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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.

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.

5 Steps to Digitise Your Business in a Tech-Savvy World

Today’s technology grows at such breakneck speed. Compare the gadgets and online tools you are using today to ten, or even five, years ago. Technology is inseparable from daily life. Take online shopping. These days, many people prefer it to brick-and-mortar shops.

Business owners must adapt to the new digital age to stay afloat and thrive. Everyone needs to digitise their businesses. How to do so? Here are 5 steps:

Set a goal

Never build anything unless there is a set goal. Why do you want to digitize your business? What are your goals? Do you want to gain more sales? Do you want to create awareness for your business? Setting goals will help you decide which digital strategy you need to utilize.

Create your own sites

Invest your capital in creating your own business website. Make the address as simple as possible, preferably using your brand name as the web address. Prioritise design. Don’t hesitate to hire a web designer if you can’t do it yourself. Your company website is your business face. People will assess how professional your business is based on your site interface.

It doesn’t stop with design. You also need clear and useful content on your business website. Make sure that your content is related to your target market. You will gain more leads if you have high-quality content aimed to your target market.

Read Also: 5 Tips to Create & Manage the Best Business Website on a Budget

Use the power of social media

Now that you have your own website, you need to spread the word. This is where social media will help you in the most effective way. Create a Facebook page, an Instagram account, a Twitter account, even a LinkedIn page – utilise as many social media platforms as long as the platform is still within your niche and your company has the capability to maintain these accounts.

Invest in advertising. You can also broadcast your website’s high-quality content via social media accounts for branding.

Create a mailing list

Creating a mailing list will help you to keep in touch with customers. Hold promotions and discounts to attract more people into subscribing. You can also use referral campaigns to gain more subscribers from loyal customers.

Arrange your projects online

If possible, start digitising manual processes. By making your company more digital, you can cut down on inefficiencies and evaluate the overall workflow. Schedule periodic reviews to continue streamlining and evaluating your operations to keep your processes up to date.

Digitising your business is easier than you think. And the benefits are many. Adapting to digital technology will lessen the possibility of human errors and develop more efficient business processes. In the long run, digitising your business saves both time and money.

Read Also: Grow Your Business Without Breaking The Bank

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.

Default Rates in Peer-to-Peer Lending Platforms

To paraphrase Crowdfund Insider’s “The Ultimate Crowdfunding Guide,” with peer-to-peer (P2P) lending, the risk an investor accepts is default. Every P2P lending platform has its own policy on default, and all investors need to take the time to understand these policies in order to protect themselves.

Because every P2P platform has its own default policy, and because the P2P lending business model is relatively young, we must be cautious when making generalizations about default rates across all platforms. Specific to Funding Societies, we fully aim to keep default rates close to banks – not exceeding 4 to 5% of loan amount to secure healthy returns for investors, even accounting for the cost of default.

The industry’s youth may cause investors with low-risk tolerance to view P2P lending as an unpredictable instrument. Generally, there is a consensus among investors that P2P lending constitutes a higher-risk, but higher-reward investment.

Is this belief true and valid? Let’s take a look at the global trend of default rates in P2P lending platforms.

Default Rates on P2P platforms in the USa

Let’s begin with default rates in USA platforms. In this fascinating article, the author analysed historical trends of default in two well-known USA platforms, then drew conclusions about the default rate of the P2P industry.

(Note that the article was published in 2014, so some might find it dated. However, the analysis within is worth a read)

The writer pointed out that from 2007 to 2008, the USA economy was doing very poorly and that both Lending Club and Prosper were operating under their earliest and most imperfect credit models, which means the default rates of 2007 and 2008 can be waved off. Since 2010, both platforms have averaged a 5% default rate and are likely to continue having solid repayment rates in the future.

The article ends with a positive conclusion about the P2P lending industry. The author wrote: “I see refined underwriting algorithms and mailed borrower marketing, encouraged investor capital and purpose-built technology all repositioning itself over and over for the past eight years until they are arrive at the stable place they hold today. I see analysis and sweat and reanalysis in these charts, and in the end I see it culminating into one of the most simple and creative investments our country has ever seen.”

His statement underscores that under the right circumstances, which includes an innovative team and rigorous credit policies, P2P lending platforms thrive and provide attractive returns while lowering default rates. The key is in selecting a trustworthy platform to invest in.

Read More: 5 Reasons To Invest in Peer-To-Peer Lending

DEFAULT RATES ON P2P PLATFORMS IN THE Uk

Moving on, let’s focus on a well-known and respected P2P lending platform from the UK: Funding Circle. In their statistics page, Funding Circle claims that its average annual default rate stands at 2%. The rate has also remained solid over the years (calculated from 2012-2017), showing that platform maturity and good credit underwriting will stabilise default rates.

funding societies’ DEFAULT RATES

What about our own platform, Funding Societies? Here is our own statistics page. Historically, our default rate across the region has lowered overtime, which reflects the analysis of P2P lending platforms in the USA: continuous platform improvement and rigorous credit policies will lower default rates.

Another worthwhile read about the risks in P2P lending is the study released by the UK Peer-to-Peer Finance Association (P2PFA). Some of the study’s pertinent points include:

  • The P2P industry has created more choice in the financing and investment market.
  • P2P lending platforms conduct credit risk assessment using the financial industry’s best practices.
  • P2P lending does not create systemic risk. Platforms are well-placed to weather a downturn in the credit cycle – defaults would need to increase at least threefold to reduce average interest rates for investors to below zero.

So let’s go back to the question we asked earlier: is P2P lending a higher-risk investment? Not necessarily.

However, the P2PFA study presented two caveats: that there is a good regulatory framework for the P2P industry and that investors are educated. For the first point, MAS has begun setting up regulations for P2P lending platforms. Funding Societies has always been compliant with regulations; we hold the CMS license required by MAS to operate, along with taking due diligence and our credit assessment process very seriously.

For the second point, there will always be risks in investing, including risk of default in P2P financing. But there are ways to mitigate such risks.

Read More: Investing In An Uncertain World

how can i diminish p2p investment risks?

How do you diminish P2P investment risks? You diversify your investment and reinvest your returns.

Diversification means distributing your funds across as many investment opportunities as possible to prevent loss in case of default. The more diversified you are, the more protected your investment. Even defaults hardly disturb your rate of return. If you choose not to diversify, you stand to lose most of your investments should a default occur.

Meanwhile, reinvestment refers to the act of funnelling your investment gains into new investment opportunities to maximise your returns. Without reinvestment, you only receive the expected rate of returns. But with reinvestment, you can maximise (sometimes doubling, even tripling) your returns while minimising your investment risks in case of default.

For more information on diversification and reinvestment, see here.

When investors fully understand the risks of P2P lending and take proper precautions to protect their funds, the advantages of investing in P2P lending clearly outweighs the risks. In fact, it’s very likely that most investors who keep diversifying and reinvesting their investment will continue to earn positive returns.


This is an updated version of an article posted on this blog. Click here for the original article.

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.

Businesses That Should Consider P2P Loans

Peer-to-peer (P2P) lending is the practice of lending money to individuals or businesses through online platforms that match lenders and investors directly with borrowers. Anyone can take advantage of P2P loans, so long as they pass the required credit assessment.

P2P loans are particularly advantageous for small businesses and SMEs; applying for financing through a P2P lending platform offers a faster, simpler process – very useful for small businesses that need quick hits of working capital and cash flow aid. Whether or not you need a business loan depends on your financial condition, but if you are looking at financing options, P2P loans can be the loan product for you if you fit the categories below.

Businesses Looking to Grow

Looking to expand your business? P2P lending platforms can be the financing source for you. P2P lending platforms often target small businesses, with the appropriate revenue requirements and loan sizes to prove it.

Businesses Looking for More Working Capital and Cash Flow

A small business, no matter how profitable or healthy, needs constant cash flow. Because P2P lending platforms provide faster processing and approval notification time, businesses can get their funding faster than from a traditional financial institution. This is useful for certain businesses, as they need running cash flow more than others. Wholesalers, for instance, always need to buy more stock inventory.

Read More: 5 Useful Tips To Keep Your Business Finances Healthy

Younger, Smaller Businesses

Why is P2P lending an excellent option for young SMEs? Because even though they may be financially healthy and are generating good revenue, they usually have no suitable assets for secured loans. P2P loans generally have competitive rates and no collateral requirements, making it ideal for small businesses hungry to expand their companies (or maybe just need financing to fund a new project). P2P loans have a structure that is short-term with competitive rates.

Read More: When Should Your Business Apply For A Loan?