The chair and joint chief executives of small business lender Prospa were contrite at the company's annual general meeting yesterday, offering apologies for the company's failure to meet prospectus forecasts.On November 18, the company issued a trading update saying it expected revenue for the 12 months to the end of December 2019 to fall short of the prospectus forecast by 8 per cent.The company was listed on the ASX in June, after raising $109.6 million at $3.78 a share. Following the release of the trading update, the stock price fell from $3.86 to $2.10 before recovering a little to its current level around $2.20.The company said it expected 2019 originations to be a little ahead of prospectus forecast and explained the revenue shortfall as a function of the "premiumisation" of its book. This means the company is doing more lending to borrowers with higher credit scores and, as a result, the overall interest rate it earns is lower and the margin is tighter.The company said the margin decline would be offset, to some extent, by a reduction in loan impairments, which are expected fall from 10.2 per cent of average gross loans to 8.1 per cent.The prospectus forecast was for calendar year 2019 EBITDA of $10.6 million, which was cut to $4 million in the trading update.At yesterday's AGM, Prospa chair Gail Pemberton said: "We owe shareholders an apology. While we believe we have the right strategy to drive the best long-term value for shareholders, the board is disappointed in the performance of management in the first half."Joint CEOs Greg Moshal and Beau Bertoli provided a more detailed explanation of the premiumisation strategy. They said: "Our strategy involves attracting better credit quality customers. These premium risk grade customers have three main benefits:•    we see this revenue as less risky as the probability of default is usually significantly lower;•    lower impairments can lead to improved funding costs and funding diversity; and•    in the long term we believe these customer segments should have higher lifetime value as they typically trade for longer, are larger businesses and are more likely to take up recurring revenue products like our new line of credit."Our revenue is sensitive to a lower rate card because our loan product is shorter in term and we charge a fixed interest rate. This means small movements in rate or term can generate a greater impact than in longer term or variable rate products."Moshal and Bertoli said premiumisation was always part of their plans and it was able to introduce a new rate card after receiving new funding from a major Australian bank that reduced funding costs. They said the impact on revenue was greater than expected  because there was strong take-up of the new rate card.