Debitum Analysis

Debitum is a Latvian investment platform that focuses on loan originators issuing business loans. The platform allows retail investors to invest in pools of business loans from five loan originators across Europe. Debitum has since it's launch in September 2018 attracted more than 10,000 registered investors and facilitated €87m worth of business loans in primarily Latvia, the United Kingdom, and Poland. During the past 12 months the monthly funding volume slightly surpasses €1 million on average.

• Debitum offers business loans pooled into asset-back securities (ABS) starting at a minimum investment of €50.
• The underlying business loans are backed by collateral and in some instances a 90-day buyback guarantee.
• Statistics page displaying a 13.06% average return since launch with a 0% default rate on the 75+ ABS investments and 8,100+ business loans facilitated

Debitum is an investment firm authorized by the Bank of Latvia, providing investors with asset-backed securities (ABS) that yield a fixed interest income starting from minimum investments of €50. These securities are supported by a revolving pool of business loans, which are regularly replenished as the loans are paid off or become overdue throughout the duration of the security. All investments on Debitum are backed by collateral in case of non-repayment, such as stock, guarantees, property, inventory, invoices, or promissory notes.^[1]

Small and medium-sized businesses seek funding from loan originators, also known as brokers that sell these issued loans in a bundle on Debitum. Debitum’s partnered loan originators submit loans to the platform for review, Debitum’s team of financial analysts then evaluate, credit scores, and either approve or deny the loans. Most of the investments come with a Buyback Guarantee, requiring the loan originator to buy back the loan and cover any outstanding interest if the loan becomes late beyond an agreed-upon number of days (typically 90 days).

There are currently five loan originators offering business loans on Debitum. Evergreen Capital (Estonia), Flexidea (Latvia), Flexidea Polska (Poland), Sandbox Funding (Latvia) and Triple Dragon (United Kingdom).^[2] All securities available on the platform are bullet loans, meaning investors receive monthly income payments and are paid the principal amount in full at the end of the term. Most of the securities are short-term with expected principal repayment in less than a year. Debitum does not provide an auto-invest feature or a secondary market for early exiting the investments.

According to Debitum, the average return on all the investments since launch has been 13.06% with 0% defaults on any of the 76 ABS investments.^[3] They do not provide any further insights to default rates or delays on the underlying 8,100 issued business loans. The ABS investments currently available on the marketplace offers an interest rate ranging from 9.5% to 14.35%. Additionally, the return can increase when penality fees incur if a loan surpasses the grace period once the asset is repaid. The most common grace period on Debitum is 7 days and investors do not receive penalty fees if the asset is bought back by the loan originator following the buyback guarantee.^[4]

As a investment firm regulated company, your uninvested funds are protected up to €20 000 by the Investor compensation scheme in case of insolvency. Debitum does not charge investors any direct fees according to their price list, but makes money from charging the loan originators a 1%-3% fixed fee on the investments facilitated.^[5]

Mārtiņš Liberts is the founder of Debitum. He has a professional background in business development and innovation, untill recently working as a board member at Debitum and now the Chairman of one Flexidea that issues loans on the platform. Henrijs Jansons leads the company as CEO and brings extensive knowledge of FinTech and IT. He has previous experience with another Latvia-based P2P lending platform, DoFinance, that is no longer operating. Among the managing team, you will find the Anatolijs Putņa as COO, Gvido Bajārs as CLO, and Toms Ābele as CMO with years of experience in the financial industry, together with six additional colleagues in their current team of 10 people.^[6]

The Debitum platform was originally incorporated under SIA Prosperitu, but is today operated by SIA DN Operator, which officially was incorporated in April 2019 with the purpose of having Debitum owned by a regulated company. Debitum recently changed it's ownership structure to CEO Henrijs Jansons and businessman Ingus Salmiņš in July 2023 after being approved by the Bank of Latvia. It is planned that the new owners will soon be joined by a third member, Ēriks Reņģītis.^[7]

Although you have access to information regarding the loan originators themselves and from there can get a sense of the type of companies they issue loans to, you are unable to see which specific companies you are funding through the ABS investment.

According to SIA DN Operator’s annual report 2021, the company reported operating losses for the last two consecutive years (2021 and 2022). However, SIA DN Operator has considerable assets beyond those operating losses, including “Claims on demand from credit institutions”, which are receivables that can be satisfied without prior request.^[8]

In March 2023, Debitum published an annual report for 2022 audited by Grant Thornton with the claim to publish an English version for the Debitum investors in April 2023 that is still not available. The loss for Debitum in 2022 was at €110,487, up from €83,693 in 2021.^[9]

Debitum launched a token called DEB back in 2018 as an integrated part of the platform with a reward based setup on the platform utilizing the tokens, that is no longer a key part of the platform, but it gained a lot of traction as a pioneering company in the community at the height of the crypto craze.^[10]