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Why Invest in P2P Lending?

Many people are new to peer-to-peer (P2P) lending as an investment option. Questions arise. Is it trustworthy? Does it fit my needs as an investor? Who else have invested in it?

All valid concerns. Nearly no one wants to jump in blind when it comes to investing hard-earned money. Not billionaires, not angel investors – even they do extensive research prior to investing. People want examples of successful P2P investors and whether P2P lending works for their portfolio.

However, you’d be surprised by how flexible this form of alternative investment is.

Flexibility

Let’s start with individual or retail investors. Why is a relatively new investment opportunity so appealing to this segment?

The financial market can strike one as tangled, complicated, and unpredictable. Where does one even begin? P2P lending can feel like a breath of fresh air as it offers a much simpler concept. Basically, it is a form of alternative investment where investors collectively fund loans and earn interest-based earnings in return. Think of P2P lending as profitable crowdfunding! Where crowdfunding projects usually support charities and artistic ventures, P2P lending lets you collect attractive returns.

Due diligence and credit assessment guides your choices

Also, compare P2P lending with stock investment. Navigating the stock market requires expertise and research. Credible P2P lending platforms perform all the necessary due diligence and credit assessment to guide your investing choices, which saves time.

You still need to do some of your own research though, so you can decide for yourself which businesses you want to invest in. But overall, P2P lending jargon is more accessible compared to other investments.

Read Also: Three Key Risks of P2P Lending

alternative and affordable

Other bonuses? The affordable entry. At Funding Societies, you can invest in each small business with as little as SGD 100. P2P lending is also a profitable, with returns up to 14% per year.

It’s easy to see why individual investors are seeking alternative investments like P2P lending. Through it, you make passive income with ease and you earn higher returns from lower capital.

Read Also: 3 Alternatives To A Dividend Portfolio

More and more, P2P lending is gaining popularity. Respected media outlets such as Forbes have talked about its benefits. P2P infrastructure is thriving and all the indications point to one conclusion: P2P lending is here to stay!

This article was first posted on the blog of Funding Societies (Malaysia). Click here for the original article.

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.

6 Different Types Of Alternative Investments You Should Consider

Whether you’re just looking, or starting out in investing, it will be helpful to understand the major instruments with which people tend to invest. This video gives an overview of 6 main investment options, as well as their qualities and characteristics. 

Read More: Starter’s Guide: 6 Different Types of Investments For You To Consider

Read Also: This App Can Help You Kick Start Your Investment Journey

Find out more about alternative investing at Funding Societies here.

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.

 

How Technology Can Revolutionise The Way We Invest

The older generations love gold and properties as their mode of investment and method to hedge against inflation. With the advancement of the Internet and technology, the new generation of investors are now more well-equipped with information and new investment opportunities. This is especially so in recent decades, when the huge leap in technology opens up a whole lot of new sub sectors in the digital industry which can potentially revolutionise the way we invest.

Let us look into 5 growing digital sub sectors and how it can create new investment opportunities.

1. Crowdfunding

According to Investopedia, Crowdfunding refers to the use of small amounts of capital from a large number of individuals to finance a new business venture. Typically, crowdfunding is either reward-based or equity-based.

For reward-based crowdfunding, entrepreneurs or inventors will pitch their product idea to investors, in exchange for a free or discounted finished product. An example of such crowdfunding website would be Kickstarter, the world largest reward based crowdfunder where over US$2 billion has been pledged by more than 10 million people since they launched in 2009. Oculus Rift began as a Kickstarter project 3 years ago, and eventually raised US$2 billion. Pledgers of the project were promised to get the upcoming Oculus Rift for free (how we wish we knew this project back then!) However, this type of crowdfunding is not considered as an investment.

As for equity-based crowdfunding, investors can chip in for the projects in exchange for the equity of the firm. The more prominent equity-based crowdfunding platforms are Seedr and CrowdFunder. Locally, Fundnel also offers various funding methods for businesses and investors depending on their suitability.

Based on 2014 statistics, Asia is recording exponential growth in crowdfunding market, contributing 21% to the global funding volume. Globally, an estimated US$87,000 is raised every hour.

2. Peer-To-Peer (P2P) Lending 

P2P lending refers to a debt financing method which enables individuals to borrow or lend, without the traditional brick and mortar financial intermediaries. Investors can lend money to the businesses in exchange for periodic interest payment and the principal amount upon maturity. It is also known as social lending. Without the traditional financial intermediaries such as banks and finance companies, P2P lending narrows the interest spread between lenders and the borrowers which is beneficial to both parties.

P2P lending is usually deemed as risker as investors are lending their money to businesses that banks might have rejected their loans. However, there are many reasons why banks can reject a loan. And one of the main reason is that these SMEs do not have enough history of track records in earning ability or cash flows.

P2P lending platforms can help to assure the investors by doing first-round screening of the SMEs before posting them online. Financial information are also provided for the investors to do due diligence.

MoolahSenseFunding Societies and Capital Match are some of the P2P lending platforms in Singapore.

3. Bitcoin

Bitcoin is a digital currency (also known as crypto-currency) created in 2009 with the promise of lower transaction fee than traditional online payment methods. It is the most accepted digital currency and some businesses accept Bitcoin as a mode of payment for goods or services. Besides acting as a mode of payment, Bitcoin is also seen as a type investment for many people. However, price of Bitcoin can be very volatile. The highest recorded price was US$1,151 per Bitcoin in 2013 while the lowest was US$205 in 2015. As at 15 Feb 2015, price of 1 Bitcoin is at US$404.

To find out moreBitcoins Investopedia 

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4. Direct Purchase Insurance (DPI)

DPI enable consumers to buy basic life insurance policies directly from the insurance companies online, without having to go through financial advisors and hence, bypass commission charges. This initiative implemented by Monetary Authority of Singapore (MAS) to allow Singaporeans to have access to basic protection without any financial advice. Consumers can compare financial products offered by different insurance companies using online platforms like CompareFirst and take their time to decide which policy best suits them.

This initiative, together with vast availability of information online, people can make more informed choice and hence reduces the conflict of interest for insurance agents. The current commission based system might prevent some of the agents from recommend the soundest advice for their clients.

Read Also: Will Buying Life Insurance Online Be The Next Big Thing?

5. Ecommerce

Everyone loves Ecommerce. Yes, everyone, even the Durian sellers.

People love to buy things online for many reasons. It can be due to convenience, price competitiveness, price comparison or variety. The trend of buying things online is set to grow further and hence, listed ecommerce companies presents an unprecedented investment opportunities for the investors. The ecommerce sector is undergoing explosive growth, attracting US$112 billion worth of investments globally in 2014.

With increased connectivity and the advancement of technology, it spurs a new wave of innovation and the birth of new subsectors. This also presents more investment options hence moving investors away from the more traditional investment methods. It is worth looking more in-depth in digital sector than ever before.

To find out more about the digital sector, visit sgx.com/digitalsector

Source of top picture

Growing Your Business Without Breaking The Bank

Do you know that 99% of businesses in Singapore are small and medium-sized enterprises (SMEs)? They employ 7 out of every 10 workers and contribute over 50% towards the National GDP.

Yet only 1 in 20 SMEs gets bank financing. Why? Insufficient collateral and track record, staggering interest rates, or all of the above. The reality is that every business starts small and raising capital is a challenge. And in addition, startups are expected provide collateral, afford high interest rates, and have a proven track record, just to be able to get funded.

While traditional banks may be appropriate for big, established corporations, small businesses may be better served by a less traditional route, but one that has gained popularity and traction over recent years. Consider peer-to-peer (P2P) lending, also known as “social lending.” P2P lending allows for individuals to lend and borrow money directly from each other, doing away with the middlemen, financial intermediaries like banks. Just as it offers borrowers loans with low interest rates, P2P lending also benefits lenders (investors) with deserving returns.

How It Works

In a typical P2P lending scenario, you sign up to become a member at a P2P marketplace website. We at Funding Societies are among the first of such marketplace platforms in Singapore and South East Asia. Serving as the platform between borrower and lender, we take care of your borrowing and investment needs.

Borrowers

Before you can borrow from our pool of lenders, we first take some time to get to know you better. We look into business and credit records along with a personal interview to understand your business. Because we want to make sure everyone goes home happy, we only accept quality applications.

Let’s say you’ve been accepted (yay!). Our pool of lenders will see your approved application and make the decision to lend the funds to you. Once your loan is fully funded or funded to your satisfaction, the amount will be released to you.

Lenders

As a lender, you get to choose which ventures you wish to fund, and you can even spread your funds among several borrowers, spreading your risk. Because of the information transparency on our site, you’ll know what kind of business you’re lending to and to what end. You may sympathise with a particular industry’s story or venture, and the future success of the borrower and related industry can give you a sense of personal satisfaction knowing you contributed.

Getting Started

Whether you are a borrower or lender, you may look into P2P lending for your next venture and consider Funding Societies. We are a marketplace lending platform that facilitates funding objectives of SMEs who hit a roadblock when it comes to getting financing. From the borrower’s end, one business borrows from many lenders. From the lender’s end, one person lends to many small businesses, spreading and minimising risks. Investors or lenders get high returns (in comparison to most investment instruments) and borrowers get the loans they need at reasonable rates. And fast. All in all a win-win situation.

While we are confident in our mission, we realise that this operation comes with inherent risks and work with caution. In our efforts to mitigate any inherent or potential risks, we differentiate ourselves in that we work with a safer and less risky SME segment. With an interest rate of 10-20%, lenders can expect lower loan default. Being a marketplace platform, we are able to secure funds from not only retail investors, but also high net-worth individuals and institutional investors. From application to cash disbursement, the process time is short, with SMEs being able to immediately secure the minimum funding within days.

Our team is comprised of predominantly Southeast Asians, with a vision of making a positive contribution to the Southeast Asian societies, hence our name Funding Societies. Within three months since our incorporation in February 2015, we have put together a team of professionals, raised funds, and received large commitments from lenders. With access to the largest and most innovative marketplace lending players in the US and world-renowned thought leaders, and bringing into play the essence of the Silicon Valley startup culture, we work collectively to continually learn, deliver, and reinvent ourselves in this market.

Our customer service is rooted in our relationship with you. We are investing in our community and education to encourage discussion on relevant topics within the world of SMEs, safe borrowing, and investment, which is why you’ll see regular articles posted on our site blog. We have a dedicated team towards client service, ensuring that you will always be served and responded to in a timely way. Making the most of today’s technology, we operate efficiently to connect and facilitate the conversation among our community of borrowers and lenders (investors).

We understand that everybody starts somewhere, and it doesn’t matter where you are, our focus is to get you (the SMEs) the funding required to grow and for lenders (investors) the boost in returns you deserve. With your partnership, you’ll be helping us deliver our mission of serving local businesses and aspiring entrepreneurs. This is our social promise.

The thriving of our national economy is measured by the growth and success of its enterprises, small, medium, and big. Let’s work together not just for our individual accomplishments, but also for our collective progress as a community.

Read also: 8 Things to Ask Yourself Before Applying for a Business Loan

Find out more about the peer-to-peer loan at Funding Societies here.

8 Things to Ask Yourself Before Applying for a Business Loan

These days, there are several resources available for business loans. But while the options exist, receiving funding is never easy – especially if you are part of a small business. Then there’s the evaluation bit. Lenders review your application thoroughly before they can deem you worthy and disburse the necessary funds. (For more information on the loan evaluation process, see this article).

Obviously, you want to maximize your chances of loan approval. Ask yourself these question before you prepare your loan application:

  1. Why do I need a business loan?

Every business loan consideration should start with this question. Do you really need a business loan? Of course, there are many excellent reasons why a business loan would be beneficial: you are planning an expansion and need financing to make it happen, you need to purchase equipment to improve your product, you need to purchase more inventory from your supplier, or you just need an injection of working capital.

Feeling unsure if your “why” passes the test? Here’s a good rule of thumb: ask yourself if a business loan will make your business grow. If the answer is yes, go for it. If not, you may want to evaluate some of your priorities.

Remember: whatever your reason for a business loan application, your lenders will question you about it. Be sure you can explain your reasoning eloquently.

  1. How much money do I need?

Like question number 1, lenders will ask loan applicants this question. Do ensure that you have spent enough time making proper calculations. If you are buying equipment, research the cost. Create financial projections.

Asking for too little will create working capital problems and might make your company financials suffer. Asking for too much makes you look as if you haven’t done the necessary research. Worse, lenders may think you lack credibility.

  1. How are my financials?

Obviously, your lenders will want to know if you can repay your loans. Otherwise why would they bother? So make sure you have a healthy cash flow and solid financial figures.

It’s very likely that you will be asked for your company’s balance sheets, income statements, cash flow statements, and bank statements so your lenders can analyze your situation.

Take the time to create accurate projections. Try to create a debt repayment plan as well.

  1. Do I have other debts?

Related to number 3, lenders will want to know all about your credit history. They want to ensure that you can repay your loan, and if you have other unmet obligations hanging over your head, lenders will view your other debts as a danger sign.

  1. Which lender is most appropriate for my credit needs?

Take the time to choose a lender that suits your needs. Research various loan products and structure, take a look at loan interest, etc. There are different lending institutions for different needs, such as large and small banks, financial institutions, government-backed loan packages, and alternative lenders, such as crowdfunding.

To read more about finding business financing for small businesses in Singapore, click here.

  1. Do I meet my chosen lender’s requirements?

Business loan applications goes both ways. While you need to choose the most suitable lender for you, it is crucial that you meet their requirements. Otherwise, sending a loan application would be a waste of time. And it can hurt you, because the next lender you apply to might question why you were rejected for other business loans.

  1. What’s my business plan?

Lenders will ask for your business plan. They want to know details on how you will use the loan money, what your plans for the future are, and whether you will ultimately repay your obligations.

A strong business plan should include past and current financial statements, along with future projections. Other elements you may want to consider are: company and product description, market analysis, and company strategy for growth.

  1. Do I have all my documents in order?

If you have all your documentation ready, the application process will be much smoother. You will also look prepared to your lender.

While required documents vary across different lending institutions, every lender will ask for financial statements. In addition, you may be asked for your credit report (personal and/or business), tax returns, bank statements, collateral information (depending on loan type), and legal documents (business licenses and registrations, articles of incorporation, etc)

Ultimately, applying for a business loan is all about preparation. Good luck!