Business loans to Irish small and medium enterprises (SMEs) with low default rates and decent ROI
Flender is a well-established platform (as for the P2P lending baby sector standards at least) that offers carefully selected business loans with varied risk-return ratios. Does it compensate enough for the lack of secondary market and buyback guarantee? Let’s find out.
|Total Investment Volume||€28m+|
|Average annual interest||9.6%|
|Who’s eligible to invest||Anyone over 18 years|
|Investment Type||Business loans|
|Auto Invest Function||Yes|
|Investor Protection||Personal guarantee|
PROS & CONS
- Ireland is one of the fastest-growing and most business-friendly economies in the EU – this is particularly good news if you’re about to invest in SME loans. Also, although Ireland lacks bespoke regulation on P2P lending, Flender is regulated by the British Financial Conduct Authority, which arguably offers stricter rules than the Baltic countries where most platforms are headquartered.
- Flender undertakes comprehensive due diligence before they onboard an investment project, including credit check (a third-party provider – Credit Safe is used to get a full report about the financial health of the company), affordability check (borrower’s cash flows are assessed), and creditworthiness check (details of company’s financial data, including bank statements and audited financial accounts, are evaluated). As a result of this strict selection process, less than 1% of borrowers have historically defaulted. The default rate went up to 1.8% recently, following the COVID-induced strain on businesses, but that’s still one of the lowest scores in the industry. Also, should a default occur, Flender has a debt recovery programme with a third-party agency to recover the capital.
- Each Flender loan is given a credit grade from the safest A+ (6-6.5% annual ROI) to the less safe D (13.5-14%) and an additional, high-risk V rate (16%). The grades are based on the company check and include factors such as affordability, liquidity, equity base, business age, directors experience and credit history. Such a risk-return variety gives investors a decent chance to diversify their Flender wallets.
- Good in-platform diversification is hard to fully realise, though, as simply too few investment opportunities go past the strict selection process. Rarely more than a handful of projects are open to funding (only one at the time of writing), and they usually sell out very quickly. It might also hurt your returns if you’re not able to reinvest the earned profits swiftly.
- With maturities as long as five years, a secondary market would be more than welcome. Right now, you just have to wait until the loan is fully repaid to recoup the whole investment – although monthly repayments will provide some cash flow in the meantime.
- All loans are secured with directors’ personal guarantees. Still, they lack any stricter investor protection schemes, which investors might be used to, such as a buyback guarantee, a provision fund or collateral. Given the low default rate, the capital loss risk seems acceptable but may still be a worry for more conservative investors.
Who is behind Flender?
Flender’s team brings in a good level of experience in corporate finance, banking and business development. One potential red flag is that the founder – Kristjan Koik – has been taken down from the ‘About us’ page – reasons unknown.
What does Flender offer?
Flender offers business loans to Irish SMEs ranging from €15,000 to €300,000 and terms between 6 and 60 months. Sector exposure is quite broad – some recent projects dealt with a construction company, a pharmacy, an HR agency, a coal mine, and a food manufacturer.
How much can you earn (and lose)?
Interest rates vary from 6.25% on short-term A+ loans to 16.3% on V-rated long-term loans. The current average annual ROI stands at 9.6%.
You can earn a 5% cashback on the funds invested within the first 30 days after registration if you sign up using the link provided below:
Who is Flender best for?
Next to Debitum Network and October, Flender is one of the best sites if you want to invest in European business loans. Given the low availability of loans on Flender in particular, but also SME-focused lending platforms in general, it’s not a bad idea to spread your capital across a few of them. This will ensure a better geographical diversification and possibly less cash drag as you can move your capital back and forth depending on where good opportunities arise.
Of course, diversifying into other asset classes is also highly recommended. In any case, Flender may be a strong element of any P2P portfolio, and all kinds of investors (e.g., more and less risk-averse, with shorter or longer investment horizons) will find something for them.
How to invest on Flender
Signing up is quick and easy. You will need to fill in some personal information and verify your identity, and you should be ready to invest within one business day. With relatively few loans available, manual investing makes some sense – especially because you can review each project’s details in a quite handy manner. If you’d rather automate the process, you can set up the ‘AutoFlend’ function and have your money allocated following your criteria.
The lack of an early exit option is probably the platform’s biggest drawback. But if long-term investments fit your P2P Lending strategy, Flender’s offer is worth considering. In my view, using one’s capital to support promising businesses offers an additional moral or ‘feel-good’ appeal, which also might be a not insignificant factor in choosing the right investment opportunity.
P2P Market Data are dedicated to providing unbiased reviews of P2P Lending platforms and other alternative investment platforms. We are on a monthly basis collecting funding amounts from over 90 different platforms for The Monthly Funding Report.
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