Invoice discounting is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e. invoices) to a third party at a discount.
Traditionally, invoice discounting is a market that is taken up by banks and finance companies. However, due to recent regulatory changes, banks can no longer offer loans to micro business at attractive rates. Hence, we offer this attractive investment opportunity to you without going through banks/finance companies. It is an avenue for retail/individual investors to directly invest in large multinational credit names at a much smaller notional value (as compared to buying corporate bonds) and at the same time enjoy attractive returns at relatively lower risk compared to equities.
Businesses eligible to sell their invoices through the platform are private limited companies incorporated in Singapore. They span from diverse industry sectors and would have at least one or more customers who are large corporations or listed-multinationals.
We will perform rigorous credit and background checks to ensure that borrowers are legitimate and to mitigate potential risk of fraud. There are certain strict criteria before any borrower can be on-boarded to sell its receivables through our platform.
The interest rate of the invoice discounting is dependent on the creditworthiness of the borrower’s customer/borrowers as well as the tenure of the invoice’s credit term. The lower the quality of credit of borrower and its customer, the higher would be the interest rate that would be required by you to compensate for the credit risk that you are taking. Similarly, the longer the tenure of the loan, the higher also would be the interest rate.
Depending on the borrower/customer’s creditworthiness, an appropriate range of target interest rates will be suggested based on the fair market rate. Once the borrower has accepted the interest rate range and agreed to the terms of the listing and product features, the loan will then proceed to be listed on our bidding platform for auction. When the auction is in progress, you will be allowed to bid for a portion of or the total loan commitment based on your acceptable interest rate return within the defined range set by the borrower. At the end of the auction, all bids will be tallied and the interest rate that reaches a cumulative sum of the required funds raised will be the final effective interest rate applied to investors who won the auction. This interest rate will then be used to discount the invoice.
No, all bids done are final and will contribute to the final tally once the action period ends.
Generally it will take a couple of days, but depending on the size of the deal it can stretch to a week.
Investing in any financial products places your capital at risk, so does investing in invoice discounting. Before you decide to participate in any deal, you are expected to perform your own credit assessment to ensure that the credit risk associated with the borrowers/borrower’s customer is within your risk appetite. Building a diversified credit portfolio across multiples sectors and business enables you to reduce portfolio risk. Our platform is capable to show exposures by sector to facilitate investors to view your concentration risk by sector as well as exposures by counterparty names.
We apply a rigorous and thorough credit check and the process involve several stages, beginning with the initial qualification and onboarding of new borrowers.
Step 1: Eligibility
Prior to signing up with the platform, we will conduct the following:
After the risk assessment, the invoice is ready to be listed to attract potential investors. Each borrower is assigned a limit for the maximum amount which can be advanced at any point, called the Advanced Ratio, based on assessment of historical turnover and financial statements.
In certain instances, we will place additional security over the borrower before allowing participation on the platform. Forms of security can include: personal guarantee provided by the shareholder(s) of the borrower, or other forms of credit enhancements package.
Step 2: Deal Review and Pricing
Each deal (package of invoices being discounted) is reviewed on a standalone basis and typically verified directly with the borrower’s customer. The borrower will upload all required documentation to the platform, including the physical invoice. We will then check all documentation for consistency and to ensure legitimate invoices are being listed.
Step 3: Continuous Borrower’s Financial Health Review
We will continually monitor and update the financial situations or creditworthiness of the borrowers that currently have active deals through the platform. Any situation known to us that might adversely impact the capability of the borrowers to pay future obligations shall be notified to affected investors immediately.
There are two types of structure that can be offered, depending on your preference and your relationship with your customer. Either structure carries different level of risk and credit protection to the investor. The types of deal structure are as follows:
All borrowers are analysed and assessed internally in a dedicated onboarding process. Directors are authenticated and invoices are typically verified with the customer’s borrower prior to being sold. In addition, we will perform additional checks to match invoice versus corresponding purchase order and delivery order to verify the authenticity of the underlying invoices.
There can be a possibility that the invoice you purchased is not repaid on time. This can be a common occurrence when dealing with the payment of SMEs by large corporates. As a result, the platform typically offers grace period to borrowers, which is 10 days from the expected repayment date.
When an invoice is not paid by the expected repayment date, the platform will contact the borrower for a payment status update. At the end of the grace period, if there is no material update or comfort provided, we will demand the borrower to repurchase the invoice if the sale of invoice is with recourse.
We will classify an invoice as in arrear if it is overdue by over 60 days from the expected payment date or greater than 90 days from the invoice date, whichever is earlier. We have the right to classify an invoice as default before that time in the case of borrower or customer in administration or liquidation, redirection of funds, or suspicion of fraud. In such cases, we will appoint a debt collector service to help you recover the investment, at your expense. Interest will continue to accrue on any outstanding invoice on a daily basis until it is paid.
Once a borrower has gone into administration or liquidation, we will mark the trade as a crystallised loss if either the administration or liquidation process shows that there are insufficient assets remaining in the company’s name to cover outstanding liabilities to creditors, including those senior or related to the platform, or 180 days have passed with no resolution.
You will be informed along the way as to the payment status of the loan and situation of the borrower.
Invoices are a short duration investment product, meaning that investing through the platform provides you with lower duration risk and higher liquidity versus other credit related financial products.
The range of invoices on platform has duration of 30 – 90 days, and assuming no default an investor is expected to receive his principal back at the end of that period. This short duration, highly liquid investment profile is most comparable to money market products, however given the additional security in the form of an invoice receivable, the risk/return profile of invoice finance is better compared to an asset-backed corporate bond.
In addition, investing through corporate bonds in Singapore is restricted to accredited investors with minimal investment of $250,000. Through us, investors will be able to invest in credit financial instruments at a much lower minimal investment and at a shorter duration, hence providing better liquidity to the investors.
Historical investor returns typically have been in the range of 0.8% to 1.5% per month (before fees). Past returns are not necessarily a reliable indicator of future returns.
We charge a fixed 20% of the interest earned by investors. There are no sign-on fees or ongoing service fees. You only pay fees on the interest you earn.
We are not registered for GST (and do not claim GST). Therefore, we do not charge any GST on fees to you. However, if there is such requirement by the authorities for the platform to be GST registered, then any GST could be applied on fees and will be charged to you.