interview

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

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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

 

Interview with Stuart Law, CEO and co-founder of Assetz Capital

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What is Assetz Capital about?

Assetz Capital is now the UK’s second-largest peer-to-peer business and property lender and also the second largest in Europe.  Since 2014, we have been providing competitive loans to credit-worthy SMEs and attractive returns to investors. We provide fairer and more accessible business lending to small and medium sized businesses and property developers throughout the UK.

Since our launch, we have lent more than 350 million GBP to credit worthy businesses whilst providing returns of 30m GBP to our investors using a number of automated investment accounts that earn gross rates of return between 3.75% – 7% per annum and also permitting manual lending at rates often above that. Almost all funding to date has come from retail investors and maintaining support for retail investment is one of our business aims.

What are the three main advantages for investors?

Firstly, we only lend to businesses who we assess as credit worthy businesses with tangible assets. Tangible security is taken for each and every loan – which is unusual for peer-to-peer lenders – in order to reduce the risk of capital losses for investors, while also lowering the cost of borrowing for businesses. We also deploy traditional credit assessment techniques rather than rely solely computer-based borrower assessments, meaning our processes are fast, meticulous and human. As a result of our processes, Assetz Capital’s expected loss rates are amongst the lowest in the industry (currently standing at just 0.35% across our live loan book).

Secondly, we cater for all types of investors. In the past four years, we have experienced strong annual growth year on year, and have attracted a wide set of sophisticated and consumer retail investors, as well as attracting family office and institutional investment. We believe it is because we have demonstrated excellent credit skills and loan performance, while delivering strong net yields.

Thirdly, we are also the only major UK P2P platform to still offer a manual investment option. This allows investors to choose exactly which borrowers to lend to, allowing them to cultivate a bespoke investment portfolio and choose appropriate levels of risk in their investments. For those wanting automated accounts, we offer a wide selection ranging from our Access Accounts to a Green Energy Account, all of which cater to those with less time to invest. This combination of accounts offers the type of control that an individual investor may require, allowing people to pick and choose from a wide range of individual loan opportunities, and also the ability to automatically lend if they are time-poor.

What are the three main advantages for borrowers?

Assetz Capital has been providing small and mid-sized businesses with flexible and quick access to funding for future business and employment growth with competitive rates.

Rather than being just a website with automated credit assessments, Assetz Capital is run by finance, banking, credit and lending professionals with huge industry experience, alongside our large UK-wide network of employed Regional Relationship Directors who visit potential borrowers and help structure the loans.  I believe that this is unique to the P2P industry, and is reassuring to both business borrowers and lenders that behind the technology and website there are actual, qualified humans with relevant experience to help structure good quality transactions. Borrowers really appreciate the ability to structure their loan requirements face to face with experienced professionals instead of encountering the “computer-says-no” problem of today’s banking industry.

We’re also a lean business, and as such we have lower overheads than traditional lending institutions.  Coupled with the fact that we only lend to credit worthy businesses holding tangible assets, this means our cost of borrowing for businesses is kept low.

With the uncertainty that has come with Brexit, we have found that our platform is overcoming some of the issues which many UK businesses are currently facing.  We believe that fixed rate loans offer businesses a stable way to predict part of their finances, regardless of external market conditions. Brexit may put pressure on banks to reduce loan availability or raise rates substantially, but alternative finance providers such as Assetz Capital are continuing to offer fixed rate loans.

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

As a business, we are totally transparent with our top-line numbers, and these are updated live in a prominent position on our website. In just over four years, investors on Assetz Capital have collectively earned gross returns of around 30 million GBP on their investments, relating to more than 350 million GBP in loans to date.  We have a big announcement at the beginning of November that further endorses these results.

Stuart LawAssetz Capital has succeeded in growing loan originations sharply in the past 12 months. How did you achieve that and were intermediaries like brokers a major factor?

While much of our loan origination is organic, brokers have also played a vital role in referring many small and medium sized businesses to us. To date, more than 350 successfully funded projects have come through brokers, and we predict that this will grow to approaching 1,000 by the end of the 2018 year.  In fact, this has been so successful, we are actively working to increase our broker network significantly in the next two years, and have recently revealed a strategy to further support brokers through a number of methods.

For example, our network of nationwide Regional Relationship Directors is supporting more brokers locally. We are also offering new product and pricing improvements to further build our relationships with brokers. Our face to face approach is very much liked by brokers and their borrowers alike and this is also a factor in our success, as is the experience of our team.

What will the soon to be launched Assetz Capital IFISA offer? Will it offer the same range of investments and interest rates as currently? Will the IFISA be flexible?

Now that we have achieved full authorisation from the UK regulator, the Financial Conduct Authority (FCA), we are preparing to launch our Innovative Finance ISA (IFISA), which should be ready by the end of 2017.  While I can’t reveal all the details at time of writing, it will be highly flexible as it is an extension of our very successful model.  There is no intention to have any ISA fees for normal transactions and we also intend for our main lending investment accounts to also be available at the same rates in the ISA. We also intend to release our next generation investment dashboard that we believe will keep it at the forefront of the industry.

Will you soft launch it to existing investors first or will it be open to all from day one?

We will open the account to all comers straight away, not just existing investors.

I heard Assetz Capital is profitable? Can you walk me through some of the key facts of the financial side of the company, please?

Very few FinTech businesses are even close to breaking even, so it was a momentous day this year when we proudly claimed we made a seven-figure profit (GBP) for the last financial year to March 31st 2017.  I believe that this is a testimony to our business model where we refuse to believe fast growth should be at the cost of profit and cashflow. While several others built their loan books up quickly with a more lenient approach to credit and very substantial levels of outside investment to cover trading losses, we took a more cautious approach to credit risk and built our entire business on an initial seed funding round of 1m GBP and Series A equity raising of just 5m GBP more. We have now lent similar levels to the whole of 2016/17 year in the first six months of this year and also booked profits of around the same as last year in this period. We have a healthy balance sheet and have just announced a new Series B equity raise that will bolster it further.

You are currently raising 1 million GBP through a crowdfunding for equity round on Seedrs. What will you use these funds for?

We had a very successful raise of 3.2m GBP on Seedrs in 2015, and now we are looking to fund a number of short-term capital expenditure projects, which are aimed to help the company continue its substantial growth.  We believe that this may well be the last one prior to an institutional investment round or IPO but we will keep this under review and are really pleased to have not just delivered thousands of people great levels of interest through our platform but also delivered hundreds of investors a strong equity growth also as a result of the Series B being priced at 250% approximately of Series A carried out two and a half years ago..

What are your views on Brexit, the impact on UK fintech in general and on p2p lending in particular?

With the many political, regulatory and economic twists and turns of 2017, uncertainty continues. While many of those involved in business and investment are nervous, there are others benefiting and seizing on opportunities. Since the Brexit vote, no one is really sure of what the longer-term impact will be on businesses, investors or the UK market in general, however from the P2P market perspective, this has been an important year to further solidify its stature and firmly place it as a viable alternative to banks for both investors and borrowers.

We see that Brexit has actually had a positive effect on P2P, and all indications signal that the industry will benefit further in 2018 as a result of banks seeming to entrench somewhat ahead of the outcome being more visible. The impact on wider Fintech is more varied and we see a disincentive to set up in London to some degree for some businesses but for those here I expect they will take a wait and see approach. The possible loss of the ability to ‘Passport’ UK regulatory permissions across Europe or vice versa could be the major loss for companies intending to operate both here and in Europe.

The main issue is that the result of the Brexit vote is still some way off and indeed it is entirely possible we could see a continuation of the recent economic strength if Brexit turns out well economically and some real challenges if it does not. It is too early to call but the former would be my expectation on balance.

Where do you see Assetz Capital in 3 years?

Assetz Capital will continue to grow, to offer new and innovative products to investors and borrowers, and to hold true to our founding principles of fairness to all our stakeholders including investors, borrowers, shareholders and staff. We have already seen growth of around 100 percent year on year since 2014, and we believe that this rate will continue.  We have very ambitious plans for the business, and certainly we see ourselves in three years as becoming one of the leading secured lenders to creditworthy businesses looking for additional funding as well as one of the top few P2P platforms for investors looking for choice, flexibility and fair, risk-adjusted returns.

We want to be recognised as being a real contributor to the economic success of the country, on several levels including helping house building volumes increase to address the housing shortage, helping businesses grow and increase employment, helping private investors earn more from their hard-earned capital, helping institutions deploy capital on market-leading risk return ratios and finally helping incentivise and contribute to a greater quality and breadth of financial education in today’s society.

P2P-Banking.com thanks Stuart Law for the interview.

Interview with Terry Fisher, Founder at Huddle Capital

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What is Huddle Capital about?

Huddle Capital is a P2P lender specialising in high quality, high yielding business loans. In an already crowded space, Huddle is differentiating itself by it high quality origination and a focus on educating its lenders to help them make better decisions. Unlike many other Huddle Capital is backed by a parent company that has been lending its own money for a long time, which they will continue to lend though the Huddle platform – really putting our money where our mouth is!

The parent company underwrites each deal, which means that all borrowers will 100% get funded through our platform.  In addition, we offer investors instant returns – in other words, investors start earning as soon as they make a commitment to invest in a loan, regardless of how long it takes for a loan and get fully funded.

What are the three main advantages for investors?

The main advantage for lenders on Huddle is that we are owned and managed by Access Commercial Finance which is an FCA regulated, balance sheet lender. Our belief is that most fintech businesses in the marketplace are too much ‘tech’ and not enough ‘fin’ so we are looking to correct that balance on Huddle. There is no point having a fancy website & tech if the underlying loans are of poor quality and the collection process has holes in it. We are an existing finance business that has all the processes and knowledge in place already – we are simply bolting on the p2p tech to allow investors the opportunity to invest alongside us.

Investors benefit in 3 ways:

  1. We aim to provide higher returns compared with average returns in P2P market, by leveraging our loan management expertise. Naturally investors must balance risk versus reward.
  2. We provide instant returns to investors, as explained above; and
  3. We believe in empowering investors to make educated investment decisions, especially in this new asset class. We educate and provide a platform for investors to network with each other.

What are the three main advantages for borrowers?

The main advantage to borrowers is getting speedy access to funding for strong business cases that have been unable to achieve satisfactory funding elsewhere. This could be due to slow processing timescales by more mainstream lenders, or the fact that the borrower can’t find a lender who like their particular case / asset class etc.

At Huddle we share many of the same management team of Access Finance and therefore have a wealth of commercial business experience as owners as well as lenders, allowing us to understand borrowers needs better and quicker than most other lenders.

What ROI can investors expect?

As always, reward increases with perceived risk so individual lenders are free to choose the loans and risk profile that suits them. Currently we have loans that pay lenders from 8% to 16% per annum, depending on their risk appetite.

Naturally, ROI increases with the ability of the platform to manage bad debts.  Our parent, Access Commercial Finance, has only ever had minor default since they started lending.  We deploy the same credit management team who is proactive in chasing down late payments.

Why did Access Commercial Finance decide to start Huddle Capital?

At Access we have been originating a stream of good quality loans for many years and have had great success funding them from our own balance sheet. But we don’t have unlimited funds and often come across loans which we would like to be involved with but they need pricing more competitively than we are able to. So with Huddle we are looking to open up our origination channel to P2P investors, allowing us to write more business and not have to pass up great opportunities just because our own funding capabilities don’t allow it.

Terry FisherHuddle Capital is using technology supplied by Ablrate. What factors led to the choice of this solution and how satisfied are you with the software?

At Access we have had a fantastic working relationship with Ablrate for the last couple of years. We have originated a lot of high quality loans that Ablrate have funded through their investor base. We actually looked at a lot of software providers in the market and were not 100% happy with any of them. Then we thought ‘hang on a minute! Why aren’t we working with Ablrate on this?!’. 10 weeks later we were live! David at Ablrate is a very good operator and very commercial to work with, so the process was a breeze.

The Ablrate platform is proven – having gone through a stringent review by the FCA as part of the approval process.  We leverage their practical experience to ensure that we avoid mistakes made by the pioneering P2P industry.

Huddle Capital Limited is an Appointed Representative of Rebuildingsociety. What does that mean and why did you choose that structure?

In simple terms this mean Rebuildingsociety provide us our regulatory permissions whilst we await our own from the FCA. Getting directly authorised from the FCA is a long and laborious process. Becoming an Appointed Representative allows us to get up and running in a matter of weeks as opposed to potentially well over a year. It makes no differences to our lenders or borrowers, we are still governed by the same rules as everyone else for their protection. We will look to get our own permissions in the fullness of time, but right now we are concentrating on building the business.

What were the main challenges launching your platform in a competitive (crowded?) market?

Once your tech works there are only 2 real challenges in this business – attracting lenders and finding borrowers. Fortunately we have got plenty of borrowers both existing and in the pipeline – so our challenge is getting out there in front of more lenders so they can learn about our platform and the benefits of lending through Huddle. Hopefully this interview will help with that!

We had support from a progressive consultancy, Vedanvi, who helped us develop the strategy, build the business, operate it and then transfer it to our own internal team.  They have significant experience in this market space and we leveraged their expertise to ensure a smooth and successful launch.

Is Huddle Capital open to international investors?

International investors are welcome to invest through Huddle Capital.  As required by law, they have to undergo additional anti money laundering checks before they are allowed to invest on our platform.  Investors need to realise though that their loan contracts and their contract with us are governed by UK law.

Which marketing channels do you use to attract investors and borrowers?

Currently all our borrowers are generated via Access, our parent company. We have no shortage of quality businesses looking to borrow money!

We are marketing to investors through the usual channels of PPC & SEO, but the primary channel we use is content led marketing, providing educational led content, empowering potential lenders to understand the lending business better and be in a position to make informed lending decision.

Do you plan an IFISA product offer?

Yes we certainly do but realistically it will be a few months down the line. We have lots of additions to the platform & the technology over the coming months and it is a matter of getting our priorities in order. We have launched, we have tech that works and now we are starting to get a flow of strong and high yielding loans. We are currently concentrating on brining on new investors so we can ensure strong liquidity in both the primary and secondary markets. Then we will move on to getting the IFISA launched. It’s keeping us busy!

Where do you see Huddle Capital in 3 years?

Hopefully as a highly recognised brand name in the P2P space. We should have a large base of happy lenders who come to us time and again to deploy their money in to high yielding, secure opportunities. Just doing more of what we do now, and listening to our lenders and borrowers to keep improving!

P2P-Banking.com thanks Terry Fischer for the interview.

Interview with Loit Linnupõld, CEO of Crowdestate

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What is Crowdestate about?

Crowdestate is a leading Nordic real estate crowdfunding marketplace offering high-quality, pre-vetted real estate investment opportunities. Only the best investment opportunities survive our rigorous due diligence process, and these are the ones we open for investing on our platform.
With each project, we present our investors with extensive background information, risk level, SWOT, business plans and financial models. Combine it with Crowdestate’s low, just 100 euro minimum investment – all of this makes investing into real estate quick, easy and affordable to everyone.

What are the three main advantages for investors?

Pre-vetted real estate investment opportunities – Our experienced real estate and finance team evaluates thoroughly each aspect of every project and picks the best investment opportunities to be published for crowdfunding.
Low minimum investment amount – the minimum investment on our platform is just 100 euros, meaning basically anyone can afford to invest into real estate with Crowdestate.
Everyone can invest – Crowdestate is open to all investors all around the world, provided that they have a way to make an international bank transfer to their virtual investment account previously created on our platform.

As an additional advantage, we charge no fees from our investors.

There are many different types of investment opportunities on Crowdestate. Debt, equity, secured, unsecured… Why did you decide to use so many different types for the offers?

If we look at the real estate industry, any real estate project needs different types of capital – from senior loans to mezzanine debt to preferred or common equity. Crowdestate’s aim is to become a full capital stack provider so we can address our Sponsors’ needs properly. This is the reason why we have not limited us to a single capital type.

If we look the real estate projects from investors’ perspective, investors have different investment preferences (e.g. time horizon, risk tolerance etc) and therefore they are looking for different types of investment. Young and aggressive investors might like high-risk equity deals while some other investors might prefer lower risk-lower return senior loans.

What ROI can investors expect?

The historical money-weighted average internal rate of return on our exited investment currently at 29.59%. However, as the fast-increasing money supply is driving the expected returns down, the investors’ annual returns are probably going to remain between 10-20%. The return rate is a reflection of project’s riskiness – a mortgage-backed senior loan might yield around 10% per annum while riskier mezzanine or equity investments may offer much higher yield.

How did you start Crowdestate? Is the company funded with venture capital?

During my few decades in the banking industry, I have met hundreds, maybe even thousands of clients, who are unhappy with the investments offered by their banks and they have clearly expressed their preferences to invest in real estate. Unfortunately, for most of these people investing into real estate never became a reality. They simply could not afford it due to the high entry costs and significant individual investment ticket.

At the same time, funding real estate projects had become a challenge for developers as banks became more and more picky.

I founded Crowdestate in 2014 to match the needs of the investors to the needs of real estate companies.

Is the company profitable now?

Yes, Crowdestate has been profitable from its very first year, and we have reinvested all the profits to developing the business.

Loit Linnupõld, CrowdestateIs the technical platform self-developed?

Yes, our platform was developed from scratch, and we are constantly working on improving it.

Are there any new features for the platform your team is working on? What about a secondary market?

We are currently finishing updating our mortgage-back loans offering and we will have very quick and automated approach there. We are also introducing a reverse interest auction to determine a true market rate for a specific project and an autoinvest feature.

We are also considering opening a Secondary Market for investments within this year allowing our investors to buy and sell their investments to other Crowdestate’s investors.

Currently there are usually one or two new investment opportunities per month. Can investors expect more deals in the second half of this year?

Our thorough vetting process eliminates most of the original investment ideas and therefore limits the number of investment opportunities we can present o our investors each month. Our Estonia and Latvia based teams are working hard to identify high-quality investment opportunities in the region.

We are also testing the interest for crowdfunded corporate finance deals and we are launching a new mortgage-backed loans solution soon. We expect those new solutions to increase the variety of investment opportunities on the platform.

Crowdestate is open to international investors. Can you please share from which countries the majority of your investors come?

Crowdestate is visited from all over the world and our investors come from South-East Asia to North-America.

As Crowdestate was founded in Estonia, Estonians are still the largest investor group, but the fast-growing number of international investors will bypass them probably quite soon.

Do you plan to cooperate with institutional investors? In which way?

Crowdfunding is about crowd and investment democracy and we prefer to serve a large number of small investors to serving a small number of large investors.

What is the current state of the real estate market in Estonia?

We believe the overall health of the market is good as the economy is doing well, interest rates are low and real wages are growing fast. At the same time, we have some suspicions on the health of specific sectors, namely offices and retail spaces – there is a lot of speculative developments in those sectors and we will probably see some changes there.

How do you think the property development market will be impacted by p2p lending in Estonia / in Europe in the future?

One of the leading Scandinavian banks stated recently, that the residential developments should be funded by equity, prepayments and crowdfunding. As the credit is quite tight in most of CEE countries, crowdfunding will play a significant role in funding the real estate development market.

Where do you see Crowdestate in 3 years?

I hope that Crowdestate is present outside our current domestic markets and we can help hundreds of thousands of investors in turning their savings into earnings.

P2P-Banking.com thanks Loit Linnupõld for the interview.

Interview with Joerg Bartussek, Co-Founder of Finnest.com

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What is Finnest.com about?

Finnest.com is the only platform successfully providing modern corporate finance for well-established Mittelstand companies (no start-ups). Borrowers are mostly AAA-like rated brands and industry leaders that have been on the market for years (often decades) and are able to demonstrate a sustainable and profitable growth path.

These top-companies are actively seeking alternatives to their traditional bank loans and want to diversify their finance mix. For the first time, Finnest.com gives these Mittelstand champions access to the capital market. The platform is a 21century version of a classic corporate bond bookbuilding process and provides end-to-end financing solutions.

Currently, Finnest.com is licensed and active in Germany, Austria, Switzerland and Slovakia.

What are the three main advantages for investors?

1.) Investors get access to a completely new class of investments, previously reserved for a handful of professional investors.
2.) On Finnest.com, investors select the interest rate of their choice! Only if the company agrees to pay this annual rate (or more), will a deal be closed.
3.) Investors can invest in local and regional companies that create jobs and income in their area.

What are the three main advantages for borrowers?

1.) For the first time, Finnest.com provides this segment of well-to-do Mittelstand borrowers with access to the capital market previously reserved for large corporations.
2.) Mezzanine financing as provided via Finnest.com strengthens these companies’ balance sheets.
3.) An enormous PR & loyalty effect – when customers invest into “their” brand, the term “brand messenger” gets a rich new meaning.

What ROI can investors expect?

On Finnest.com, investors select their interest rate of choice. On average, companies have paid out 5.5% annually fixed interest rates. The concept works: a Finnest investor invests about 7.000 Euro per transaction, that is roughly 20 times higher than on other online platforms.

Finnest charges investors a fee of 1% (minimum 25 Euro). Doesn’t a high fee hinder diversification?

We are one of the few (the only?) platform that charges an investor fee. It’s 1% of the invested amount. That means if an investor invests 7.000 Euros, she/he is charged 70 Euros once. That’s it. We haven’t learned of any investor who would not invest because of this small fee.

Finnest.com uses subordinated loans (‘qualifiziertes Nachrangdarlehen’). An Austrian court recently ruled that this structure severely disadvantages investors. Why did you choose this structure rather than standard loans?

Headquartered in Austria, Finnest.com is licensed by the Austrian AlternativfinanzierungsGesetz (alternative financing law). This law (just like its German counterpart, the Schwarmfinanzierungsprivileg) actually requires us to use subordinated loans. It’s the tool the law selected.
The court ruling you refer to, addressed one specific contract by one single issuer who did not use any legally checked platform, but decided to do this financing on his own. Apparently, that was not such a smart idea – that contract must have been quite bad and the court ruled accordingly. Our contracts are thoroughly checked by leading law firms in each jurisdiction and have been presented to the financial authorities, of course.

How did you start Finnest.com?

For many years, Günther Lindenlaub, my co-founder, had been in charge of capital market transactions for one of Europe’s leading banks. While he saw, that large corporates keep using tools like corporate bonds to diversify their finance mix, the banks we not able (or willing) to offer something similar to the Mittelstand. But bonds are too complex and costly for the Manners and Almdudlers of this world. So, he decided to create his own platform – Finnest.com.

Joerg BartussekIs the technical platform self-developed?

Yes. It was built by a team that had previously built part of ING-Diba and AustroControl, the Austrian flight control agency. These guys know everything about stability, security and usability. We like to joke that we did not build a Tesla but one of those 80s’ Volvos with the iron bars in the doors. Very safe, very stable, drives, and drives, and drives.

Was the company funded with venture capital? Is the company profitable now?

We were lucky to attract Speedinvest, the largest Austrian VC, as our seed investor. And we have added a carefully selected group of international angels and VCs since. As we are still growing fast, we are not profitable, yet. But we are doing very good business.

Are there any new features for the platform your team is working on? What about a secondary market?

We are expanding: As we are speaking, our team is in the last phases of building a new, second platform. It will provide a similar service as Finnest.com does, but it will address a different market segment: large corporations on the one hand and professional as well as institutional investors on the other hand. Modern corporate finance XL, so to say.

Which country are you most successfully attracting investors in?

Even though we originate in Austria, Germany is our prime market. Already today, the majority of our investors comes from Germany and we have just hired new team members focusing mainly on the German market.

You plan an expansion beyond Germany, Austria and Switzerland. What can you tell us about your next market(s)?

Our industry is a highly regulated one, governed by national rules and regulations. But with the new platform, we will be able to provide a pan-European service. That will open a completely new scale of opportunities for us.

Do you plan to cooperate with institutional investors? In which way?

Yes, definitely. The new platform will be customized for their interests and needs.

What is the current state of the market in Austria?

With the passing of the AlternativfinanzierungsGesetz, (alternative financing law), the online financing market grew at a rapid pace. We have now more than a dozen platforms and high 2-digit number growth rates. But of course, business in Austria is always only a fraction of that in Germany. Germany is the main market we are focusing on.

Where do you see Finnest in 3 years?

We believe, that in 2020 there will be three main platforms financing larger, successful companies across Europe. Finnest.com should be one of them.

P2P-Banking.com thanks Joerg Bartussek for the interview.

Interview with Evaldas Remeikis, Chairman of the board at UAB NEO Finance, Marketplace Paskoluklubas

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What is Paskoluklubas about?

NEO Finance is the leading P2P lending platform „Paskolų klubas“ in Lithuania. The platform is an intermediary for consumer loans connecting lenders directly with borrowers. We believe that fintech company should be not only innovative, but also professional. This is why we gathered a strong team of senior experts from the banking sector with the expertise in consumer lending, bank management and risk control. Currently all of “NEO Finance” activities are supervised by the Bank of Lithuania due to obtained e-money license, P2P license and as a consumer lender status, to ensure that responsible lending criteria is enforced.

We have a unique platform that we developed our self to fit the needs of our investors. NEO Finance offers buyback and provision fund services, which minimizes risk for lenders. Moreover, partnership with Legal Balance, UAB enables platform’s users to experience the benefits of 7+ years of delinquent loans recovery know-how.

By transferring money to “Paskolu klubas” account investors deposit it into e-money IBAN account under their own name and hold all of the money under their control till the investment is made.

Our main goal is to ensure a sufficient supply of loans are listed in the primary market, so that our investors can cherry-pick the loans adequate to their investment strategy.

What are the three main advantages for investors?

  1. Provision fund service. By voluntarily paying a provision fund fee, more conservative investors can be secured from delinquent or defaulted loans. If a borrower is late with the installment, provision fund immediately covers that installment. The fund holds largest amount of proceeds to cover late payments in the Baltics and holds more than 100 000 EUR at the moment.
  1. Buybacks. Investors, who did not choose the provision fund service, can sell defaulted investments to “Paskolu klubas” for 50-80% of its face value. Instead of waiting for a relatively long recovery process they can reinvest their money into other loans.
  1. Higher interests rates of return. In Lithuania, we operate in market of higher interest rate. Currently our average interest rates are as fallowed for each of the credit rating: A – 13 % B – 17% C – 20%. This creates opportunity for investors from all over the Europe to receive higher returns.

What are the three main advantages for borrowers?

  1. Lower fees for borrowers. As our fees are one of the lowest for borrowers, therefore half of the borrowers choose “Paskolu klubas” loan as an alternative for a bank loan.
  2. Possibility to get an instant loan. Since we developed in-house state-of-the-art IT platform ourselves we can offer unique features for borrowers and investors. One of them is instant loan service. Investors can set up their automatic investment tool and borrowers can see what amount they can borrow at what rates, as the system collects all automatic investment orders starting with the lowest rate and building it up to meet the needs of a borrower. This feature enables investors to invest their capital faster.
  1. No upfront fees. Unlike other platforms Paskolu klubas does not charge upfront fee from borrowers. Borrowers do receive the exact amount they borrow. Platform fee is deducted from the payments, this way we take the risk together with investors and are able to offer barrows flexible barrowing.

What ROI can investors expect?

10-18% after taxes. One investor did an experiment with 4000 EUR initial deposit. Half of the investments were made using a provision fund service, 5 defaulted investments were sold to NEO Finance and some investments were sold in the secondary market with premium. ROI after exactly 1 year was 14% after taxes.

Is the technical platform self-developed?

Yes, this allows us to add various new features and to fit the needs of both – investors and borrowers. We are not only the peer to peer platform, but also a fully licensed e-money institution. This enables us to operate as an online bank with IBAN account numbers and SEPA MMS payments.

Evaldas RemeikisHow is the company financed? Is it profitable?

The company is financed from shareholder’s equity. It is not profitable yet, but we are in operation for only one and a half year. Our current goal is market penetration and market share.

What were/are the main challenges in the Lithuanian market?

When preparing for the launch, we spent a lot of time carefully analyzing Lithuanian and foreign markets. “Paskolu klubas” shareholders and employees have a lot of experience in the financial sector, we also cooperate with the best partners and agencies. This helped us to be prepared, therefore none of the challenges were unexpected.

One of the more significant challenge was financial literacy. Potential investors were not introduced to peer to peer lending before. Therefore, we started an event and training cycle where we educate investors about pros and cons of peer to peer lending.

You launched the company for residents of Lithuania quite some time ago. What prompted you to open up for international investors and launch an English version of the website right now?

From our experience, we knew that establishing consumer loan brand in a market takes at least a year. We focused our effort on becoming the number one platform in Lithuania for the past 18 months, but had strategic plans to open our platform to international investors from the beginning. Currently we can supply enough of quality loans for international investors.

Another reason was it took time to acquire full e-money license. For this we had to make sure we meet international anti-money laundering requirements and international identification requirements. Only after establishing processes, developing the system and meeting those international requirements we are ready to offer opportunity for international investors.

Which marketing channels do you use to attract investors and borrowers?

For investors, we mostly use educational channels where we try not only to advertise, but also to educate people about investment opportunities. In 2016 we organized over 30 events for our investors. We also use partnership of different financing experts who can provide feedback on our platform and receive bonuses for the investors they bring in.

Moreover, word of mouth perfectly works for us, because we have many satisfied investors, who are sharing their experiences and helping us grow.

For the borrowers, we have fully integrated marketing campaign. We use all traditional and digital channels. We invest in brand building and acquiring quality borrowers. This helps us to acquire valuable borrowers, who are worth to invest in.

Where do you see Paskoluklubas in 3 years?

We see Paskolu klubas as a global player in P2P lending sector. We may establish borrowing sites in other countries, but we will localize it as we did with Paskolu klubas in Lithuania. We see advantages of strong brand in each country we operate for borrowers. We are currently on a path of fast growth and we are not looking to slow it down. Our goal for next few years is to be the number one platform for investors in the Baltic states.

Investors can use the Paskoluklubas referral code P2PBANKING when registering and get 10 Euro for their first investments.

P2P-Banking.com thanks Evaldas Remeikis for the interview.