Borrow Capacity

Additional Borrow Capacity is published alongside a Credit Score, RAE, and Implied PD. Additional Borrow Capacity is the output of a shock analysis on the Credit Score, considering the marginal impact of additional credit in the context of the credit evaluation outputs, strategy, current leverage, and historical leverage.

Additional Borrow Capacity is calculated using three parameters: Credit Score, Tolerance Percentage, and Discount Tier. These inputs are used in the Borrow Capacity Model, where the output is a dollar amount representing the amount of additional debt that has a ‘material’ impact on the Credit Score. The Tolerance Percentage defines 'material' for the Borrower (i.e. a larger tolerance for higher Credit Score Borrowers) and the Discount makes an adjustment based on the amount of Current Assets available to service debt.

A shock analysis considers the impact of additional debt on selected factors. These factors include Return on Assets, Return on Equity, Interest Coverage, Current Ratio, and Portfolio Leverage (“Shock Factors”). In total, they represent 280 of the available 1000 Credit Evaluation points. The figure below illustrates the breakdown of the available 280 points that make up the Shock Factors.