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Want To Add Alternative Investments To Your Portfolio? Here Are 5 Kinds You Could Consider

Stocks and bonds are not the only things you may invest in. There is a range of alternative investments available which fits one’s investment profile, risk appetite and investment capital.

Alternative investments refers to any investment which does not fall under the traditional umbrella of stocks, bonds, mutual funds or insurance. Alternative investments may include peer-to-peer loans, private equity, real estate, art and collectibles or forex and more.

The market for alternative investments is increasingly popular – The total global alternative assets under management swelled to almost $6.5 trillion in 2017, up from$6.2 trillion in 2016. And growth is expected to continue, in light of the increasing popularity of retail investments, demand by growing businesses and the development of technology for risk management and portfolio monitoring.

A major selling point for alternative investments is that their returns are not closely correlated to stocks and bonds. This may help investors increase or stabilize portfolio returns while diversifying risks. However, alternative investments come with trade-offs. They tend to be less liquid than stocks and bonds and it may also be difficult to accurately assess the values of each particular investment. Before investing in alternative assets, investors should seek out expert advice and guidance to ensure they fully understand the associated values and risks.

Private equity

Private equity represents an ownership interest in a company. Unlike stocks, private equity investments are not listed on a public stock exchange. Examples of private equity may include angel investors who provide startup capital to companies, venture capitalists who invest in companies that are in their early to mid-growth stages, or buy-out investors who purchase and privatize companies. There is also equity crowdfunding which involves an online offering of a private companies shares. These investors earn returns when the companies thrive, as the value of their ownership interest increases. However, they face risks that the value of their ownership interest may decrease if the business venture fails or does not do as well as expected. In Singapore, brand-name restaurants Crystal Jade and Jumbo are backed by private equity. The investments in these restaurants aid in expanding its franchise beyond Singapore, with Crystal Jade expanding into Greater China and South-East Asia and Jumbo into Shanghai. As private equity requires a relatively large investment for a long term before significant cash flow is produced, this form of Alternative Investments may not be suitable for individual investors who are just starting out.

Real estate

Investors may purchase properties, renovate it and sell it for a profit. Investors may also choose to purchase properties and rent it out to a tenant to earn income each month. While real estate investments can potentially be a profitable investment strategy, buying a property may pose a great financial hurdle for some. Furthermore, depending on the conditions of the property market, land prices may be raised or lowered. This may affect the amount of profits one can earn. To illustrate, if one purchased a property below market value but manages to sell it for a price above market value, his profits earned would be higher. For example, en blocs are a potential way to earn profits, where properties may sell for higher than what its owners originally paid for the property.

Art and collectibles

Investors can purchase and sell fine art for a profit. Some fine art pieces may appreciate over time, earning investors a handsome sum of money. However, investors must be careful about the kinds of pieces that they choose to invest in as not all art pieces on the market may be authentic or appreciate in value. To ensure this, it is best to invest in art through licensed art dealers to avoid purchasing counterfeit pieces and to accurately value the pieces. In Singapore, investors wanting to trade art pieces may attend The Affordable Art Fair held twice yearly, where they may sell art pieces for up to $15,000.

Investors can also trade collectible coins, which can be found on online platforms such as eBay. Investors should do their research or seek expert advice before investing in art and collectibles, to ensure that they understand the true value of the investment as well as to ensure they are dabbling in only authentic goods.

Cryptocurrency

A cryptocurrency is a digital or virtual currency designed to work as a medium of exchange. Cryptocurrency trading does not require a high start-up capital and opportunities to enter the market are 24/7. The value of cryptocurrencies are widely known to be volatile and unpredictable. Similar to stocks, investors trade cryptocurrency on stock exchanges. There are two ways to obtain cryptocurrency, through “mining” and or buying them from a trading platform. There are many trading platforms now in Singapore that enable you to buy and sell cryptocurrencies. Cryptocurrencies are presently unregulated in Singapore and most of the world. Due to the lack of regulations, cryptocurrencies are highly volatile and investor sentiments tend to fluctuate wildly.

Peer-to-Peer lending

Peer-to-Peer lending (or P2P lending), or debt crowdfunding, is a concept whereby businesses approach a crowdfunding platform for loans which are then funded by a pool of investors. Investors earn interest, paid by borrowers, as returns on their investment. With Funding Societies, you can invest from as low as $20. With a risk-based pricing, investors should remain cautious that there may be higher risks involved in investments which bring higher returns (from higher interest rates). The main risk comes in the form of defaults by borrowers who are unable to repay the loan. Investors should choose a P2P lending platform which carries out comprehensive due diligence on each investment opportunity. However, investors should still note they are not immunised from risk entirely.

Should you invest in alternative assets?

As with any investment, it is important for you to fully understand the investment opportunity before putting any money into it. While there is no harm in diversifying your portfolio and giving alternative investments a try, you should invest in line with your risk appetite.

What Is An Escrow – And Can It Help Reduce Risk For P2P Investors?

When conducting important transactions that involve numerous intricacies, it is essential that safeguarding measures are in place to protect the interests of both parties. One efficient and common approach is none other than utilising an escrow account.

What exactly is an escrow account?

Now what exactly does escrow imply, and how does an escrow account work? Escrow refers to the use of a third party entity that is not directly involved in the transaction or contract, to safe keep documents, funds and the likes before the transaction is finalised. Terms and conditions are drafted by immediate parties (e.g. mortgagor and mortgagee) before the escrow account is created. If the agreements fall through, funds will be returned to the original owner.

Funding Societies understands the importance of building trust with investors and borrowers, and became the first peer-to-peer (P2P) lending platform in Singapore to use an escrow. We engage Vista Trust Singapore, which is regulated by the Monetary Authority of Singapore (MAS). This ensures that our borrowers and investors go through the Know-Your-Customer (KYC) process- a compliance process to verify their identity, and that all monetary transactions uphold the requisitions of the Anti-Money Laundering Act.

Why is Escrow important for a P2P lending platform?

First, it ensures transparent transactions. Funds will not be transferred directly into the business account of the platform at any point in time. Rather, it goes from the investor to the escrow and finally the business as a loan, upon fulfillment of all terms and conditions. Essentially, an escrow serves as an intermediary that acts on behalf of investors or businesses to guard and transfer the funds such that neither parties have immediate access to it. Thus, all stakeholders involved in the transaction can rest assured that no underhand dealings will take place.

Second, escrow acts as a second line of safety for investors like yourself. In the event that the platform goes bankrupt,  the escrow agent will continue to collect repayments for ongoing loans from the borrowers to pay the investors. In other words, investors’ money is protected by the escrow and the terms are still fulfilled.

Why should Funding Societies be your chosen P2P investment platform?

At Funding Societies, earning trust from our clients is our priority. This is the core reason why we dedicate time, effort and resources to engage an escrow agent to serve both ourselves and clients. We want to do things right, and gain the trust and support of our most valued clients.

Complete Beginners’ Guide To Investing In P2P

By now, you’ve probably heard about P2P lending as a fast-growing alternative investment.

P2P lending allows investors to earn attractive interest on their money by lending it to businesses with growth potential and plans.  Returns come in the form of regular repayment of interest and principal. For any given loan, there could be hundreds of investors who put up the money and share the risks and returns of the investment.

There are some misconceptions about P2P lending, which you should be aware of so that you can make your own informed decision whether to invest in it or not.

Read Also: The Myths And Misconceptions About Peer-To-Peer Lending

The P2P Sector Has Grown And Matured

The alternative finance industry, or marketplace lending, has become increasingly popular regionally in recent times and has been growing at an impressive pace.

In 2016, Southeast Asia’s alternative finance market grew 363% from 2015 to a value of US$215.94 million, with marketplace business lending amounting to more than half of the market’s value. Further data showed that the market size of Singapore’s marketplace business lending grew almost 10x from US$9.43million in 2015 to $88.4million in 2016.

Funding Societies, one of the leading P2P platforms in Singapore and Southeast Asia recently surpassed $200 million in P2P loans successfully transacted through their platform, while maintaining industry-low default rates. The number of investors of P2P loans have also increased significantly – with 75,000 investors on Funding Societies’ platform alone.

Earlier this year, the Singapore Fintech Association formed the Marketplace Lending Committee, with the aim to represent all marketplace lenders, nurture and build relationships, design and promote good practices, and play a part in ensuring that the industry remains a reliable and viable source of alternative financing for business owners.

Why Invest In P2P Lending?

There are many good reasons why investors might want to consider investing in P2P, including flexibility, low investment amount, and transparency about the company you’re lending to, and their own skin in the game.

There are a few platforms that offer retail investors with P2P investing opportunities. One of them is Funding Societies, where users can enjoy loans with a short tenor, receive fast and frequent updates to their app and platform, as well as access loans with high potential returns.

Once you’re ready to take the plunge, head over to Funding Societies’ website to sign up for an account and take a look at the loans that are currently available for investing.

Read Also: 3 Good Reasons Why You Should Consider Investing In P2P

Sound Investing Principles Still Apply

Even though P2P lending is a new and nascent investment instrument, the fundamentals of investing still apply, such   as diversification, investing only what you can afford to lose, and knowing your own risk tolerance.

All investments carry risk, and you should be fully aware of what the risks are before investing your hard-earned money. The key risk being that of companies defaulting on their debt obligations.

Read Also: 8 Principles Of Investing For Beginners And Beyond

S$200 Million Mark Reached For P2P Crowdfunding Platform Funding Societies

Funding Societies announced that they have surpassed the SGD 200 million mark in total crowdfunded SME loans. This achievement came just 6 months after crossing SGD 100 million in January this year. In the same period, its investor base has also increased from about 40,000 to  75,000, indicating strong demand from investors to support local SMEs while diversifying their investment portfolio.

Kelvin Teo, co-founder and CEO of Funding Societies commented, “It took 30 months to achieve our first S$100M and 6 months for our second S$100M. But the industry is still nascent. We’d continue to focus on serving SMEs’ and investors’ needs.” Kelvin is also the c0-chair for the Singapore Fintech Association’s Marketplace Lending Committee.

As you probably know, Funding Societies provides business financing to underserved SMEs for their working capital and expansion needs across Singapore, Indonesia and Malaysia. This is done through its digital marketplace platform where retail and institutional investors come together to lend to the SMEs. Businesses can avail loans ranging from just SGD 5,000 going up to SGD 2 million and with a quick turnaround time,  as fast as 2 hours for loan approval and 24 hours for SMEs to receive the funds. On the other spectrum, investors who lend to the SMEs through the platform receive up to 14% per annum in returns and can invest starting from just SGD 20 per loan. In linking SMEs and investors, Funding Societies has achieved a notable track record of less than 1.5% in default rate, one of the lowest in the region.

According to the SME Development Survey by DP Information Group, 35% of SMEs in Singapore surveyed in 2017 face finance-related issues, up from just 14% in 2015. This problem is further compounded, with 81% of these Singapore SMEs experiencing delayed payments from their customers, a jump from just 14% in the previous year. The problem of cash flow management faced by SMEs is an issue that needs to be addressed. Funding Societies is committed to support SMEs by providing more flexible business loans to suit the financing needs of these SMEs.

Funding Societies has been innovating to serve SMEs. In 2016, it launched FS Bolt, a first-in-Singapore mobile app based loans meant for micro and young businesses. Funding Societies was also the first FinTech firm to adopt MyInfo under GovTech’s initiative, to simplify SMEs’ loan application process. In the last few months, Funding Societies introduced  Property-backed Secured Loans as well as an enhanced version of Invoice Financing where based on past aging, for well paying debtors, the tenor can be extended up to 120 days.

Most SMEs Funding Societies has funded come from diverse sectors and do not receive adequate financing through traditional options. Others have existing bank loans but approach Funding Societies for fast and short term bridging loans. The speed of crowdfunding is fast with loan campaigns getting funded within minutes for small loans to a few hours for larger loans. The efficient crowdfunding reflects a strong demand by local investors and provides SMEs access to funds in a shorter time frame.

In its recent Series B funding led by SoftBank Ventures Korea, Funding Societies raised US $25 million, the largest for a peer-to-peer lending platform in Southeast Asia. The funding round was supported by global and local investors like Sequoia India and Golden Gate Ventures.

Funding Societies has earned many local as well as global awards and recognition over the last one year. Its Indonesian entity Modalku won the Global SME Excellence Award from United Nations’ ITU Telecom late last year – the first and only Asian startup to win the award. It has earlier won the Fintech Award from Monetary Authority of Singapore (MAS) and was recently recognised amongst the Best 50 Companies to Work for globally by Silicon Review. The local and international awards highlight the impact of financial technology on SMEs and society as a whole.

News of this milestone for Funding Societies, and the larger P2P lending space, also made it to Digital News Asia and Crowdfund Insider.

Singapore Fintech Association Launches New Marketplace Lending Committee

In response to the dynamic growth and future potential of the P2P lending space for both companies and retail investors, the Singapore Fintech Association (SFA) recently announced the creation of Marketplace Lending Committee. Kelvin Teo, CEO and co-founder of Funding Societies was appointed as Co-Chair of this newly-created committee.

P2P Lending: A Growing Sector

The alternative finance industry, or marketplace lending, has become increasingly popular regionally in recent times and has been growing at an impressive pace.

In 2016, Southeast Asia’s alternative finance market grew 363% from 2015 to a value of US$215.94 million, with marketplace business lending amounting to more than half of the market’s value. Further data showed that the market size of Singapore’s marketplace business lending grew almost 10x from US$9.43million in 2015 to $88.4million in 2016.

In 2016, MAS created regulations for securities-based crowdfunding. Funding Societies was one of the first to acquire a CMS license and has grown significantly to become the leading platform in Indonesia as well as Malaysia.

Singapore Fintech Association’s Marketplace Lending Committee

Marketplace Lending Committee aims to represent all marketplace lenders, nurture and build relationships, design and promote good practices, and play a part in ensuring that the industry remains a reliable and viable source of alternative financing for business owners.

The committee is made up of online lenders licensed by the Monetary Authority of Singapore of the Capital Market Service License.

The Marketplace Lending Committee’s initial tasks are to design and promote best practices, industry guidelines and codes of conduct in a collaborative and open manner. This is to encourage transparency between market participants.

Kelvin Teo, Co-Chair of Marketplace Lending, CEO of Funding Societies, stated:

“Working together, we believe this is the first step towards building a healthy and sustainable marketplace lending industry.”

To find out more about Marketplace Lending committee or the Singapore Fintech Association, please visit their website.

(Images Credit: Singapore Fintech Association)

4 Reasons To Consider Investing With Funding Societies

Peer-to-peer lending, or P2P lending, utilizes technology and big data to connect investors and small and medium-sized enterprises (SMEs) looking for business funding. To investors, it can function as an alternative investment that gives them an opportunity to earn passive income by financing business loans for SMEs.

In Southeast Asia, P2P lending has witnessed significant growth in recent years, led predominantly by Singapore. To date, around 60 platforms are currently operating in the online lending and crowdfunding space, which have become an increasingly popular alternative investment option.

If you’re wondering how you can take part in investing with P2P lending, Funding Societies would be a great place to explore. As of May 2018, Funding Societies has onboarded more than 70,000 investors across Singapore, Indonesia and Malaysia and provided more than S$160 million worth of investment opportunities in crowdfunded loans.

Here are four things you can expect when investing in P2P lending through Funding Societies.

# 1 Business loan products with short tenors

Funding Societies offers three investment products: Business Term Loan, Invoice Financing, and the newly launched Property-Backed Business Loan. Business Term Loan allows you to make investments by financing SME loans with tenors ranging from 1-12 months. In return, you will receive monthly repayments of principal and interests. You can maximize your returns by reinvesting your repayments to new loans.

Meanwhile, with Invoice Financing, SMEs would be able to cash out by pledging their invoices to Funding Societies. Invoice Financing has a shorter tenor, which generally lasts for only 30-120 days with a one-time repayment of principal and interest at the end of the tenor.

With Property-Backed Business Loan, investments are secured by a property (residential, industrial, or commercial). Different from the other products, Property-backed Business Loans offer security in the form of property as a collateral, and is a good option to add diversification to your investment portfolio.

# 2 Potential returns as high as 14% p.a.

As an investor, the returns you get from your P2P lending investments come in the form of interests paid by SMEs.

Given that P2P loans are generally more flexible in its tenor and SMEs that get financing from Funding Societies have shorter or imperfect operational track records, interest rates are determined accordingly based on risk, in the range of 8-14% p.a.. Higher risks typically come with higher returns, so investors should invest based on their appetite for risk.

# 3 Regular updates from the platform

Expect to get regular updates from Funding Societies as an investor on the platform! With every important event or update, the platform sends alerts via email or in-app notifications so that investors are constantly kept up to date with us.

For instance, whenever there is an upcoming loan for crowdfunding, investors will receive an email notification. In the event of late repayment or if there’s an update for specific loans, Funding Societies will also communicate in the quickest and most transparent way. So make sure you switch on your app notifications for any important alerts!

If you need any further clarifications, Miyu, Funding Societies’ very own chatbot, and our customer experience (CX) team will be happy to answer all of your questions via live chat. Or call us at 62210958 to have a quick chat with our team.

# 4 Well-designed User Interface

Funding Societies Website

Funding Societies Mobile App

Investors should be able to review their portfolios easily. That’s why Funding Societies’ website has recently been improved to provide details of your investment portfolio in a clear and concise manner.

In addition, since 80% of Funding Societies’ investors access our platform via their mobile phone, the company has created a Funding Societies mobile app to cater to all mobile users out there. As an investor, you can review your portfolio, change your auto-invest settings, crowdfund a loan, and even use the live chat feature — all in one app! It’s simple, convenient and efficient.

Funding Societies is also constantly taking feedback from investors and working on them to improve the whole experience for you.


About Funding Societies

Funding Societies is the leading digital P2P lending platform in Southeast Asia and is operating in Singapore under the Capital Markets Services license issued by the Monetary Authority of Singapore (MAS). Recently, it has raised a Series B round of funding, the largest by a P2P lending platform in Southeast Asia. Funding Societies is also the only P2P lender to have received the Fintech Award given by MAS.

Sign up as an investor with Funding Societies now!

Introducing Property-Secured P2P Loans

For the newbies, debt crowdfunding is a concept where borrowers (usually SMEs) approach a crowdfunding platform for loans funded by a pool of investors. Investors earn interest, paid by borrowers, as returns on their investment. Investments are open to individuals as well as corporates with a minimum amount going down as low as $50 for smaller loan amounts.

Funding Societies, licensed and leading crowdfunding platform in Southeast Asia, backed by SoftBank Ventures Korea and Sequoia Capital, has recently introduced Property backed Secured Loans to its pool of more than 50,000 investors, providing them with more diversification opportunities. This is the third product Funding Societies has introduced since Business Term Loans and Invoice Financing.

What are Property backed Secured Loans?

Property backed Secured Loans are loans taken by companies who have pledged a local property as a form of collateral against the loan. These are local properties owned by the companies and/or Directors of the companies, and can be Residential, Commercial or Industrial. The loan amount is capped at 70% of the property value determined by independent valuers.

As an investor, you can start investing from $1,000 in this secured crowdfunding product.

Why should you be excited about this product?

It is secured by property as a collateral: Funding Societies (FS) takes the first charge on the property, i.e. In the event that the property needs to be liquidated to repay the loan, FS will have the first right to access the cash after it is auctioned. Given the 70% Loan to Property Value (LTV), there is enough buffer against fluctuations in market prices that result in properties being devalued.

It’s a short-term investment: The loans are typically up to 12 months’ tenor.

Fair returns for a lower-risk product: You can get up to 8% p.a. returns in your investment.

Additional Diversification: Existing crowdfunding investors now have a secured loan product to further diversify their portfolios. New investors who have not invested in crowdfunding can take this opportunity to start investing.

What happens if a borrower misses out on repayments

In the case of repayment by borrowers, FS will liaise with borrowers on behalf of investors for collections. If the loan reaches defaults (defined as 90 days past payment due date), Funding Societies will pursue legally to auction the collateralized property. Proceeds from the auction will be used to repay the investors and any excess will be returned to the owners of the property.

In the rare scenario where proceeds from the auction are insufficient to repay the loan, Personal Guarantors (usually Directors of the company) and the borrowing company will be liable for the outstanding due.

TL;DR (Too Long; Didn’t Read)

Given that there is collateral security in the form of a property, Property backed Secured Loans become more secured and typically lower risk compared to other crowdfunding investment products.

For those with a lower risk appetite but still want to potentially earn a return of up to 8%, the Property backed Secured Loans is a product for you to diversify your portfolio in.

Limited Time Promotion: Receive $20 Cashback!

From now till 15 June 2018, sign up as an investor and invest at least $1,000 to be eligible for the $20 cashback. That’s an upfront 2% cashback on your investment!

Here’s how to claim the cashback:

  1. Sign up for your new investor account on www.fundingsocieties.com.
  2. **IMPORTANT!** Enter MDMAY in the Promo Code section.
  3. Complete your registration and activate your account.
  4. Invest at least $1,000 before 15 June 2018. Investment can be in one loan or across multiple loans.

Eligible investors will be notified via email of their within one month from the end of the promotion.

Largest Round Raised By P2P Lending Platform In South-East Asia

US$25 million – that’s the amount raised by Funding Societies in their latest round of Series B funding. With lead investor SoftBank Ventures Korea, other investors include Sequoia India, Alpha JWC Ventures (Indonesia) and Golden Gate Ventures.

Funding Societies (also known as Modalku in Indonesia) is a Peer to Peer (P2P) lending platform gives Small and Medium Enterprises (SMEs) access to capital by connecting them with retail investors. Earlier this year, Funding Societies surpassed the $100 million mark in crowdfunded SME loans, while maintaining a default rate of less than 1.5%.

Growth Of Alternative Funding Sources

P2P lending has been growing in popularity in Southeast Asia, due to the difficulty small businesses face in securing funding to grow their businesses and manage cashflow. According to a recent study by Ernst & Young, UOB and Dun & Bradstreet, 65.2% of the SMEs in Southeast Asia do not have easy access to business financing.

These small businesses cannot turn to traditional lenders like banks because they often lack collateral, have unproven track records, and need to pay prohibitively high interest rates.

P2P lenders like Funding Societies addresses this gap by providing fast and flexible funding for the growth of local SMEs, while allowing retail investors to participate in the growth story of Southeast Asian businesses. In fact, after just three  years of operation, Funding Societies  increased its lender base beyond 60,000.

Growing From Strength To Strength

Kelvin Teo, CEO and Co-founder of Funding Societies wrote in a blog post that the latest round of fundraising will help Funding Societies realise its vision of financial inclusion for the region. He shared, “It will enable us to help hundreds of thousands more underserved SMEs, while offering our lenders an even better user experience.”

The growth of P2P lending and the opportunities they provide for both companies and investors alike is an exciting prospect for the larger business eco-system.

This achievement of raising the largest amount of money for a P2P platform in Southeast Asia joins a long list of achievements for Funding Societies: Including being the first to introduce e-signing of contracts, implementing auto-investment algorithms for lenders and launching a mobile app for borrowers and lenders.

New To P2P Investing? Start Here.

You’ve probably heard about Peer-to-Peer (P2P) lending  as an alternative investment.

What Is P2P Lending?

P2P lending allows investors to earn attractive interest on their money by lending it to businesses with growth potential and plans.  Returns come in the form of regular repayment of interest and principal. For any given loan, there could be hundreds of investors who put up the money and share the risks and returns of the investment.

Peer-to-Peer lending is enjoying increasing interest and participation in Singapore for a few reasons.

#1 Higher Returns Than Traditional Investment Instruments

P2P loans could yield returns in the region of 10 to 14% per annum, which is very attractive, given the low interest rate environment.

#2 Short Investment Time Horizon

Compared to other investments than require you to hold an investment for years before seeing a substantial return on investment, yield from P2P investments can start to stream in months after the initial investment.

#3 Huge Capital Not Necessary To Invest

For as little as $100, you can begin to invest in P2P loans. This makes it ideal for young people who do not have alot of cash to spare and beginner investors.

#4 Relatively Simple Investment Mechanics

Investing in P2P loans do not require knowledge of technical analysis, performing stock valuations, or an advanced knowledge of finance. For each P2P investment, investors can examine a comprehensive factsheet that spells out vital information about the company and the terms of the loan. You can then decide for yourself if the returns promised is worth the risk will be taking on.

Interested To Learn More?

If you’re interested to learn more about P2P lending and how you can get started, Funding Societies is organising a seminar titled “What is Peer-to-Peer Lending?“.

Date: 24 January 2018
Venue: The Working Capitol (1 Keong Saik Road)
Time: 6.30pm – 8.30pm
(Registration: 6.30pm – 7pm)

Agenda:
– What is Peer-To-Peer Lending? – A global and local perspective
– How does investing in P2P lending work?
– Returns and risks in P2P lending
– How you can invest on Funding Societies’ platform
– Q&A session and networking

Drinks & light snacks will be provided.

You can head over to the event page for more details and register! The event is free of charge.

About Funding Societies

Founded in 2015, Funding Societies is an award-winning digital lending platform that enables SMEs to get unsecured loans and invoice financing, crowdfunded by individuals and institutional investors. It is licensed and operating in Singapore, Malaysia and Indonesia (as Modalku).

Backed by Sequoia Capital, it was the recipient of the MAS FinTech Award (SME category) and is also the only digital lender in Southeast Asia to be recognized as top FinTech 250 firms globally by CB Insights.

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.