Crowdfunding Companies (By Jocelyn Ke)

Vinco Game Changers

Speaker: Lawrence Yong (MoolahSense)

4 February 2015

Crowdfunding Companies

*Check out event images here*

Lawrence is the founder of MoolahSense, Singapore’s only fully compliant peer-to-peer (P2P) lending platform. There is a gap between SMEs and small investors, and crowdfunding functions like a bridge between these two underserved groups in society. MoolahSense is a platform where individuals can lend directly to businesses, for a fixed return. Crowdfunding has achieved phenomenal growth and rapid acceptance around the world thus far.

Addressing Market Failures

For SMEs in Singapore, the cost of borrowing (unsecured loans) is ~5-6 times more expensive than it would be for bigger companies. It is a global problem that SMEs are only responsible for >20% of loans from the financial sector. In Singapore, SMEs make up 99% of all enterprises locally. Small, everyday investors seeking better return rates have little options, as most investment opportunities with fixed returns would require at least $100k to start with. MoolahSense is a debt-based crowdfunding platform, where businesses can quickly secure funds at potentially attractive rates and involve community engagement. For investors, with just S$1000, you could diversify your portfolio, earn better interest rates, and support local businesses at the same time.

How Does It Work?

There are 3 main steps in the entire process for businesses:

  1. Curate – Businesses will be accessed on their past revenues, willingness and ability to repay the funds
  2. Infrastructure – Once approved, MoolahSense will provide the transaction platform, legal documents and takes care of account management
  3. Control & Monitor – Businesses who are crowdfunded only write one cheque to MoolahSense, who will do the control, monitoring and subsequent splitting of investor’s funds

MoolahSense Model

A key feature of the MoolahSense platform includes the allocation and rate setting feature. The borrowing rates are decided by auction; investors who place a bid will set their own expected interest rates, and overall, the offers with the lowest rates will be selected. For every successful campaign, which usually runs for a year, the borrower (business owner) will only pay a flat 3% fee to MoolahSense.

Campaigns

MoolahSense’s first offer was Smaths Consulting, which raised S$100,000 in 20 days at a final rate of 9.9% interest. In the end, it was oversubscribed, with 44 individual investors who placed a bid (but only the offers of 19 people were selected). Ian Gan, Smaths CEO, expressed pleasant surprise from the PR that the fundraising has garnered, with The Straits Times, Business Times and Channel News Asia, each writing a feature on it.

What’s Next?

Moolah 9 is an introductory incentive for businesses in the following 9 sectors: education, retail, F&B, lifestyle & wellness, business services, ICT, engineering & contracting, manufacturing, trading & logistics. This promotion runs till 31st March 2015 – find out more here. You can connect with MoolahSense on Facebook for more updates on future campaigns.

 

Question and Answer Session

1. What will happen if the borrower (business) cannot fulfil their repayments?

MoolahSense has a 3-stage recovery process: at the first stage, there will be a penalty charge (late fees), and arrears will accrue to investors at 24% p.a. Following that, professional debt collectors will be called in to recover funds. Failing all methods, the third stage would likely result in legal action or involve restructuring. These extra costs will be borne by investors, as MoolahSense is not a party to the contract, but will assume the roles of monitoring, controlling and managing these transactions.

2. Is MoolahSense’s revenue model so simple?

Yes, there is only the 3% fee on total approved funds to be paid by the borrower. However, there is a lot of consulting involved from our side, which is still complimentary for the time being.

3. Can startups participate to borrow from this platform?

Most startups have a long gestation period, and thus may not be suitable for debt-based crowdfunding (depending on what stage they are at). Most importantly, the business must demonstrate capability to repay their investors (proven track record). They might consider exploring rewards-based or equity-based crowdfunding though.

4. How do you know ascertain the borrower’s future performance?

MoolahSense’s crowdfunding campaigns only run for a year (12 months), with immediate monthly repayments that include principal and interest. As mentioned, the rates are set by an auction process. There is no guarantee to future performance, but our curation process when we access borrowers are stringent, and we have our recovery processes in place too.

 

Interested in how you can start investing in local businesses too? Or would you like to list your business on MoolahSense to get funding? Do check out their detailed, comprehensive FAQ page on their website.

Written by

Jocelyn Ke (www.jocelynke.com)