Tag: Debifo
Attractive European logistics industry’s assets to invest in
Attractive European logistics industry’s assets to invest in
Importance of logistics for business
It would be impossible for the current world to exist without goods or objects delivered or transported between places. Logistics is a part of supply chain management; it plans, implements and controls the flow and storage of goods and services in order to meet customer’s requirements. Logistics management might be the underlying factor in the success of any company’s operations and outperforming of competitors. Logistics is crucial to the distribution industry, as it makes the distribution of goods fast and efficient.
The transport and logistics industry is made up of six industry sectors making it one of the largest industries in the world and since it largely correlates with other industries, particularly manufacturing, the growth of logistics is positively reflected on the growth of an economy as a whole. Expansion in logistics sector accelerates the optimization and adjustment of the industrial structure, advances the transformation of economic growth, and thus promotes a rapid economic development.
Europe – the hub of world logistics
Logistics is widely considered one of the main engines of the European economy too. It helps create industrial value by the movement of goods and cooperation among companies and is one of the key industries in job creation. Logistics sector comprises around 14% of GDP of the European economy and has been one of the fastest growing economic industry of EU. Total goods transported in the European Union are estimated at 4 billion tkm (1 tkm is 1,000 kgkm and a kgkm means moving 1 kg of cargo a distance of 1 km). More than 11 million people are employed in the European logistics sector.
LPI index published on the World Bank website indicates that 8 out of 10 top performing countries in logistics around the globe are European countries.
As Lithuania, Estonia and Latvia have the main routes of logistics connecting Russia to Western Europe, the two countries are climbing in the chart and currently take 54, 36 and 70 positions in the field. No wonder the above mentioned facts make investing in logistics (in Europe) an attractive opportunity. However, those opportunities in the industry come with challenges and risk.
Innovative technologies create sharp competition and costs remain an impediment for the industry
Implementation of new technologies and automation in logistics creates obvious advantages for local service providers, but may force the ones that do not have money to invest in technologies out of business. As around 14% of companies outsource their logistics services, competition for the market share becomes even more fierce.
Furthermore, personnel, fuel/energy and real estate costs in particular, as well as interests, and leasing showed significant increase throughout the decade in the industry, new entrants in the market as well as introduction of robotics drove prices down, thus reducing the competitiveness of smaller companies and even forcing some of the players out. This leads us to the conclusion that investing in the field requires careful selection and weeding out the weak performers as well as choosing the best companies. Picking random assets is far from effective strategy here.
Comparison of assets from logistics by different loan originators
Bearing in mind both opportunities and risks involved in investing in the industry, let us look at some of the loans in logistics from loan originators that upload their loans from the industry of logistics on Mintos platform. We singled out Capitalia and Aforti that operate in related European countries as Debitum Network. The third player is DEBIFO that in addition provides its assets via our own Debitum Network.
We see logistics not only as a very promising industry to invest but also a very competitive one, where sharp competition drives logistics companies out of business, thus making investing in random companies of the sector risky. Attractive interest rates without a buyback guarantee will likely significantly reduce average return for investors as bankruptcies in the respective field happen from time to time. Thus, a buyback guarantee offered from a broker is a sign that a broker is willing to take full responsibility in case of bankruptcy and not leave the losses for investors to cover.
A faster turnover of capital should be viewed as a plus as opposed to investing in loans with a duration of 12 months or more. Debitum Network accepts loans that have a much shorter maturity date, which also significantly reduces the possibility of default and reduces psychological stress for those who have invested in the assets. Plus, if the company has been paying off the loan for a year, statistics show that the risk of a company to go bankrupt reduces significantly for the last few months before the final repayment date.
Why is logistics industry attractive for Debifo?
- The invoice amounts are relatively small 5,000-34,000 Euros.
- Our customers’ main logistics operations are export from Lithuania to Western Europe.
- Large and strong European buyers that will pay for invoices.
- Freight is mostly insured or is insurable.
- Owners have strong ambitions to grow.
- Owners accept somewhat higher interest rates from alternative lenders.
What are the benefits for investors?
- Assets in logistics on Debitum Network platform will pay 7-11% per annum.
- The loans are issued to businesses that have been in business (on average) for 9 years and the loans are backed by an accepted invoice from large corporations with an average revenue of 700 million EUR. In addition, there are private guarantees, usually from two or more shareholders of a company and also a buyback guarantee from the broker.
- Repayment days are from 2 weeks to 2 months. You start earning interest since day one.
- You can invest flexible amounts, starting from 10 EUR per asset.
- You can invest even if the date of repayment is a few days away.
- More loans from European businesses in logistics coming soon.
Got interested? Why don’t you try our platform for yourself!
Disclaimer: The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
Meet Debitum Network partner Debifo
Meet Debitum Network partner Debifo
Debitum Network pursues the goal to have a decentralized lending marketplace platform, which would involve as many professional businesses, institutional and private investors, as well as qualitative third parties providing services such as risk assessment, insurance, and debt collection. One of the parties is loan originators that put invoices or business loans for investors to invest in on the platform. Debifo is one of our partners and loan originators. Get acquainted with them!
Brief history and achievements
Debifo was established in 2015 and since then, it has been providing smart working capital solutions (short term loans) for small and medium-sized businesses (SMEs) in Lithuania. In 2016, Forbes singled out the company as top five European fintech Startups to watch in 2016. And they have justified the image of a firm to be watched. Since the inception, Debifo has financed over 20 million EUR worth of invoices. Companies working with them are happy with the provided service and 97% would recommend their invoice financing service to others. In 2016 it was nominated the financial service of the year in Lithuania.
The company uploads assets on the platform of a well established P2P lending platform of Mintos. Here is some statistics on Debifo involvement on Mintos platform:
- Total amount of loans originated: 53 million Euros
- Loan portfolio: 6.5 million Euros
- Loans outstanding on Mintos: 0.53 million Euros
- Net annualized return: 11.2%
- Skin in the game: 5% (percentage of the originated loans that they have stake in)
Common business vision – SMEs remain underfinanced
In Lithuania, small and medium-sized (SMEs) comprise 99.6% of all entities. SMEs are the heart of the economy and only a small part of them have sufficient funding. The same is true for SMEs around the world. In EU, the number is 99.8% of all firms. Unfortunately, they lack access to funding and as a result, their growth is capped.
Debifo is offering an alternative financing product for the Lithuanian market – invoice financing. The mission of the company is to help SMEs expand their businesses and manage their cash flows. Debitum Network has the same vision. It serves as a marketplace connecting SMEs, investors and third parties around the world to fill the gap of underfunded small and medium-sized businesses. Debitum Network and Debifo work in unison to make borderless financing of SMEs possible, not just locally, but also, globally.
Advantages over traditional banking factoring
The Debifo system gives clients the opportunity to free up vital working capital that is ‘frozen’ in long payment terms. Small business owners can take advantage of Debifo’s financing services to turn a payment term of 30–120 days into just a few days.
Debifo invoice financing has numerous advantages over the factoring services provided by banks. Debifo does not require long-term contracts or collateral and has no hidden fees. After completing a short registration form, clients can raise invoices for financing and receive the funds they need within a few days. The same procedure with the banks would take businesses 1-2 weeks. If young businesses can prove sales revenues exceeding 30 000 Euros, provide services and goods to other businesses and have been in business at least 6 months, they would not have problems with getting funds. On the other hand, banks would not finance companies that have short business history, lack of real estate collateral or personal guarantee.
Amount of value of invoices on the platform and the benefits of it
At any given time, the total amount value of invoices Debifo provides is around 0.5 million Euros. As invoices are repaid, new ones are uploaded and so the possibilities for businesses to be financed never ends. Everybody participating in financing can benefit greatly. Other benefits include:
- SMEs can get funding faster
- Investors and companies from around the world can participate in the financing process of local and global SMEs
- Investors/companies that fund SMEs earn higher returns (annual interest of 7-11%)
- Investors/companies contribute to the growth of SMEs around the world
- Investing in short term loans is a good way to diversify
- Investment amounts are flexible as no one must cover the entire loan
- Third parties can get attractive compensation for their services
- Flexible choice of portfolios: conservative, moderate, aggressive
- No collateral for SMEs necessary
Types of assets
At any time, Debifo has around 30 assets on our platform. As they are repaid, new ones are uploaded. At the time of writing there are 23 assets and the industries that dominate in those loans are: Logistics, Wholesale, Services and Manufacturing. Repayment periods vary from 1 to 130 days. The range of amounts are from 4000 Euros to 46 000 Euros. Investors can pick any asset and invest a flexible amount. The minimum is 10 Euros. Below is the example of an asset. If you want to find out what each item on an asset bar means, read this post.
Got interested?
Disclaimer: It is important to point out that the approach presented here is not necessarily suitable for everyone and is presented for information purposes only. It is not intended to be investment advice. You should seek a duly licensed professional for investment advice matching your specific situation.
Investment series: analysis of an asset on Debitum Network platform
Investment series: analysis of an asset on Debitum Network platform
Debitum Network platform 1.0 Abra has been live for one month. Borrowers have uploaded the assets (short term loans) to be financed, a lot of investors onboarded and now anyone can participate in the funding process to help with the growth of SMEs around the world. We currently have 32 assets from various industries. You can invest in any of them. We decided to pick one asset and look at it more closely so that you could better understand what is what and how to invest in it.
This is the asset we decided to discuss. It has 65 days before the date of repayment. So, if you make up your mind to participate in the funding, you still have time.
1. The first item in the asset is an industry. Every asset is put into a specific industry category. This one belongs to logistics. Debifo (that collects invoices) told us that logistics is one of the most reliable industries and they hardly ever hesitate whether to take on an invoice from the industry.
2. The second item indicates who the broker that collects the invoice is. At the moment, the broker that puts most invoices on our platform is Debifo. It has been in invoice factoring business for over 3 years and was featured in Forbes among top five European fintech companies to watch in 2016. Another most recent partner providing invoices is Chain Finance. More partners loan originators will be soon.
3. Issue date simply states the exact date when the invoice was issued.
4. The next item is the number of days left till the repayment. This one ends in 66 days. Most loans are short-term, so you have quite limited time to consider what loans to invest in before they reach maturity term.
5. You can also see the country where the borrowing company operates. We have started our operations in Eastern Europe. This logistics company is from Lithuania.
6. Our short-term loans mostly belong to Invoice financing category. This one too. Invoice financing is a way for businesses to borrow money against the amounts due from customers. By pledging their invoices businesses can get the bulk amount much faster than they normally would.
7. Guarantee icon means, your investment is secured by a guarantee. It maybe backed by invoices, a personal guarantee from the business owner, another company or a buyback guarantee. To learn more about the specific guarantee of an asset go to next point.
8. When you press view, a pop up comes up. In it, you will see a summary with all info about the asset. Below pop up shows all the info about the asset we are talking about.
9. If you press “BORROWER & UNDER ASSET DETAILS”, you will learn more the purpose of the loan, a business sector the company is in, when it is registered, a quick description of the company and what kind of guarantee it has for the asset.
10. The next 2 items indicate the total amount of the invoice and the amount available (for investment). This one has 500 Euros covered and 33,060 Euros available for investment.
11. The percentage shows what is the annual interest rate for the asset. This one is 10%. This is how much you would earn if you kept your investment for the whole year. The number would be different as the maturity term is shorter.
12. The item below shows the credit score of a company. The higher the number, the safer the company, the lower the interest. The lower the number, the riskier the company is, the higher the interest rate. The higher is better, the lower is worse. The range for the score is from 0 to 100.
13. Below is the field where you have to enter the amount you want to invest in the asset. The amounts are flexible. The minimum is 10 Euros.
14. Add to briefcase icon is the last item on the asset. After you entered the amount you need to add it to briefcase by clicking ‘ADD TO’ briefcase. It is, then, added to your briefcase. You confirm it, and you have invested in the asset.
Ready to invest?
You can easily invest in any asset on our platform. Having chosen the asset you like, it is a matter of split seconds and you can start earning interest on that instrument.
Disclaimer: It is important to point out that the approach presented here is not necessarily suitable for everyone and is presented for information purposes only. It is not intended to be investment advice. You should seek a duly licensed professional for investment advice matching your specific situation.
Martins Liberts’ interview at VZ office
Martins Liberts’ interview at VZ office
VZ (Verslo Zinios), one of the leading business/finance newspapers in Lithuania invited co-founder of Debitum Network Martins Liberts for an interview. Martins sat down to share his vision of Debitum Network, behind the scenes of preparation for the upcoming release of the platform on the 3rd of September, and future plans. Below are some of the themes that were covered during the interview.
“Banks are not necessary for borrowing”
The title of the article “The banks are not necessary for borrowing” put a smile on our faces. IFC (International Finance Organization) has recently released a report, which indicates that there is 5.2 trillion $ gap in credit for micro, small and mid-sized businesses in the world. Traditional banks are not that interested in financing these. Debitum Network aims at filling some part of the gap by connecting small businesses in need of capital with investors. As a result, a new market is being created, where Debitum Network will connect borrowers to investors who invest in fiat. Thus, banks will also be able to participate in the financing process.
Debitum Network is a B2B platform
Martins singled out that in Lithuania and around the world there are a lot of internet lending platforms that are P2P (peer to peer), while Debitum Network is B2B (business to business). The main focus is to connect businesses that want to borrow with businesses that want to invest.
Individual investors will also have a chance to onboard the platform and invest flexible amounts, but the recipients of loans will only be businesses, not individuals. At the beginning of September, Debitum Network is organizing a fundraising event in London, where more than 100 institutional investors are expected to participate.
Investment amounts and potential interest
Most P2P platforms lend at 20% or more annual interest rates and few if any businesses will borrow under such conditions. When Debitum Network platform launches, SMEs will be able to borrow up to 10 million EUR, at an average 10-15% interest rates annually with terms between 2 weeks to 2 years. Banks typically lend at 3-8%, so you may see that we fit in the golden middle.
Responsible assessment of SME and distribution of loans
Martins, likewise, stressed that loans will be distributed responsibly and each SME that applies for a loan will have to provide legal documents, prove its’ solvency and pledge some assets as a guarantee.
Blockchain technology will be key to test the reliability of a borrower, as all operations and will be recorded on the blockchain and will be available to everybody.
Trust rating algorithm, together with a risk assessment score give star ratings for each participant on the platform. Trust rating algorithm was created by KTU (Kaunas Technological University). Third parties will also offer services of risk assessment, insurance, and debt collection.
Expectations for the launch
Martins states, that it is expected to start with € 500 000 – 1 000 000 worth of loans, on the day of the launch and have a turnover of 10 million EUR by the end of the year. Debitum Network has already made agreements with enterprises from Lithuania and Latvia and will soon be joined by companies from Estonia. The Czech Republic and other European countries will follow suit.
Modification to the previous expansion plan
Liberts admitted, that initial plan to launch in 16 countries and later expand to 50 countries were too ambitious, and the plan was moderated to expand at a slower pace, but in a more decisive manner and convincingly, by starting in 5 markets.
In the beginning, the funds between investors and SMEs will run through Debitum Network, and as the system reach maturity, Debitum Network will perform the function of a “bulletin board” by simply connecting investors with businesses who need to borrow.
The co-founders and experience beyond Debitum Network
Besides Martins Liberts, the other two co-founders of Debitum Network are Donatas Juodelis and Justas Saltinis, both of them are also co-founders of invoice financing company “Debifo”. Donatas is also one of the co-founders of INNTEC – a progressive IT company.
Thus, Debitum Network is being built on the practice and experience gained in the sectors of finance and technology. The company currently has around 30 people working on the project.