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Success Story – P2P Loan To Manufacturer

This article first appeared Lets Crowd Smarter, a digital publication about crowdfunding and investing in Singapore and Asia.

Not all crowdfunding schemes are fraudulent. We (the Let’s Crowd Smarter Team) have invested in over 50 crowdfunding schemes across different platforms and our overall experience has been great.

Yes, there are a few problem loans whose repayments are always late. And we’re lucky not to have encountered any outright default yet. But we have seen more successes than failures.

We believe that as long as investors stick to the more established crowdfunding platforms (such as Funding Societies, MoolahSense, Capital-Match, Crowdo and New Union) and have a widely diversified portfolio, the overall returns should be positive.

As an example, our p2p loan portfolio is earning a cash return of about 1.5% per month, or about 12% so far this year.

Read Also: Spotting Red Flags in Crowdfunding Schemes

Crowdfunding Success – A Real Story

Here, we’ll share with you a crowdfunding success story – a p2p loan that we participated with Funding Societies in December last year. The effective interest rate was a cool 23.6% per annum. (We also have similar successes with other platforms and will share them next time.)

The loan ID is SB-1512005 but we’ll respect the borrower’s confidentiality and not disclose its identity. Below are some of the key features of the loan.

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To summarize, this company is borrowing $100k as working capital for a $780k project. It promised to repay over 6 months. Effective interest earned by the lender is 23.6% per annum. As this is a 6-month loan, the actual  interest earned is roughly half of that.

Funding Societies provided further financial information and comments on the borrower. We did a quick review and find the risk to be acceptable. Hence, we decided to lend $1,000 on this loan in December last year.

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Prompt Repayment

Over the next 6 months, this borrower repaid promptly every month. The final repayment was in June 2016. On this loan, we earned the 23.6% effective interest rate per annum – exactly as promised.

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Verifying Our Return On Investment

Now let’s verify that we are indeed earning 23.6% effective interest per annum.

But before we do that, we’ll need to explain the difference between effective and simple interest rates.

Effective interest rate refers to the interest earned on the outstanding loan. When the borrower repays its loan every month, the outstanding loan balance declines. The interest earned by this declining loan balance is known as the effective interest.

On the other hand, simple interest is basically the total interest earned by the loan as a percentage of the initial loan amount. It does not take into account the declining loan principal or the repayment every month.

We prefer to use effective interest rate. Using Excel’s IRR function as shown below, we easily show that the effective return is indeed 23.6% per annum.

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Is it really so easy?

If crowdfunding is so easy, why are there still plenty of negative news about defaults and frauds?

In our view, most of these platforms that ran into trouble are poorly managed. Many are fly-by-night operators that nobody has heard of. Their loan underwriting process is not credible at all. For the recent First Asia Alliance case, there were so many red flags, including the fact that the director of the crowdfunding platform is also the shareholder of the investee companies.

But there are also well-managed crowdfunding platforms that already have or in the process of getting CMS licenses from MAS. This includes Funding Societies, Capital Match, MoolahSense, New Union and Crowdo.

We (at Let’s Crowd Smarter) are comfortable with and have invested our own money with this second group of crowdfunding platforms. Overall, our investing experiences have been great. Of course, we do have some problem loans and late repayments, but these usually form less than 10% of our total portfolio. Success stories still far outnumber the failures we had.

If investors choose the correct platforms, investing into crowdfunding schemes can generate attractive returns without too much risk as shown in this example.

Read Also: Traits Of A Successful Trader

Funding Societies is a DollarsAndSense Brand Connect partner. Funding Societies is Singapore’s leading peer-to-peer (P2P) lending platform. They provide working capital loans for small and medium-sized enterprises (SMEs), along with attractive investment opportunities to the broader public. If you are interested to know them better, you can find out more on what they do on our DollarsAndSense Brand Connect Page.

How To Manage Your Investment Portfolio Like A Pro

Managing an investment portfolio is a lot like managing a business. With a disciplined, patient, and proactive approach, you can preserve and protect your wealth while attaining financial independence. Your investment strategies might differ, but you’ve to begin with some principles that are consistent at its core, which not only match the markets but your individual characteristics as well.

It’s also important to remember that not all investments in a portfolio may generate returns. It’s a lot like a badminton match – you will lose some points, but to win a game you’ll just have to win more points than you lose. Read the following keys to investing and know how you can ace those points!

Invest only in assets you understand

In many cases, retail investors take action in the fear of missing out on a “sure-shot” investment opportunity. The key is to avoid any frantic decision. Don’t worry about what you don’t know, worry about being sure on what you do know. If you don’t know how an investment actually works, you can’t know whether you really need it. There are plenty of alternative investment opportunities like P2P lending, which are easy to understand and implement. Consider investing in those.

Diversify

It is a prudent approach to create a basket of investments that provide broad exposure within asset classes. It spreads the risk and reward within your investment portfolio. When it comes to investing, the more diversified you are, the better.

We also advise diversification within an asset class or sector. For example, if you invest in P2P lending, you can distribute your investments across as many SMEs as possible to prevent loss in case an SME defaults. Even defaults hardly disturb your rate of return.

If you’re investing in stocks, make sure to not put more than 4% of your total portfolio in one individual stock. This will ensure that if a stock or two faces a downslide, your entire portfolio doesn’t suffer.

Invest for the long term

We believe that a long term horizon is a necessary ingredient for investment portfolio success. Investing is a marathon, not a sprint. Don’t get carried away with the ebb and flow of the market, and stay patiently invested. Also keep in mind that past performances are no guarantee of the future, and individual situations may vary.

Rebalance your portfolio regularly

Over time, your investments may fall out of sync with the original asset allocation. You may also want to restructure investment allocation. Re-assess your portfolio every six months or annually. Try not to tinker with your investment portfolio at short intervals of time – it’s also important to give time to investments.


This article was written by Funding Societies, Singapore’s leading peer-to-peer (P2P) lending platform. They provide working capital loans for small and medium-sized enterprises (SMEs), along with attractive investment opportunities to the broader public. 

Funding Societies is a DollarsAndSense Brand Connect partner. If you are interested to know them better, you can find out more on what they do on our DollarsAndSense Brand Connect Page.

Investing in Invoice Financing vs. Investing in Term Loans

Some of our investors may have already heard of our new product: Invoice Financing. But perhaps some questions remain on why it is a worthy addition to our list of products, how it is different from our regular peer-to-peer loans, etc. We hope this post will alleviate and dispel any confusion.

To start, it may help to understand what invoice financing is and why a small business may need invoice financing. Invoice financing is a product where sellers (“Borrowers” in this case) sell the future receivables or invoices they issued to their customers (“Debtors”) to get immediate cash, at a discount. When the debtors pay their invoices, investors who bought these future receivables would receive full payment and make a return.

A small business, no matter how profitable or healthy, needs constant cash flow. Credit terms of invoices (usually between 30 to 90 days) result in a time gap between delivery of goods/services and receipt of payment. Invoice financing bridges this gap by providing immediate cash up front. Certain businesses need running cash flow more than others. Wholesalers are a good example – they always need to buy more stock inventory. If most of their income is in accounts receivable, then their cash cycle will be negatively impacted.

Compare invoice financing to the more ubiquitous term loan. Invoice financing and term loans have visibly different tenures. Our term loans’ tenures range between 3 to 24 months whilst terms of payment (i.e. tenure) for invoice financing listings range between 30 and 90 days, typical of invoice cycles – this is a great difference, and some investors are fond of invoice financing because it takes much less time to get their full principal and interest back.

Another key difference would be the risks involved. As invoice financing listings are secured against the invoices, lesser risk is involved. Furthermore, an invoice financing institution would not advance 100% of the borrower’s invoice to buffer against any unforeseen circumstances. This reserve amount (as we call it), will push the Seller to chase the Debtor for timely repayments as any borrower woul want 100% of his invoice back rather than 80% the maximum amount Funding Societies will advance payment for.

The repayment and fee structures differ between the two products as well. For term loans, repayments are on a monthly basis, while service fees are charged at 1% of the monthly repayment. For invoice financing listings, repayments are only made on the invoice due date, while service fees are charged at 15% of the interest earned.

Of course, certain things stay the same here at Funding Societies. Our credit assessment of borrowers will remain rigorous. In fact, for invoice financing listings, we’ll extend our assessments to the debtors as well. We will continue with our monthly reminders and strong infrastructure in place to collect repayments in case of payment delays. As per term loans, for each invoice financing listing we put up, investors have access to a detailed factsheet to evaluate the listing.

The returns you can earn from invoice financing is comparable to term loans as well, at around 8% to 15% per annum. So if you are interested in investing in our new product, click here to access your “Browse Loans” page if you already have an account with us. If you don’t, click here to sign up now!

How Invoice Financing Can Help Business Owners

Funding Societies is happy to announce the launch of our newest product: Invoice Financing. As an introduction, invoice financing is a product where sellers (“Borrowers” in this case) sell the future receivables or invoices they issued to their customers (“Debtors”) to get immediate cash.

Simplifying the concept further, say there is a business owner and a buyer. The buyer purchased goods or services from the business owner and was issued an invoice with a credit term of 60 days. This means the business owner will only receive payment after 60 days, at the earliest; but what if the business owner needs immediate cash? This is where invoice financing comes in. Business owners can sell their invoices at a discount, in exchange for immediate cash, thus enhancing cash flow.

Utilised wisely, invoice financing can be a fantastic tool for business owners. The process of getting upfront cash through invoice financing is significantly quicker than applying for a loan from a traditional financial institution. This is especially useful for business owners who need a quick cash flow fix. Perhaps he has the opportunity to fund business growth but most of his short-term assets are tied up in accounts receivables – he can apply for invoice financing and does not have to wait till the end of the credit term to get cash.

Here at Funding Societies, we can advance an immediate loan of up to 80% of the invoice value at interest rates as low as 0.67% a month. We charge no processing fee for the loan application and approval process, only a competitive fee upon successful disbursement.

For first time Funding Societies borrowers, it would take three to seven business days from application to disbursement – a process that is relatively quick and already includes a compliance check. Repeat borrowers are in luck: the assessment, approval, and disbursement process takes merely one to two business days.

Interested in learning more about our invoice financing product? Refer to our infographic below, or contact us to find out more!