Another month, another new platform joins the crowdfunding space. Since I started p2p lending last year, I’ve lost track of the number of companies moving into the crowdfunding space. The latest is Co-Assets, which is previously more in real estate crowdfunding, is actively moving into the SME p2p lending space. Co-Assets recently raised $200k within 30 minutes for a toy distributor. At roughly around the same time, Capital-Match, an SME p2p lending platform, is moving into invoice financing space, competing directly with Invoice Interchange. In the Equity Crowdfunding space, UOB is partnering Israeli-based OurCrowd to bring its offerings to Asia.
Co-Assets enters SME p2p lending!
There are now about 4 main players in this space: MoolahSense, Capital Match, Funding Societies and now, Co-Assets. MoolahSense has been on a roll recently, funding one loan after another in quick succession and at record speed. (See here for my previous comments on the impact on borrowers and investors.) This creates plenty of publicity; and I guess MoolahSense is now the top choice for SMEs looking to for alternative funding. Thus, Co-Assets must have readied itself for a tough fight in moving into the SME lending space. Although it has some experience in real estate crowdfunding, it is quite late to the SME lending which already has 3 players. Can 4 players co-exists in this space? Probably not. I suspect there could be a consolidation within 2 years’ time. Which are the stronger platforms, which are the weaker ones? Only time will tell. The global economy is slowing down and Singapore could go into a recession. Default rates will move up. Only then, will we probably know which platform has a good underwriting standards.
p2p invoice financing comes to Singapore!
While the p2p SME lending space is becoming more crowded, another interesting opportunity opened up in p2p invoice financing. Invoice financing refers to the sale of receivables for cash at a small discount. Generally, invoice financing is safer because it is backed by a receivable and for very short duration (less than 2 months). Invoice Interchange is the start-up that specializes in this space. Capital Match is also offering invoice financing, but the opportunities are currently limited only to a small group of investors.
Equity Crowdfunding is still restricted to accredited investors.
Equity Crowdfunding is currently regulated by MAS under the Securities and Futures Act (SFA). Only accredited investors are able to participate in equity crowdfunding campaigns. However, MAS has issued a white paper on this topic last year, and the expectation is that it will relax its criteria to allow sophisticated investors – who understand such risks – to participate. Nonetheless, several players such as FundHere and CapBridge is already operating in this space. Most recently, UOB is also partnering Israeli-based OurCrowd to bring equity crowd-funding to Asia.
Plenty of developments to watch out!
All in all, there will be plenty of developments within the crowdfunding / p2p investing space this year. The SME lending space should see increased competition and probably higher default rates as the economy slows down further. It will be interesting to see which platforms will emerge as eventual winners. For investors, risk management will be very important. On invoice financing, the p2p players could take market share from the traditional factoring companies due to their cost advantage. For equity crowdfunding, everyone that I spoke to is basically waiting for MAS to come out with a decision on how it intends to regulate the sector.
For this blog, this means that I have more avenues to invest my money and you should see me further diversifying my portfolio. I’ll also be writing more about invoice financing because I think the risks are manageable for most people. For more information on invoice financing, do read this blog by II.