What is the difference between Tranche A and B?

Tranche A investors take on a lower level of risk and so stand to receive a lower rate of return than Tranche B investors. This means that an investor that chooses to invest in Tranche A will, in respect of each scheduled repayment of capital or income from a borrower, be paid in priority to a Tranche B investor.

If a Tranche A payment is not made in full, no further payments to Tranche B investors will be received until all Tranche A payments are up to date. To reflect the priority in which tranche investors are paid (and therefore the additional risk), Tranche B investors are entitled to receive a higher income rate for the same loan invested in.