Risk Management

In addition to KYC and AML checks, creditworthiness data and debt collection information are checked. Furthermore, this data is supplemented by the following internal audit processes:

Business Credit

A qualitative and quantitative due diligence (DD) is performed on every company. The qualitative DD is composed of e.g. management experience, strategic focus, data transparency, completeness of documents, etc. The quantitative DD is based on the last two annual financial statements.
Depending on the desired loan term, CG24 uses a short- or medium-term oriented cash flow debt model.

Real Estate

The review process is based on the underlying investment property that CG24 holds as collateral (subordinated to an external first mortgage). Our real estate experts determine the market value and thus the loan-to-value ratio of the property. Since the loan must be covered by the income from the property, CG24 also determines the affordability of the property.

Private Credit

The monthly budget surplus is determined for the affordability of the loan instalment on the basis of income and expenditure.

In addition to the credit check on the borrower himself, any collateral is stringently reviewed and monitored for value. Collateral can be joint and several guarantees, company guarantees, bank guarantees, mortgages, shares and debtor books, etc.

After the borrower and the collateral have been checked, CG24 issues a rating to the loan project. The individual rating levels consist of, in descending order, AAA, AA, A, B and C. The better the rating, the higher the probability that the borrower will repay the loan on time and in full.

If a borrower defaults on payment, the following measures are taken:

Automated dunning system

• Payment reminder
• First reminder
• Second reminder

Loan restructuring

Under certain conditions, loans can be restructured. The investor's interest is always paramount.

Legal steps

If no solution has been found with the borrower, the following steps, among others, will be taken:

• Loan termination with a payment deadline for repayment of the entire loan amount.
• If this payment deadline is not met, a debt collection procedure will be initiated.
• Realisation of collateral.

Technical default

If, despite multiple attempts to contact the customer and legal actions, no (partial) payment or a mutual solution, such as a time-limited installment plan due to changed life circumstances, is possible, a technical credit default occurs after loan termination or at the latest after 180 days of payment arrears. At this point, all investors in the corresponding solidarity pool (with the same credit type and rating class) are obliged to contribute solidarity contributions. These solidarity contributions ensure that affected investors do not suffer a total loss (see also the point on the solidarity principle).

Throughout the entire recovery process, CG24 offers you full transparency as an investor. In your investor dashboard, you have access to the status of payment arrears and the current recovery status, so you can track at which point we are in the process and negotiations.

Solidarity principle and its advantages

The solidarity principle is an essential component of the CG24 platform, which serves to spread the risk of credit defaults among all investors within the same credit category and rating level (= pool). This arrangement offers several advantages, including:

• Risk minimisation: Through the solidarity of the investors, the risk of an individual loan default or partial default is spread across the entire group, thereby reducing the individual risk of loss.
• Stability: The principle of solidarity promotes the stability of the investment, as potential losses are cushioned by the joint cover.
• Trust building: Investors can develop confidence in the platform and their investments because they know that in the event of a default, the solidarity agreement will take effect and they will not have to bear the loss alone.

Calculation example for solidarity contributions

Assume that a loan with a total amount of CHF 10,000 defaults in the ‘Private Credit Rating C’ solidarity pool, which comprises a total of CHF 5,000,000.

Directly affected investor:

One investor (investor 1) has invested a total of CHF 30,000 in this ‘Private Credit Rating C’ solidarity pool, of which CHF 2,000 is attributable to the defaulted loan.

The solidarity charges of investor 1 are calculated as follows:

Individual investment amount in the pool / total volume of the solidarity pool * defaulted amount.

(CHF 30’000 / CHF 5’000’000) * CHF 10’000 = CHF 60.

The loss suffered by investor 1 is therefore only CHF 60. Thanks to the solidarity agreement, investor 1 benefits from a repayment of solidarity credits in the amount of CHF 1,940. This repayment is made through solidarity payments from other investors who are invested in the same pool and thus bear part of the loss.

This calculation illustrates the fairness and effectiveness of the solidarity principle, which helps to minimise the risk for all investors on the platform.

Indirectly affected investor:

One investor (investor 2) has also invested a total of CHF 30,000 in this solidarity pool. However, he himself is not directly affected by the default. 

The solidarity charges of investor 2 are calculated as follows:

Individual investment amount in the pool / total volume of the solidarity pool * defaulted amount.

(CHF 30’000 / CHF 5’000’000) * CHF 10’000 = CHF 60.

Investor 2, who is indirectly affected by the default, pays CHF 60 as a solidarity contribution. This charge is automatically deducted from the next expected repayment of his investments.

Triggering of solidarity charges and transparency of pool sizes

The solidarity principle is activated in the event of a technical default, which is typically marked by a loan termination or a payment delay of up to 180 days. At this point, the investors in the affected pool are obligated to make solidarity payments in favor of the directly affected investors to ensure they do not suffer a total loss. These solidarity payments are automatically deducted from the next repayments.

The size of the individual solidarity pools and your own share of the pool are displayed transparently in the investor cockpit. Every registered investor has access to this personalised and free investor cockpit, in which the individual solidarity pools are displayed with live data and the investor’s own share of the pool is calculated. In addition, the investor cockpit offers the option of downloading monthly reports that show the performance of the individual pools based on payment delays in days.