Funding Societies Debt Investment Platform - Review for Investors
Funding Societies Debt Investment Platform - Review for Investors
ValueChampion Rating 
Pros
- Investors who prefer an online debt invsetment platform with a strong performance record and high asset quality
- Individuals that value investing with a platform whose executives invest in the same deals
Cons
- Investors that want to purchase shares of equity of a business
Funding Societies stands out from other debt investing platforms and SME lenders for several reasons. From an investing perspective, the platform's asset quality (approximate 1.66% default rate & 90% on-time repayments) is unmatched. Additionally, the platform has provided great returns over the past few years.
| Summary of Funding Societies Debt Investment Platform |
|---|
| Cashback Promotion: S$50 cashback on a minimum S$100 investment when you sign up with ValueChampion |
| More than S$3 billion funded |
| Lowest long-term default rate of debt investment platforms (approximately 1.66%) |
| Low minimum investment per campaign (S$20) |
| Funding Societies' executives also invest through the platform, aligning their incentives with investors |
Table of Contents
What Makes Funding Societies Stand Out to Investors
Funding Societies provides an excellent opportunity for debt investing into Singapore SMEs. In general, SME debt investing presents added risk, compared to other investments, given that companies seeking this financing tend to do so because they do not qualify for traditional bank loans. This highlights the need for a platform like Funding Societies, which features the best asset quality of all platforms in our review. Its default rate (approximately 1.66%) matches those of high quality commercial banks and it features exceptional rate of on-time payments (approximately 90%), and it also launched Guaranteed Property-backed Investments (GPI) in 2020 to provide additional level of safety for investors. It has completed over 5 million deals amounting to more than S$3 billion, with a financing fulfillment rate of 100%, which further supports its strong performance track record.
Additionally, Funding Societies founders and employees are unique in this space for investing in every opportunity on the platform along with their users, which indicates that the platform is incentivised to keep investors' best interests in mind. Finally, Funding Societies offers "Auto-Invest", a free tool that allows investors to automatically allocate funds to investment opportunities based on preferences of tenure, interest rates, and industry. There are a few drawbacks of the Funding Societies platform. First, it does not offer equity investing. Also, its 18% (of interest earned) investor fee is comparable to some of its competitors, but some platforms charge less expensive fees.
Investment Opportunities at Funding Societies
Funding Societies offers investors a variety investment opportunities. These include short to medium-term unsecured business loans, invoice financing, and guaranteed property backed loans. The tenure of these investments options ranges from 1 - 12 months and 30 - 90 days. Funding Societies business and invoice financing loans generally earn 8 - 18% annual effective interest rates, while secured loans typically earn 3-8% p.a.
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| Business Loan | Invoice Financing | Property Secured Financing | Guaranteed Property Backed Loans | ||
| Annual Returns Range | 8 - 18% | 8 - 18% | 4 - 8% | 3 - 8% | |
| Investor Service Fees | 18% of interested earned | 18% of interested earned | 18% of interested earned | 18% of interested earned | |
| Minimum Investment per Campaign | S$20 | S$20 | S$20 | S$20 | |
| Initial Deposit | S$100 | S$100 | S$100 | S$100 | |
| Loan Duration | 1 - 12 months | 30 - 90 days | 1 - 12 months | 6 - 12 months | |
| Security | Unsecured | Secured and unsecured | Secured | Guaranteed |
Funding Societies offers both secured and unsecured investments. Unsecured loans mean that borrowers do not provide collateral for the chance that they cannot repay. This increases both the risk and the potential return of these investments. Invoice financing tends to present lower risk and returns than unsecured business loans, because invoice financing is based on the value of goods/services that the borrower has already provided and is owed from its customers. This makes the loan more likely to be repaid compared to business financing, which can be used for any number of purposes. Funding Societies requires that business loans are personally guaranteed (a legal promise to repay) by the director(s) of the borrowing company.
On the other hand, Funding Societies also offers property (i.e. residential, industrial or commercial) secured financing. These loans typically offer lower returns (4-8% p.a.), but offer additional recourse for investors. For example, Funding Societies can recoup some losses from their loans by liquidating the property. Some of the loans are even guaranteed by Funding Societies's sister company FS Capital.
Funding Societies' Debt Investment Platform's Recent Performance
Funding Societies has a great performance track record, highlighted by its impressive default rate of just 1.66%. Additionally, the platform has provided impressive returns in recent years. With that said, past performance does not guarantee future results and investors must conduct their own research and due diligence on individual investments.
| Year | Weighted Average Annual Return | Non-Performing Loans (90+ days) |
|---|---|---|
| 2017 | 16.21% | 0.08% |
| 2018 | 11.73% | 0.00% |
| 2019 | 9.82% | 1.89% |
| 2020 | 7.82% | 0.00% |
| 2021 | 7.09% | 0.00% |
Investor Eligibility Criteria
- Investor Service Fee
- 18% of interest earned
- Typical Returns
- up to 8 - 18% (Business Term Loans & Invoice Financing); 4 - 8% (Guaranteed & Property Backed Notes)
- Min Investment Requirement
- S$20
- Investment Horizon
- 1 - 12 months
Funding societies is easily accessible for most investors. For example, the minimum investment per campaign for both investment types is S$20, which is significantly lower than the requirements of some of its competitors. Additionally, there is no application fee.
- At least 21 years old
- S$100 initial deposit
- Minimum investment per campaign S$20
- Free application
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Stephen Lee is a Senior Research Analyst at ValueChampion, specializing in insurance. He holds a Bachelor of Arts degree in International Studies from the University of Washington, and his prior work experience include risk management and underwriting for professional liability and specialty insurance at Victor Insurance. Additionally, Stephen is a former US Peace Corps Volunteer in Myanmar (serving between 2018-2020), where he continues to provide business development consulting services to HR companies in Asia Pacific.