There are currently 4 live crowdfunding campaigns for investors to choose from: (1) Lincoln, a retailer for lifestyle products; (2) a niche cinema operator; (3) a contractor for paint work; and (4) a supplier of natural stones (in slabs and tiles). My preferred choices would be the niche cinema operator and the supplier of natural stones.
|Lincoln||Cinema Operator||Painter||Stone supplier|
|Platform||MoolahSense||Funding Societies||Funding Societies||Funding Societies|
|Business||Retailer of lifestyle products (mainly shoes)||Screens Tamil and Hindi films at Little India||Painting work||Importer of natural stones (in slabs and tiles)|
|Customers||Teens to early adults||Foreign workers||Construction projects based||Construction projects based|
|New cinema may not succeed||Slowdown in construction industry||Slowdown in construction industry|
|DP Probability of Default||>16.15%||3-5%||N.A.||3-5%|
|Duration||12 months||24 months||12 months||12 months|
|Purpose||Expansion into e-Commerce||Expansion (New Cinema)||Working Capital||Working Capital|
|Repayment||Equal Monthly||Equal Monthly||Equal Monthly||Equal Monthly|
|Return (AER)||18% max||20% (re-computed)||28.3% (re-computed)||23.2% (re-computed)|
AER = Annualized Effective Interest Rate. The rate earned by borrower, net of all fees and charges.
The AER for Funding Societies loans are re-computed based on the repayment schedule provided. Funding Societies reports its borrower’s return using a flat rate. For more information on the differences between flat and effective rates, please refer to my previous post.
What I like about Cinema Operator:
- Niche market serving foreign workers. Less competition.
- Existing cinema operations should be fairly stable, generating decent returns.
- Directors have strong repayment ability.
What I like about Stone Supplier:
- Despite being in the construction industry, company manages cash very well
- Little company debt.
- Small loan amount and directors have strong repayment ability.
Why I would avoid the Paint work contractor (with no disrespect to company):
- DP default probability not available
- Short operating history.
- Small contractors tend to run into cashflow problems during a recession.
Disclaimer: The author is not affiliated with crowdfunding platform companies and borrowing companies. However, he may be an investor in crowdfunding campaigns. Information provided may are obtained from external sources and may contain views by the author. Crowdfunding as investing may not be suitable for everyone. No financial advice or recommendation is provided. Caveat Emptor.