By Koko De Vera, Director of Credit
4 min read
Executive Summary
- Good underwriting starts with understanding the business behind the numbers
- Conversations reveal context that financial statements alone cannot capture
- Ratios are essential guardrails, but experience and judgment help interpret them
- Strong underwriting is both analytical and intuitive
I heard a sharp snap as we beelined into the end of a bamboo solar drying facility. I saw Asri, co-founder of Agradaya, holding up a slice of ginger as she told the crowd how she tried training the ibu ibu1 to monitor the moisture in the room and in the ginger slices.
Their goal was simple. Monitor the ginger using moisture testers and aim for a precise moisture percentage to make the perfect, stable ginger slices for Agradaya’s teas. But it was difficult. The ibu ibu struggled to use the tools Asri showed them, and it felt like they would fail.
Then, after weeks of working together, the ibu ibu taught her that ginger at the right moisture level made a distinct snap. Things clicked. Instead of relying on sophisticated tools, the process relied on the ibu ibu’s ears and hands to know when the product was ready.
The ear for that snap wasn’t necessarily the most scientific, yet it came from years of working with their hands, reading materials by touch and sound. The ibu ibu showed Asri their own quality control method. It wasn’t inferior, just different. Most importantly, it worked! Agradaya produced consistent ginger slices to spec because they met the ibu ibu where they were.
Conversations Before Spreadsheets
I love this story from our investor trip in November 2025 because it reminds me so much of how we decide whether we should lend to a borrower.
Credit can be so restricted by ratios and numbers — and these are great guardrails, genuine ones. But at Beneficial Returns, before we even pore through financial statements and ask new borrowers to fill out long checklists, we start with three questions: Does the business model make sense? How is impact embedded in that business? Is there a trustworthy person running the business?
If those three are checked, it would be very hard for us to say no to an investment.
While we only offer debt (Ted talks about why here), I would argue that our approach leans closer to how equity investors do their due diligence than traditional credit. We want to understand the business structure: Who needs this product? Who pays for it? What makes this enterprise sustainable over time?
We are looking for founders who understand their market deeply. I am not talking about who makes the most beautiful Total Addressable Market chart, but founders who take the time to speak with potential customers, understand the problem, and create solutions for them.
We visit suppliers, speak with staff, and ask what repeat customers say. We want to verify whether impact is core to the business model and how business and impact growth correlate.
Then, the numbers come after. The financial statements corroborate, challenge, or deepen the picture we’ve already formed.
For example, a healthy debt service coverage doesn’t offer the full story. On the flip side, a sufficient yet thin ratio on a company with loyal customers, a mission-aligned founder, and a track record of gritting through challenges and solving problems might be exactly the kind of investment we have a bias for.
Ratios tell us about the past, but conversations reveal whether the people and systems at the heart of every business can keep delivering those numbers.
Both Numbers and Good Sense
In an earlier piece of this series, The Genius of the Both/And, Alex wrote about holding two seemingly conflicting truths in productive tension, rather than choosing one at the expense of the other.
Our underwriting is another both/and exercise. We are both rigorous and relational, both analytical and intuitive. We use numbers, and we use good sense. We look at coverage ratios, and we sit with the people behind them.
Sometimes I feel sheepish sharing our underwriting approach with others because we don’t have all the sophisticated models and tools to predict the risk of each loan. But Asri’s story reminds me that oftentimes, we humans have a tendency to put weight on what is measurable, not necessarily because it matters more, but because it’s easier to see.
Asri’s story distills BR’s approach: meet people where they are, trust what they know, and measure only what actually matters.
We have another investor trip coming up this November, this time to Chiang Rai, Thailand—and I can’t wait to see what stories find us there. If you’re interested in joining, please feel free to reach out to any member of the BR team.
1 Ibu is ‘mother’ in Bahasa Indonesia and is often used as an honorific for older ladies, like Mrs. or Madam.