Investly Plans to Raise 2M GBP on Seedrs – Interview with CEO Siim Maivel

Investly is currently pitching on Seedrs to raise between 500K and 2M GBP in a crowdfunding for equity campaign. To become a shareholder, the required minium investment amount is 13 GBP.

What is Investly about?

Investly is an invoice financing platform which helps businesses from the UK and Estonia release cash from their long payment term invoices. We’re a marketplace that connects investors to companies that need short term capital, which we issue against their receivables. We have offices in London and Tallinn.

What are the three main advantages when investing in the invoices?

Liquidity – Investly is quite different compared to most platforms because the investment period is only 30 to 40 days on average. This means you can convert your investments into cash within a month by simply halting further investments.

Return – Historically investors have earned 11-12% annually on invoices. I believe every investor should have a portion of their funds allocated to P2P investing because of the higher return and additional diversification.

Added value – Invoice finance is helping small businesses who are growing fast but fail to get the support they need from local banks. The direct impact is clear – invoice finance has helped our customers grow faster and create more jobs. This would not be possible without investors.

What are the three main advantages for companies selling the invoices?

Most of all, faster business growth. We discovered that Estonian customers who are leveraging access to working capital are able to grow their turnover by 18.3%, while turnover growth benchmark equals 7.6% (Investly internal analysis, growth benchmark from Statistics Estonia report 2017)
But access to working capital is not just numbers in spreadsheet, but most of all it’s opportunities that business can take: hire more staff and win new contracts, get better supplier payment terms by offering early or up-front payment, ensure prompt payment for employees and subcontractors.

What ROI have investors made on average on the platform in the past?

On average investors have earned double digit returns in both markets. The net return on Estonian invoices has been 11.2% annually and in the UK it’s been 12.6% annually.

What is the procedure, if a company is late in repaying the invoice?

To ensure collection is as fast as possible, we rely on early action and automating notifications to debtors. If the debtor doesn’t pay within 30 days of the due date, we have the right to ask the seller to repurchase the invoice from investors. We also ask for a personal guarantee from one or several of the directors of the seller company. This means that if the company cannot pay, we can ask for payment from the directors.

Investly is the biggest p2p lending marketplace for invoice financing in Estonia. How did you achieve this position?

We use personal approach and always try to find the best solution for our customers and investors. That professional customer service constantly provides us a leverage over banks and competitors. Also, quick decision – we present an offer within one working day. This is something that many of small businesses can’t expect from traditional lenders. On top of that, we have flexible pricing, which we’re able to use thanks to loyal and engaged investors community.

Investly is also operating in the UK. Is it complicated to operate in two different markets simultaneously and which of the two markets is more attractive for future growth?

UK is the largest factoring market in Europe with €327b worth of invoices financed every year. For comparison, France is second with €268b/year and Germany is third with €217b/year. This is where the biggest potential is. However, traditional sales and marketing channels towards our target customers are extremely crowded with thousands of B2B service providers trying to sell them products. We have to be more clever about acquiring customers there. Open Banking enables us to do that.

Estonian businesses finance only €2.5b/year, but due to the connected infrastructure of public and private registries, we can reach our customers much more easily. Also, there’s fewer providers in Estonia and we’re creating a lot of the market ourselves as factoring hasn’t been available for them in the past.

Having built Investly for four years, what do you deem the biggest assets of the company?

We have gained a detailed understanding about the problem we’re solving. It’s not specific to any geography. Businesses across Europe and elsewhere in the world are struggling with the lack of working capital. It seems that our product offering helps to solve that problem more simply than traditional lenders.

Four years is typically a good time to become an expert at something. We have also build a strong team to execute our mission. We’re experts at invoice financing.

Also, we’ve managed to get a good set of advisors on board to help us build the marketplace and secure future rounds of financing if needed.

What role does ‘Open Banking’ play in the near future for Investly’s further development?

Open Banking is a technical enabler. Businesses can now choose freely between their bank and 3rd party providers to solve their specific financial needs. It’s done in a secure and easy-to-use way.

This has gotten banks looking into how they can continue to be profitable in this new environment. Completely new types of business models are emerging and we’re proud that Investly is one of the early pioneers to set the path for others. Being part of the Open Banking sandbox in UK helped us to be one of the first ones to integrate with banks like Barclays, HSBC, RBS, Lloyds and Santander.

We’re going to use these integrations to form partnerships with traditional lenders so we can serve our customer without them necessarily having to change their provider.

You want to raise new funding on Seedrs. Why did you decide to use crowdfunding for equity rather than traditional routes?

Throughout the years we’ve received multiple requests from our marketplace investors to participate in our equity financing round. They’ve been giving us a lot of valuable feedback when we’ve developed our product and directed our credit model. We’d like them to get a chance to be part of Investly mission as we continue to grow.

With traditional equity financing, we’d be overwhelmed by administrative work to get the round closed and to manage those relationships later on. Seedrs has provided a good platform on which we can do that efficiently.

What is the value proposition for investors? Do you aim for a stock market listing? What is the likely time horizon?

Get to participate in our valuation growth. The interest you earn on the marketplace is quite stable, but the potential upside on the equity investment is much higher.

UK based investors can take advantage of the EIS scheme. It’s quite a big incentive on the tax side.

Seedrs provides a secondary market, which helps to create liquidity for our shareholders. This way, you don’t have to wait for years until the startup makes an exit or files for IPO.

Is Investly profitable? If not, when do you expect to reach breakeven on cash flow.

Operationally, we’re quite close to breakeven. The target is to get profitable in core activities in the next 6 months after fundraising round closes. But on a company level we will still be investing heavily into building out the integrations with banks to execute the momentum we’ve managed to build up.

For which activities does Investly intend to raise the used funds?

Partnerships and further automation. Few years ago, all the banks would turn us down when we approached them with suggestion of cooperation. But with Open Banking, this is window of opportunity for both of us: Investly provides working solution with better experience and price for customers, banks acquire competitive leverage on the market and are part of this fintech revolution. Therefore, funds from this round will be used on product developments which will allow us integrate with banks infrastructure and automate our processes even more with the increase in volume.

Where do you see Investly in 3 years?

Investly will be the major provider of invoice finance to businesses across Europe. It’ll be partly through partnerships (invoice finance powered by Investly) and partly through building out our own brand by continuing to deliver superior customer experience.

With that scale, we will have had enough data to build up a narrow AI for credit decisions. We have followed our roadmap for getting there. We’ll be better able to score companies and collect payments than competitors.

Investors will have access to debtors across Europe, which enables them to achieve a good diversification of currencies, countries and sectors.

Once we’ve received that scale, we will be able to deliver the best financing rate to businesses with our marketplace model, where banks are lending alongside with our investor community.

P2P-Banking thanks Siim Maivel for the interview.

Updated Jan. 23rd: A previous version of this article stated 2.5M as upper limit of the fundraise. That figure was incorrect.

Investly pitch video on Seedrs

 

Investing on the Mintos Secondary Market – Hint One

On the Mintos p2p lending marketplace the majority of investors invest on the primary market into loans, either manually or via autoinvest. But for the 29% of investors that do invest on the secondary market picking loans presents them with a huge choice of about 125,000 offers (no typo, really 125K loan parts on offer!).

Main characteristics of the Mintos secondary market:

  • no transaction fees
  • selling at discount, par or premium, adjustable in 0.1% increments
  • no minimum amount for buying, a buyer could make a partial buy of 0.01
  • seller and buyer each get credited interest for the amount of days they hold the loan; that means seller continues to accrue interest for an offered loan until the part is sold
  • good filtering

Sorting on the secondary market is preset to YTM (yield to maturity). This figure shows the yield the buyer would make (taking into account the discount or premium), if he would buy the loan and hold it to regular (!) maturity. Emphasizing regular is important since many of the buyback loans end prematurily, which would result in a higher than shown yield for loans listed at discount or lower than shown yield for loans offered at premium.

Generally YTM is a very good criterion for sorting an filtering on Mintos the secondary market and it is my most important criterion.

However there are exceptions, when taking the shown YTM at face value is not advisable.

Mintos secondary market
Click on image for larger view

Look on the loan offers in the screenshot above. All are offered at 0.1% discount and the YTM is very high with 22.5% to 30.2% Let’s neglect for the moment that picking these loans would cost the seller time, which if he puts a price tag on time spent would not be worthwhile as these loans are very close to maturity and he would only earn interest for a few days.

The high YTM is caused by the discount in combination with the fact that there are only 2 or 3 days left to regular end date of loan (term is 2d or 3d). The calculation is correct, but there is one caveat. For the shown loans there is a very high probability that they will miss the payment and therefore run an additional 60 days until they are repaid under the buyback guarantee. If that happens the remaining actual loan duration would be 62 or 63 days and the impact of the 0.1% discount on the YTM would be much smaller. The resulting YTM would be somewhere around 11 to 13%. So they would not be a good buy and there are much better offers on the secondary market.

Another example to look at:

Mintos secondary market
Click on image for larger view

These loans are shown with an even higher YTM of 36% and offered at a discount of 0.1%. They are late, but with a buyback guarantee, so aside from the originator risk there is no default loss risk. But for these late loans Mintos calculates the duration to the regular end of maturity with only one day, which in combination with the 0.1% discount results in the high YTM (simplified: 0.1% per days * 360 days results in 36% yield)

If I look into the details of one of these loans, I see that the next payment is actually scheduled in two weeks. So the loan will be repaid then since it is already in the status of 31-60 days late (there is a very low probability that it will repay earlier if the borrower repays).

 

Mintos secondary market
Click on image for larger view

With two weeks remaining the effective YTM for a buyer is not 36% but rather around 12%. Again there are offers with better YTMs on the secondary market.

Conclusion

On the Mintos secondary market YTM is an important figure to regard for buyers. However, while it is calculated correctly under the definition, there are a few cases where the shown figure alone might be misleading especially in case of loans that have less than 1 month remaining loan duration. The shown YTM always applies to the case that the buyer would hold to the loan to the regular maturity date.

Not yet investing on Mintos? Get cashback.

Mintos is offering 1% cashback on all investments made in the first 90 days after registration if you use this link to signup: Mintos registration. Currently there is an additional cashback offer for new and existing investors of 4-5% cashback on Mogo loans with loan durations of 48 month or more. Need to enroll once (click banner in dashboard after you finished registration). Expires Feb. 16th. The 4-5% roughly equals 1% increased yield.

More cashback offers are listed on the P2P-Banking p2p lending cashback list.

 

International P2P Lending Volumes December 2017

The table lists the loan originations of p2p lending marketplaces for last month. Funding Circle leads ahead of Lendinvest and Zopa. Mintos finished a remarkable month fueled by the cashback promotion. The total volume for the reported marketplaces adds up to 582 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data on file, I can publish statistics on the monthly loan originations for selected p2p lending services.

This month I added PeerBerry, Look&Fin and MyTripleA.

Investors living in national markets with no or limited selection of local p2p lending services can check this list of international investing on p2p lending services. Investors can also explore how to make use of current p2p lending cashback offers available. UK investors can compare IFISA rates.


Table: P2P Lending Volumes in December 2017. Source: own research

Note that volumes have been converted from local currency to Euro for the purpose of comparison. Some figures are estimates/approximations.
*Prosper and Lending Club no longer publish origination data for the most recent month.

Notice to p2p lending services not listed: Continue reading

Assetz Capital IFISA Launches

Assetz Capital has launched the IFISA offer allowing UK taxpayers to use the 20,000 GBP tax-free allowance while investing on the p2p lending platform.

New and existing Assetz Capital investors can open an IFISA wrapper on the platform and then invest into any automated Assetz investment account in December. The IFISA is also set to include the popular Manual Loan Investment Account (MLIA) in the New Year.
The IFISA is flexible and offers investments into p2p lons with interest rates ranging from 3.75% to 12%.
 
Stuart Law, CEO at Assetz Capital said: “Our IFISA …[is] great new tax-free investment choice for those that are new to peer-to-peer lending, but we also feel strongly about delivering a product that caters for our thousands of long-standing investors who prefer to choose their own loan investments within the Manual Loan Investment Account. That’s why we were determined to ensure that the MLIA will be allowed in our IFISA shortly after launch. … We will also shortly be releasing a queuing system in case we have excess demand for the IFISA that will allow our existing and faithful investors priority access to the tax free returns.”
Stuart Law gave P2P-Banking an informative interview in November.
The Assetz Capital IFISA offer has been added to the P2P-Banking IFISA comparison table today.

Growth of Investor Numbers on P2P Lending Platforms

Today I take a look at how investor numbers are developing at several platforms. I chart relative numbers with the index set to 100 for October 1st, 2017. The advantage of using indexed numbers for this comparison is that platforms use very different definitions for their investor base size. Some count registered investors, some count investors with deposits, some count active investors, some count recently active investors, … .

The disadvantage of showing indexed numbers for growth is that it gives smaller, younger an advantage as their percentage increase of investor base is likely still higher because the come from smaller absolut numbers.

Investor numbers by P2P-Banking
Indexed investor numbers (with Oct 1st, 2017 = 100).
Reading example: On Dec 1st the index value for Mintos was 117, meaning Mintos had 17% more investors than on Oct. 1st

Up to 5% Cashback On Long-Term Investments Offered by Mintos

Lativan p2p lending marketplace Mintos just launched a cashback campaign running for the remainder of December. Investors investing in new loans with a term of at least 24 months on the primary market will receive a cashback of 2% to 5% depending on term length. The cashback will be credited within 6 days says Mintos.

This is a big bonus that goes on top of the 12 to 14% interest rate that these longer term loans at Mintos typically carry.

Important: To be eligable an investor needs to enroll once for the campaign by clicking on the promotion banner inside the Mintos dashboard.

New investors can even get an additional 1% cashback on all investments made within the first 90 days of registration (credited monthly) by registering via this link,

Most loans on Mintos are in EUR currency, but other currencies are available, too. Only recently Mintos started listing loans in GBP currency too.

See the P2P Banking cashback page for more cashback offers.

mintos cashback

“Investing long-term has many benefits. Loans with a maturity of two years and more on average have higher interest rates. As the maturity of these loans is longer, these higher rates can be locked-in for longer as well, thus avoiding cash drag effect. Also, investing in long-term loans allows for a better diversification, because this way investors can access types of loans and borrowers that have a different profile than the average short-term loan takers. We hope that in combination with our cashback campaign, all of these benefits will help our investors reach their investment goals in a more efficient and rewarding way,” says Martins Sulte, CEO and co-founder of Mintos.

International P2P Lending Volumes November 2017

The table lists the loan originations of p2p lending marketplaces for last month. Funding Circle leads ahead of Zopa and Ratesetter. The total volume for the reported marketplaces adds up to 573 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data on file, I can publish statistics on the monthly loan originations for selected p2p lending services.

Funding Circle reaches the milestone of 3 billion GBP loans originated since launch.

I removed Comunitae, because of the stop due the fraud case.

Investors living in national markets with no or limited selection of local p2p lending services can check this list of international investing on p2p lending services. Investors can also explore how to make use of current p2p lending cashback offers available. UK investors can compare IFISA rates.

p2p lending volume 11/0217
Table: P2P Lending Volumes in November 2017. Source: own research

Note that volumes have been converted from local currency to Euro for the purpose of comparison. Some figures are estimates/approximations.
*Prosper and Lending Club no longer publish origination data for the most recent month.

Notice to p2p lending services not listed: Continue reading

Spanish Platform Comunitae Stops Operations Due to Fraud

Spanish platform Comunitae has stopped operations indefinitely due to fraud. Several SMEs hat placed fraudulent offers on the marketplaces. The management says this was helped by inside fraud and they have expelled a risk analyst and initiated legal action.

Comunitae was founded in 2008. The problem was detected this October. While no figure of the monetary damage was given, management says the default level caused was to high to continue as investor demand dwindled.

The platform might be forced to close. Continue reading

Finbee Expands into Czech Market

finbee logoFinBee, a Lithuania based p2p lending platform, has started to expand internationally by launching in the Czech Republic. By 2020, FinBee plans to begin operations in another two European countries.

FinBee will provide personal lending services for residents of the Czech Republic as well as for investors from across the entire European Union. The company expects that during the first year of operation, 50M CZK (1.94M EUR ) will be distributed via the platform.

The Czech Republic’s business environment, as well as the possibility to launch with experienced local teams, were among the main reasons to launch in this Central European state, CEO of FinBee Laimonas Noreika said. Payday loan companies offering loans with high interest rates play a significant role in the Czech consumer lending market. Noreika emphasized that borrowers are looking for opportunities to refinance expensive loans.

“We are launching in the Czech Republic to provide competitive interest rates for Czech borrowers,” he said. “In other words, by borrowing for less and paying lower monthly instalments, customers will be able to repay expensive payday loans. We see a growth potential here.”

According to Noreika, one of the main challenges in the Czech market will be borrower credit risk evaluation. In the Czech Republic, there is no centralized credit rating agency or government-issued database for credit risk evaluation. Therefore, this needs to be manually extracted from several sources.

“Our historical interest rate of 21 percent, and our NPL rate of 4.9 percent are some of the best among European P2P platforms. We are very committed to maintaining these results. Therefore, solvent borrower selection will be our utmost priority in the Czech Republic.”

FinBee provides services to borrowers and investors in Lithuania and the Czech Republic. The company started operating in Lithuania in 2015.


Chart supplied by Finbee

My P2P Lending Investment Portfolio at Bondora is now 5 Years Old

Wow, 5 years have passed since I first started to invest into p2p lending at Bondora in October 2012. I periodically review my experiences in this blog – you can read my last update here. Over the total time I did deposit 14,000 Euro and withdrew 17,800 Euro.  So over time I withdrew more than I ever deposited, meaning 3,800 Euro realized profit. Even better: I still have 604 loans in my Bondora portfolio with an outstanding principal of 7,467 Euro at an average interest rate of 23.78%. Of these 2,746 Euro are in current loans, 778 Euro in overdue loans and 3,941 Euro in 60+ days overdue loans. Some of this very overdue loans do in fact make very regular monthly payments, albeit smaller than the planned payments in the original payment schedule – it will take much longer for the loan to be repaid. And of course many of my red loans are duds, which haven’t made a single repayment and it is unlikely any recovery will be achieved. There is 43 Euro cash in the account.

Bondora shows a net return of 19.0% for my portfolio. In my own calculations, using XIRR in Excel, assuming that 30% of my 60+days overdue and 15% of my overdue loans will not be recovered, my ROI calculations result in 17.2% return. Even if I assume total loss on all outstanding loans that are 60+days overdue my ROI calculation results in 15.6%

Let’s look how my remaining portfolio is distributed by several criteria

Chart 1: My portfolio by country; majority in Estonian loans, remainder in Finnish loans

Chart 2: My portfolio by rating: more than half of the amount in B and C rated loans, large portions also in A and D ratings

Current situation at Bondora

New investors cannot expect to achieve similar yields. Interest rates are much lower now than when I started and I achieved a portion of my profit by trading loans on the secondary market at premium.
If you want to start on the Bondora p2p lending marketplace now, consider using the Portfolio Pro autoinvest set to Estonian loans only with AA to B (or C) credit grades. Maybe try some Finnish loans with better credit grades too.

Bondora originates roughly 3 million Euro new loans per month. There is no cash drag, usually available amounts get invested very fast.

Chart 3: Cumulative all time development of my portfolio by credit grades 2012-2017. Remember I only deposited 14,000 Euro. The high 76,698 Euro given as total investment is a result of reinvestments and active buying and selling of loans.