Secured loans to European small businesses
|Total Investment Volume||€30m+|
|Average annual interest||8,60%|
|Minimum Investment||€10 (deposit min. €500)|
|Who’s eligible to invest||EU & US residents|
|Investment Type||Business loans|
|Auto Invest Function||Yes|
|Investor Protection||Buyback Guarantee|
|Currency||EUR, USD and GBP|
|Website Languages||English, German, Spanish, Czech|
PROS & CONS
- Excellent due diligence and risk management
- Transparent and easy to use platform
- Secured investments
- Limited diversification
- No early exit options
- Not licensed (yet)
- First, Debitum cherry-picks investments available on the broader loan originator market through a strict due diligence process. It usually takes around three months, and only about 10% of all projects go through successfully. Second, the management team closely monitors the loan originators, and Debitum was actually the only P2P platform that shielded its investors from the consequences of the recent troubles with Aforti Finance. In autumn 2019, investors on Mintos or Viventor suffered from late repayments from this loan originator. Debitum investors, on the other hand, had no reason to worry – the management had all their assets removed from the platform already in July after they had found Aforti’s financial situation unsatisfying. Such bold, proactive moves are still rarely seen and yet so appreciated by investors!
- Not only does Debitum gather plenty of useful intel on borrowers and loan originators, but it also makes it available to investors in a very transparent, well-visualised and user-friendly manner. You can easily check out statistics and summary information on loan originators as well as every single investment, including Debitum’s unified risk score, which allows you to compare borrowers based on a probability of default in the next 12 months.
- Very strict diligence and risk management processes result in extraordinarily high success rates. The default rate on Debitum is 0%, and there have been only 1.42% of buybacks. This comes with relatively high – given the safety levels – interest rates of above 8%!
- The narrow specialisation in small business loans and the diligent filtering process inevitably narrow down the quantity and variance of available investments.
- At the time of writing, there are only 175 assets open to investment, which falls short compared to large loan originator marketplaces offering thousands of options.
- There’s no secondary market on Debitum Network. In Spring 2020, the platform introduced investment liquidation as one of the “loyalty services”. This feature allows you to cancel the investment, but only if an asset is late and you have enough DEBs (Debitum’s cryptocurrency tokens awarded for every investment and deposit).
- In April 2020, Debitum Network applied for the investment firm’s license to the Latvian financial market regulator – Financial and Capital Market Commission (FCMC). This will provide another layer of supervision and investment protection, including compensation of up to 90% of the defaulted amount up to €20,000. For the moment though, unlike most platforms, Debitum Network is not regulated.
Who is behind Debitum Network?
Debitum’s core team is not new to FinTech. They are connected to the Latvian factoring company Factris as well as an invoicing company, Debifo, which was acquired by Factris in 2019, and a software company, Inntec, which helped build the technology for Debitum Network. Martins Liberts – the visionary and co-founder, is well-known for his interviews and talks about blockchain-based FinTech.
The platform was initially funded through an ICO (Initial Coin Offering), raising more than $18 million – quite an impressive sum. If you’re interested in the details of Debitum’s blockchain-based approach, you can read their whitepaper. Suffice to say; they don’t currently use their cryptocurrency for purposes other than paying for “loyalty services”.
But Debitum isn’t just about its team and business model – it is a Network. It strives to be a decentralised ecosystem that connects small businesses, investors and service providers. In practice, it means that Debitum works with loan originators as well as third-party service providers, such as risk assessors (credit rating companies), insurers, debt collectors, etc.
What does Debitum Network offer?
Debitum Network allows you to invest in business loans and invoice financing deals with durations from a few days to four years. The businesses come from Estonia, Latvia, Lithuania, Poland and the Czech Republic. They are categorised into 18 industries, including for example manufacturing, services, construction, financial, pharmaceutical, automotive, or health.
Most investments are secured with a buyback guarantee, and all come with collateral in the form of property, business or personal guarantee, promissory notes or invoices, inventory, or company stocks. Note that although you can deposit EUR, GBP or USD, all loans are issued in EUR. Other currencies will, therefore, be converted to EUR anyway.
How much can you earn?
Annual interest rates on Debitum Network vary between 6 and 12%, although at the time of writing, the ROI range of available deals is narrower – between 7.5 to 11%. You can receive an additional “penalty fee” paid by the borrower in case a loan is late for more than the grace period. The fee depends on the agreement between the loan originator and the borrower. It can vary between 0 and 15% (it’s 10% for most investments).
Who is Debitum Network best for?
Debitum’s extraordinary risk management strategy will definitely appeal to conservative investors, who value safety above double-digit returns. But the platform’s offer is a good addition to any P2P investment portfolio. For one, it’s never a bad idea to allocate a share of your capital in safer assets. Second, it exposes you to the business rather than the consumer lending sector (as most P2P lending websites do). Remember, diversification is key.
How to invest on Debitum Network
Debitum takes security seriously on all fronts. To register, you have to complete the KYC process (Know Your Customer) and activate your account with two-factor authentication. But don’t worry – it’s still a quick and smooth process. Once you register and add funds, you can start investing. Picking investments manually might not be a bad idea in this case, given the small number of well-described deals. If you prefer auto-invest, you can pick between three predefined strategies.
Even though you won’t make double-digit returns here, Debitum Network offers a really good risk-reward ratio. The highly skilled and experienced team has already proven itself in handpicking high-quality deals and protecting investors from loss. Multiple layers of diligence, risk management and investor protection make your money very safe, while still offering more than decent ROI. This makes Debitum a must-have element of your P2P investment portfolio.
At P2PMarketData we are dedicated to providing unbiased reviews of peer-to-peer lending, real estate crowdfunding and crypto lending platforms. Among other, in our mission to bring more transparency to the market we closely monitor and track over 70 platforms funding volumes.
When reviewing an alternative investment platform, we consider a variety of factors such as:
- Number of investors
- Minimum investment requirement
- Historical annual returns
- Diversification opportunities
- Reinvestment opportunities
- Educational and informational offerings
- Platform fees
- Total capital invested
- Features (such as secondary market and automatic investing)
- General transparency (the difficulty of finding who the owners are, how they make money on the platform (fees), terms & conditions and more)
- Management team
We also look into the company’s online reputation (for example customer reviews, news, complaints, average monthly searches and social media).