Asked on 06 Mar 2019
Would greatly appreciate if someone can guide me on how to read their factsheet!
Note the risk of the campaign for the least to the most : secured by property < invoice finance < Term finance. (1) this determines the interest rates. The higher the interest rates, the higher the risk.
I managed to research that FS management will do a round of company checks before approving the campaign. It is more or less if you are comfortable with the borrowers. I personally feel that credit score (2) is the least important. There is a reason why SMEs seeked p2p (poor credit history - rarely borrow money from banks.)
(3)Guarantor(great especially there is) (4) Lending history with FS 5) Loan purpose 6)payment behavior (attitude of borrower) 7) Risk snapshot* 8) ensure they have relatively healthy cashflow or /and net worth **
I am still learning to read the financial ratios. Need help with it if anyone knows. Would do a research on it when I have 6months - 1years of experience ( about 100 campaign closed)
So far understand inventory turnover for non service companies
On top of what the rest mentioned, maybe I can share a few things I picked up while working at Minterest, another P2P firm (Funding Societies Competitor)
Understanding the Business Story
I think this is quite important, as more than looking at historical trends, understanding the story of the business can help you make better decisions on whether you should make the investment or not.
I know the investments factsheet from Funding Societies is relatively short (i put money there also), but it would be good if you are able to pick up some stuff about the business, even knowing which industry the company is in might help.
For eg, you might have to be more cautious if the company is operating in the marine / maritime sector due to the decline in the industry.
These are pretty important to look at. Funding Soceities also includes profitability metrics there as well. Revenue growth, gross and net profit margin should be pretty self-explanotry. Current and quick ratio measure liquidity, which is a measure of likely the business can repay their short-term obligations. Leverage ratio measures how much debt they have relative to equity.
Receivables, Inventory and Payables turnover measure the company's working capital management, which is measure of how well the company can manage their cashflow through their working capital. Basically, shorter receivables turnover is good because it means you collect cash faster from customers. Short inventory turnover is good also because less cash is tied up in inventory and it also means that the business is good at selling existing inventory instead of hoarding them. Long payables turnover is good, since it means you can pay your suppliers later on credit, so you have more cash at hand.
08 Apr 2019
08 Apr 2019