan. When the credit rating is lower, the interest rates will usually be higher given that the investor has to face more uncertainty regarding a particular borrower. 8lends offered interest rates on the loans, which usually fluctuate between 19% and 25% APR, yet the projects differ in terms of their internal characteristics. It is important to distinguish between a returns guarantee and a professional assessment. A credit rating is the platform's assessment based on the particular metrics, meaning that a credit rating of AAA can still carry the risk of default or unexpected financial outcomes. Investment is never risk-free, and credit rating should be viewed as a professional assessment rather than a guarantee of a certain financial outcome.
What Is a Good 8lends Loan Grade?
A good 8lends loan grade is hard to determine since a higher credit rating does not automatically mean a better investment. The situation depends entirely on the investor's preferences — some may prefer projects with higher interest rates but higher risk, while others may genuinely choose lower-risk investments. It is important that such factors as LTV, the type and the legal status of the collateral, and potential portfolio diversification are assessed before making an investment decision.
Why Fewer Than 10% of Applications Get Funded
8lends has fewer than 10% acceptance rates on the parties' applications that successfully pass due diligence and have their claims listed on the marketplace. Every application from a borrower has to complete multiple stages of checks that determine the credibility of the party, including financial review, legal status review, and the review of the collateral that will be used to secure the loan.
The timeline of the process of borrower's verification can be summarized as a sequence of application submission, due diligence screening, approval, and listing of the claim on the market (this step is completed in less than 10% of the cases). It is important to understand that multiple stages of the borrower's review do not eliminate the risk of the listed borrowers. It may lower the risk profile, but unexpected financial difficulties may still emerge and create obstacles for the investor.
From Application to Listing: The Funding Flow
The project that is listed on 8lends goes through the same pipeline on the platform, including the following stages:
Application → Due Diligence questionnaire → Verification (UBO, financials, collateral) → Risk assessment → AAA-D credit rating → Terms finalised → Project listed for funding
Analyzing the LTV of the collateral pledged against the loan as well as reviewing the legal risks of the borrower and the assessment of the managerial board and decision-making are all parts of the process connected to the assessment of the borrower. Once the project has received an internal credit rating and all the documentation for it has been prepared, it is listed on 8lends and is available for financing.
Does Passing Due Diligence Guarantee Repayment?
Even if the borrower passes due diligence on 8lends, it does not guarantee repayment because even the most credible borrower (in terms of internal credit rating) may face unexpected financial difficulties that may lead to insolvency or temporary loan repayment disruptions. In case of the borrower's insolvency, mechanisms like BuyBack and the liquidation of the collateral pledged against the loan allow potential recovery. Despite proper due diligence helping to reduce the risk related to the borrower, it does not eliminate it completely.
Vetted borrowers, defined protection
On 8lends, investors fund real SME loans using USDC, receiving monthly interest at fixed rates. Every transaction — investment, interest payout, principal return — is recorded on the Base blockchain and publicly verifiable.
Each borrower passes 40+ due diligence criteria assessed by Maclear AG and is rated AAA–D before listing. Loans are backed by real-world collateral and selected projects include BuyBack protection — returning 100% of principal if a borrower delays beyond 60 days.
FAQ
How does 8lends vet borrowers?
8lends runs a multi-step due diligence process that assesses the borrower's financial situation, legal status, and the properties of the collateral that is pledged against the loan. After these steps, the platform assigns an internal credit rating to the borrower who passes due diligence, and the claim becomes available for purchase on the market.
Who performs due diligence on 8lends?
8lends performs due diligence together with Maclear AG. The platform is responsible for reviewing the applications of the borrowers while assessing the project's management and revenues, while Maclear AG serves as an independent collateral agent that assesses the legal documentation regarding the asset pledged against the loan.
What is the 8lends credit rating scale?
8lends credit rating scale is AAA-D, with AAA being the highest rating that can be attributed to the borrower and D being the lowest. A higher credit rating usually means less risk connected to the borrower's financial and legal situation, which also generally means lower interest rates for a particular loan.
How many loan applications get approved?
Less than 10% of the loan applications get approved on 8lends after due diligence. 8lends analyzes the borrower's applications under a set of criteria connected to the borrower's legal status, financial situation, and the type and value of the collateral pledged against the loan.
Does passing due diligence guarantee repayment?
No, passing due diligence does not automatically guarantee repayment. Even the most credible borrower (in terms of internal credit rating) may face unexpected financial difficulties that may lead to insolvency or temporary loan repayment disruptions. Even if the mechanisms of the platform, like BuyBack and the collateral, can protect the investor with additional layers, returns are not guaranteed, and capital always remains at risk.
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