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Peer-to-Peer or more commonly known as P2P lending started in the US and UK in 2005, and has since taken the world by storm. Back home in Singapore, P2P lending contributed to approximately USD 207 million in financing offered to businesses here in 2020. Investors on P2P lending platforms can participate in these financing and earn returns in the form of interests.

Take for example Funding Societies, a popular P2P investment platform amongst Singaporean investors. It is currently licensed in Singapore and has operations in 3 other SEA countries. Backed by Sequoia India, Softbank Ventures Asia, SGInnovate amongst many others, the platform has grown at a rapid pace since launching in Singapore 6 years ago. Here are some things to note when investing with Funding Societies:

Low barrier to entry: Investors can invest as low as $20 per loan
Short tenor: Investment tenors are quite short ranging from 1 to 12 months
Returns on Investment for each Product Type: Interest rates usually range between
- 3% – 5% per annum for a Guaranteed Investment product;
- 6% – 8% per annum for a Property-backed investment product;
- 8% – 18% per annum for Invoice financing and Working capital related investments products

Risks and Returns of P2P lending in Singapore

Investors are able to invest by crowdfunding the business financing available on the platforms and potentially earn returns in the form of interests typically ranging in the mid to high single digits. The investment amount starts as low as $20 at Funding Societies, which investors can leverage on for their portfolio diversification. Depending on the loan product, payouts can be done monthly so investors get their investments and returns in a shorter time frame. Compounding returns, as well as a rather short learning curve, are also attractive incentives as well.

That said, repayments can be delayed or go completely unpaid. This is why it is imperative for the P2P lending platform to first do a preliminary round of due diligence and present the facts comprehensively to investors, before allowing investors to decide whether or not to proceed. There is also a risk of the P2P lending platform shutting down if it is not financially stable on its own. To mitigate this risk, P2P platforms regulated by MAS can engage an independent escrow agent to handle all investor funds separate from its business account, such that the escrow agent will hold the funds even if the platform goes under. Funding Societies does just that to provide peace of mind to investors. As such, there is a need to do your due diligence and ensure such investments match your risk appetite.

Get a S$20 cashback when you sign up on Funding Societies with the exclusive promo code “MONEY21” and make a total investment of S$200 by 30th April 2021.

How can Diversification help to minimise risks in P2P lending?

One of the largest risks in investing in a P2P lending platform like Funding Societies is the risk of a SME defaulting. Portfolio diversification by means of investing into a good mix of notes and industries on the platform is one way to mitigate concentration and default risks and optimize your portfolio returns in the long run.

Taking the above scenario as an example, we see that Andy invested S$800 into a single deal and this single investment makes up 50% of his overall portfolio. Whereas in the other scenario, Emma invested S$50 uniformly across 100 deals, making a single investment just 1% of her overall portfolio. In the event that Deal A defaults, Emma’s potential loss will only be 1% of her overall portfolio whereas Andy might face a potential loss of half of his overall portfolio.

Conclusion

Although P2P lending is still a fairly young industry within Singapore, the demand is ever increasing. Given that 99% of businesses in Singapore are SMEs and that the returns on investments typically range in the mid to high single digits interest rate per annum, P2P lending in Singapore serves both the needs of SMEs and investors. With all that said, it is important for investors to do their own due diligence and measure the risks involved against their own risk appetite.

Get a S$20 cashback when you sign up on Funding Societies with the exclusive promo code “MONEY21” and make a total investment of S$200 by 30th April 2021.

Terms and Conditions apply

Investors must sign up with the aforementioned promo code and make a total investment of at least S$200 by 30th Apr 2021 to be eligible for the $20 cashback. Cashback will be credited into the eligible investors’ accounts by the end of May 2021. Funding Societies’ investor T&Cs apply.

Funding Societies is the largest SME digital financing platform in Southeast Asia. It is available in Singapore, Indonesia, Malaysia and Thailand, and backed by Sequoia India, Softbank Ventures Asia Corp and SGInnovate amongst many others. It provides business financing to small and medium-sized enterprises (SMEs), which is crowdfunded by individual and institutional investors. Investors can invest from as low as S$20 with a tenor of no more than 12 months.

Disclaimers:

This article is contributed by Funding Societies.

It should not be construed that Moneydigest is endorsing this article or any of the products and services provided by Funding Societies.

The content and materials made available are for informational purposes only and should not be relied on without obtaining the necessary independent financial or other advice in connection therewith before making an investment or other decision as may be appropriate.

Actual returns may be lower than the expected rates of return, and historical rates of returns may not reflect future returns. The Product type interest rates indicated in the article are derived from historical rates of returns and are exclusive of service fees.

All information in this article is accurate as of 29th March 2021

A Singaporean’s Guide to P2P investments with Funding Societies & S$20 cashback up for grabs

What is P2P investment?

P2P investments or more commonly known as Peer-to-Peer (P2P) lending is a type of debt-based crowdfunding enabled by digital platforms that connect borrowers with investors without going through a traditional financial intermediary such as a bank. This concept will see investors lending to borrowers (i.e. SMEs) via the platform as a form of investment, and the interest earned from it will be their returns. Despite being a relatively new concept in Singapore, it has grown significantly over the years and has shown no signs of slowing down.

How does P2P investment work for investors?

For investors, it is a means for diversification into another asset class. As most P2P investments offer a frequent repayment schedule (monthly or within 90-120 days period), it can be considered a great supplement to more traditional long term asset classes like stocks or bonds. With interest rates on saving accounts heading south, investors can look for alternative ways to earn interest on their cash.

How much can investors earn?

Be it an individual or institutional investor, the reward on their investment will come in the form of the interest payments serviced by the borrower. At Funding Societies, investors can choose to participate across 6 different investment products with interest rates ranging from 3% – 18% per annum.

Risks and returns go hand-in-hand and the difference in interest rates range is tied to the risk associated with the product. For example, a guaranteed returns investment will yield an interest of between 3% – 5% p.a. while an unsecured business term investment can fetch between 8% – 18% p.a..

How much to invest in P2P investment?

There are no hard and fast rules on how much of one’s portfolio should be allocated to any particular investment assets, and this is the same for P2P investing. What is important is that investors should always consider diversifying across many notes and avoid concentration risk to create a healthy well balanced portfolio.

At Funding Societies, investments start from S$20 onwards and most products provide a periodic repayment of principal and interest. Jointly, it is a great recipe for investors to diversify and reinvest their investments.

P2P investment with Funding Societies

Funding Societies is Southeast Asia’s largest P2P lending platform with over S$1.7b in SME financing funded. In Singapore, the platform holds a Capital Markets Services (CMS) Licence and is regulated by the local authorities. Over the years, they have been able to raise several rounds of equity funding led by investors such as Sequoia India, Softbank Ventures Asia and SGInnovate to name a few. A few things to note when investing with Funding Societies:

Interest returns are exempted from tax: For interests earned in year 2020 onwards
Low barrier to entry: Investments start from $20 per note
Short tenor: Investment tenors ranges from 1 to 12 months
Returns on Investment: Interest rates usually range between 3% to 5% per annum for a Guaranteed Investment product, 6% to 8% per annum for a Property-backed investment and 8% to 18% per annum for Invoice financing and unsecured business term investments
Default Rate: The Singapore platform default rate is 1.89%

P2P investment products

As the investor base grew overtime, they needed to continuously innovate new products to meet the needs of a wider range of investor profiles. Having launched the first product back in 2015, Funding Societies has now grown to offer 6 different investment products with varying levels of risk-return profiles.

TL;DR: P2P Investment Products Overview

1. Property-backed Secured Investment

The Property-backed Secured Investment (PBSI) is a rather unique collateral-backed investment product launched to provide investors with an additional security in the form of a local Singapore property to back the investment. The property is pledged by the SME undertaking the financing.

Funding Societies holds first charge on the property on behalf of investors and it can be auctioned off to recover funds should the SME defaults.

To alleviate concerns on property value fluctuations, the percentage of financing amount varies as per the property types (residential/commercial/industrial) and in most cases is only up to 70% of the property value. The forced value of the property is also considered while arriving at the financing quantum. By doing so, Funding Societies maintains a buffer for fluctuation in property prices as well as for distress sale situations. The interest rate for this investment product is typically between 4% – 8% per annum.

2. Guaranteed Property-backed Investment

Launched in July 2020, Guaranteed Property-backed Investment (GPI) is an investment into a Property-backed Secured Investment with an additional effective guarantee of repayments to investors. Likewise to Property-backed Secured Investment, Funding Societies has the right to liquidate the property to recover the funds should the SME fail to fulfil their obligations.

Falling under the Guaranteed line of products means that both the principal & interest repayments are effectively guaranteed to the investor regardless of the SME’s status. The interest rate for this investment product is typically between 3% – 8% per annum.

3. Guaranteed Returns Investment

Guaranteed Returns Investment (GRI) is another investment product under the Guaranteed line of products. This product was first launched in August 2019 as a means to offer more investment opportunities to investors.

GRI is an investment into a micro financing with repayments effectively guaranteed. Similar to GPI, investors are effectively guaranteed to receive both the principal & interest repayments when they participate in this investment product. The interest rate for this investment product is typically between 3% – 5% per annum.

Please invest with the knowledge that while returns are effectively guaranteed by FS Capital Pte. Ltd., there may be a chance where we might not be able to fulfil the obligations under this arrangement. To mitigate this risk, a cash reserve buffer to allow for repayments to be made on time is maintained.

4. Invoice Financing Investment

The Invoice Financing Investment (IFI) product allows investors to invest into an invoice backed financing offered to SMEs. SMEs take this financing by pledging against the receivables of an invoice. By doing so, it helps to bridge the cash flow gap between actual sales and receipt of payments.

Due to the nature of the financing, investors in this product usually enjoy a relatively short tenor of 30 – 120 days. The short tenor enables investors to receive and reinvest their money relatively quickly. The interest rate for this investment product is typically between 8% – 18% per annum.

5. Revolving Credit Investment

If you own a credit card, you will probably be aware of how revolving credit or more commonly known as a line of credit works. Based on one’s credit standing, they will be issued a credit limit to draw down from over time. Likewise in the case of Revolving Credit Investment (RCI), it is an investment into a revolving credit line granted to SMEs. The SME can repay anytime within the approved tenor and draw down again so long as the amount outstanding is within the limit.

As an investor, you can participate in a single or multiple drawdowns, each with a tenor typically between 1 to 12 months with a chance of early partial or full repayments. The interest rate for this investment product is typically between 8% – 18% per annum.

6. Business Term Investment

Business Term Investment (BTI) was the first product offered alongside the launch of the Funding Societies platform back in 2015. It is an unsecured financing undertaken by SMEs as a means for working capital, expansion or bridging needs. The interest rate for this investment product is typically between 8% – 18% per annum.

Be it a way to diversify your investment portfolio or to beat the falling savings account interest rates, investors can consider to embark on their P2P investment journey with a platform like Funding Societies. If you have done your own due diligence and decided to invest with Funding Societies, they currently have a promotion for new investors. Sign up with promo code MDXMAS20 and make a total investment of S$200 by 31st Jan 2021 to get a S$20 cashback.

Terms and Conditions apply
Investors must sign up with the aforementioned promo code and make a total investment of at least S$200 by 31st Jan 2021 to be eligible for the $20 cashback. Cashback will be credited into the eligible investors’ accounts by the end of February 2021. Funding Societies’ investor T&Cs apply.

Funding Societies is the largest SME digital financing platform in Southeast Asia. It is licensed in Singapore, Indonesia and Malaysia, and backed by Sequoia India, Softbank Ventures Asia Corp and SGInnovate amongst many others. It provides business financing to small and medium-sized enterprises (SMEs), which is crowdfunded by individual and institutional investors. Investors can invest from as low as S$20 with a tenor of no more than 12 months. Depending on the investment product, interest rates can range between 2% to 18% per annum.

Get $20 Cashback and Guaranteed Returns on your Investments

What are Guaranteed Returns on Investments

Have some idle money sitting around and hoping to invest and secure a rate of return that is higher than your usual bank interest rates? Well don’t we all? Every investment comes with different levels of risk. A guaranteed return on your investments simply means that you are promised, with some levels of certainty, that you will receive a return on your investment in any circumstances.

To learn more about guaranteed returns investments, let’s take a look at 2 effectively guaranteed returns products offered by Funding Societies, Southeast Asia’s largest Peer to Peer lending platform. Peer to Peer Lending or P2P lending is an investment concept where individuals & institutions invest in loans to SMEs and earn returns in the form of interests. Investments on the Funding Societies platform starts from S$20 with a maximum tenor of 12 months and monthly/periodic repayments to investors.

For more information on investing with Funding Societies, join their upcoming webinar on 29th Sept 2020 at 7PM. Register for free here.

How does it work

An effectively guaranteed returns product offered by Funding Societies means that you as an investor are effectively guaranteed to receive both your principal & interests on the investments regardless of the SME’s repayment status. There are currently 2 products available under this line, namely Guaranteed Returns Investments (GRI) and Guaranteed Property-backed Investments (GPI).

Guaranteed Property-backed Investments

Guaranteed Property-backed Investment (GPI) is an investment into a collateral-backed note with an additional guarantee of repayments to investors. Should the SME fail to fulfil their obligations, Funding Societies has the right to liquidate the property to recover the funds.

Key Investment Information

Minimum Investment Amount – $20 per investment
Interest rates: usually 3% – 8% per annum
Tenor: 6 to 12 months
Repayments: Monthly repayment of interest and principal at the end of tenor
Guarantee: Principal & interest repayments are both effectively guaranteed regardless of the SME’s status
Collateralised property information: Only local Singapore properties owned by the SME or it’s directors are accepted

Guaranteed Returns Investments

Guaranteed Returns Investment is an investment into a loan given to a small business in the form of a note with a layer of security whereby the repayments are effectively guaranteed even if the SME does not pay.

These small businesses come from all walks of life and Kaca Coffee House is one of them. See their story here:

Start investing with Funding Societies now and join them on their journey to help thousands of local businesses like KACA achieve their business goals.

Key Investment Information

Minimum Investment Amount – $20 per investment
Interest rates: usually 4% – 8% per annum
Tenor: 1 to 12 months
Repayments: Usually Monthly repayment of Principal & interest
Guarantee – Principal and Interest are both effectively guaranteed regardless of SME status

Please invest with the knowledge that while returns are effectively guaranteed by FS Capital Pte. Ltd., there may be a chance where they might not be able to fulfil the obligations under this arrangement. To mitigate this risk, a cash reserve buffer is maintained to allow for repayments to be made on time.

Importance of investment diversification

As the saying goes, do not put all your eggs into one basket. Just as how it is important to diversify across asset classes and business types, the same goes for varying risk return investments. Diversifying your investments with guaranteed returns products can be an option to consider to balance out your portfolio.

If you have done your own due diligence and decided to invest with Funding Societies, they currently have a promotion for new investors. Sign up with promo code MONEY20 and make a total investment of S$200 by 31st Oct 2020 to get a S$20 cashback.

Terms and Conditions apply

Investors must sign up with the aforementioned promo code and make a total investment of at least S$200 by 31st Oct 2020 to be eligible for the $20 cashback. Cashback will be credited into the eligible investors’ accounts by the end of November 2020. Funding Societies’ investor T&Cs apply.

Funding Societies is the largest SME digital financing platform in Southeast Asia. It is licensed in Singapore, Indonesia and Malaysia, and backed by Sequoia India and Softbank Ventures Asia Corp amongst many others. It provides business financing to small and medium-sized enterprises (SMEs), which is crowdfunded by individual and institutional investors. Investors can invest from as low as S$20 with a tenor of no more than 12 months. Depending on the investment product, interest rates can range between 2% to 18% per annum.

Get $20 cashback for this short term investment backed by Singapore properties

Debt crowdfunding, commonly known as peer-to-peer (P2P) lending is an investment concept where individuals & institutions together invest in loans to SMEs and earn returns in the form of interests. Considerably disruptive, the industry adopts a business model targeting the underserved SMEs by employing technology to directly link investors with them. Funding Societies is the largest such platform in Southeast Asia, having financed over S$1.3B worth of funds via their platform.

About Funding Societies

The platform is licensed and has operations in Singapore, Indonesia and Malaysia. Backed by Sequoia India and Softbank Ventures Asia amongst many others, the platform has grown at a rapid pace since they launched in 2015 in Singapore. The main risk in this investment is default risk of the loans. A few things to note when investing with Funding Societies:

Low barrier to entry: Investors can invest as low as $20 per loan
Short tenor: Investment tenors are quite short ranging from 1 to 12 months
Returns on Investment: Interest rates usually range between 3% to 5% per annum for a Guaranteed Investment product, 6% to 8% per annum for a Property-backed investment and 8% to 18% per annum for Invoice financing and Working capital related investments
Default Rate: The Singapore platform default rate is 1.89% while for Property Backed Secured Investment its 0% (no defaults till date)

To subscribe and start investing, just fill a 5 minute form here

Investing in these uncertain times

In light of the current economic uncertainties, Funding Societies has taken the approach to offer more investment notes for products that are more secure and have collateral backing it. For the purposes of this article, we will be looking at the Property-backed Secured Investment (PBSI) product.

About Property-backed Secured Investment (PBSI)

Investments backed by Singapore properties
Interest rates usually between 6% to 8% per annum
No defaults till date

PBSI is a crowdfunding investment made by investors in the form of a loan to a SME that is backed by a local property as collateral on a first lien basis. These pledged properties can be residential, commercial or industrial. Such properties may be owned by the companies and/or directors of the companies. What it means is that if the company defaults, the platform can liquidate the property to recover the principal and interest and pay back to the investors. To ensure that property price fluctuations do not impact the liquidation process, Funding Societies usually does not give loans of more than 70% of the property value and also takes into account forced sale value. Click here for more information on PBSI product.

Given that the loans are backed by collateral, PBSI is perceived to have a lower risk than other products on the platform. The rate of interest usually ranges between 6% – 8% per annum on a simple interest basis. This product portfolio has done very well so far with no defaults in more than 1.5 years since launch. While having a property as collateral does not mitigate default risk, it does provide an alternative helpline when seeking fund recovery should there be a default. At this point, it is important to note that past performance of the rates of return does not indicate future rates of return.

To reiterate, the reason behind the lower interest rate is due to PBSIs being generally less risky, given that these notes are backed by Singapore based properties. As the properties can be disposed off or auctioned by Funding Societies in the event of a default, the likelihood of recovering the principal and interest is considerably higher. More information on the interest rates for PBSIs can be found here.

While the returns are typically comparatively lower than unsecured products like Business Term Loans or Invoice Financing on Funding Societies, it can possibly be higher than some of the other investment vehicles in Singapore such as fixed deposits, certain bonds, and other fixed repayment investments. Investors will need to do their due diligence and access their risk appetite when studying various products.

To subscribe and start investing just fill a 5 minute form here

Importance of investment diversification

Just as how it is important to diversify your traditional investment portfolio across geographical areas, business types and investment types, the same is true for Debt Crowdfunding.

PBSIs can be an option to consider when opting for product diversification. By investing into both secured and unsecured products, the overall portfolio can be more balanced out to better weather storms.

Conclusion

Technological advancements have made multiple means of investment available to retail investors. While unimaginable a decade ago, retail investors today now have a large pool of investment opportunities to pick and choose from. When taking calculated risks, investors will need to fully understand the product that they are interested in. Beyond that, reading up and keeping up with trends is also crucial.

If you have done your own due diligence and decided to invest with Funding Societies, they currently have a promotion for new investors. Sign up with promo code MD20 and make a total investment of S$200 by 30th April to get a S$20 cashback.

Terms and Conditions apply

Investors must sign up with the aforementioned promo code and make a total investment of at least S$200 by 30th April 2020 to be eligible for the $20 cashback. Cashback will be credited into the eligible investors’ accounts by the end of May 2020. Funding Societies’ investor T&Cs apply.

Disclaimers:

This article is contributed by Funding Societies.

It should not be construed that Moneydigest is endorsing this article or any of the products and services provided by Funding Societies.

All information in this article is accurate as of 2nd April 2020

4 Things You Should Not Do When Investing in P2P Lending (Plus One Thing You Should Do!)

Many investors may find investment in Peer-to-Peer (P2P) lending attractive due to its potential benefits, such as higher returns and shorter tenors. The barrier to entry is also one of the lowest amongst all types of investments, from just $20.

Read about the 4 things to expect when you invest in P2P lending and also the 5 reasons to start investing in P2P lending.

First-time investors who are not yet familiar with the details of P2P lending may be hesitant to start this investment. We have compiled a list of 4 things you should look out for when investing with P2P platforms to help you avoid common mistakes made by first-time investors.

1. Investing only in loans with high returns

Investors may often be incentivised to participate in P2P investments due to the high returns they potentially provide. To receive greater returns, some investors may end up only picking loans with higher interest rates. However, interest rates are priced based on the credit risk and higher interest rates are an indication of higher risks. Interest rates should not be the only determining factor for investing in a loan. As an investor, you would be better off diversifying you investments across loans with varying interest rates.

2. Not diversifying your investments

In any type of investment, it’s crucial to diversify your portfolio so that you won’t end up putting all your eggs in one basket. When you concentrate your investments and don’t diversify them, your portfolio may go south quickly if there are non-performing loans.

Expanding on the first point, a balanced mix of high and low interest rates is a way to diversify your investments. Additionally, you can also invest across different SMEs, industries, products, loan tenors as well as investment amounts.

An easy way to diversify on Funding Societies’ platform is to set up Auto Invest. The Auto Invest bots can be customised based on your investment preferences. That said, you have the flexibility to opt out of loans in which you are not interested before the crowdfunding starts.

Secondly, you can diversify across different types of investment assets that align with your investment risk profile. This can include savings, insurances and the traditional investment vehicles such as bonds and stocks.

3. Withdrawing returns when you receive them

It may be tempting to withdraw your returns once you receive them. However, experienced P2P investors typically don’t do that to potentially benefit from the compounding effect from re-investments. You can re-invest your monthly repayments to potentially receive a higher compounded interest. Your returns (in the form of interests) also start to form part of your capital which you can utilise to re-invest in upcoming loans.

By leaving the repayments in your account, you are ensured that you have funds which can be readily invested when opportunities arise, even without pumping in fresh funds.

4. Not being familiar with P2P lending platforms & the details

While the concept of P2P lending is not difficult to understand, it is important to equip yourself with knowledge of the P2P lending platforms that you wish to invest with. Investing with a stable and responsible P2P lending platform will help you minimise unnecessary risks and inconveniences. Ensure (and expect!) that the platform is responsive, transparent in its processes and stable to carry out its operations and duties for investors.

A good platform to consider is Funding Societies, the largest P2P lending platform in Southeast Asia that holds the Capital Markets Service Licence issued by the Monetary Authority of Singapore (MAS). As of March 2019, it has crowdfunded more than $450 million in the region across more than 300,000 loans. This statistic also reflects the number of opportunities for investors.

Understanding the details of each investment will also allow you to make informed investment decisions. At Funding Societies, a loan fact sheet will be provided on every investment opportunity. It contains details of the loan, its repayment schedule, a summary of the company and guarantors, the company’s financials, and comments from Funding Societies’ very own credit team.

What’s the ONE thing you should do?

Seriously consider P2P lending as part of your investment portfolio! 😀

P2P loans are a form of alternative investments that hold many benefits, especially for new investors that would like to start small or with experienced investors looking to diversify their portfolio. An investment with Funding Societies starts from just $20.

By watching out for these 4 listed things that you should not do when investing on P2P lending, we hope that you’ll be able to have a smooth and successful P2P investment journey!

Ready to start your P2P investment journey? Sign up with Funding Societies today, or live chat with their Customer Experience team to understand this investment better.

Disclaimers

This article is contributed by Funding Societies and is adopted from this blog article.

It should not be construed that Moneydigest is endorsing this article or any of the products and services provided by Funding Societies.

Nothing in this article should be construed as constitute or form a recommendation, financial advice, or an offer, invitation or solicitation from Funding Societies to buy or subscribe for any securities and/or investment products. The content and materials made available are for informational purposes only and should not be relied on without obtaining the necessary independent financial or other advice in connection therewith before making an investment or other decision as may be appropriate.