What should you look at in a loan originator's financial statements?

Useful places to start:
- Profitability: return on assets (ROA) and return on equity (ROE). A business that earns steadily is better placed to honour buyback obligations.
- Liquidity: the current ratio and the quick ratio show whether it can meet its short-term liabilities.
- Leverage: debt-to-equity compares total liabilities with shareholder equity; a high ratio can signal solvency problems.
- Loan quality: the non-performing loan (NPL) ratio, the share of loans more than 90 days overdue or in default. A high NPL ratio is a red flag.
- Provisions: the provision coverage ratio shows how much of the NPLs are covered by provisions.
- Vintage statistics: how loans issued in each period performed over time.
Compare several years, not one, and look at trends rather than single figures. Capital is at risk: crowdfunding investments are not covered by deposit guarantee schemes, can lose part or all of their value, and may be hard to sell before the end of their term.