An much reduced number of P2B platforms
In early 2020, many platforms offering P2B (peer-to-business) loans proved to be scams : Kuetzal disappeared first in January, shortly followed by Envestio. The bad news weren’t over for investors as in April, Monethera announced its wind-down. Finally, Grupeer proved to be at least partly a scam, as several loan originators on the website were fake.
With two additional platforms currently in my blacklist, the number of platform in this comparison has thus decreased nearly by half.
At the risk of sounding optimistic, I’m rather confident regarding the genuineness of the remaining platforms compared in this article – which of course doesn’t mean that investing there isn’t risky -.
Why invest in real-estate and business crowdfunding platforms ?
An obvious reason is that returns for these projects are usually higher than with individual loans. Also, investing in such projects allows to diversify your portfolio.
Drawbacks of these investments
Unlike peer-to-peer loans, these investment opportunities don’t come with a buyback guarantee. This is obviously a price to pay for potentially higher returns. As a side note, all platforms which proved to be scams offered a 100% buyback guarantee on all their loans !
Also, in many cases they’re less transparent than most P2P marketplaces, which usually provide details about the loan originators. Indeed, very few P2B platforms disclose details about the borrowers (financial statements, management team…). However, I expect this situation to change, as investors are now pushing for more transparency. From now on, it will be much harder for non-transparent platforms to survive !
Also, several of these platforms lack a secondary market. The lack of an early exit may not be a concern with short-term business loans; however, being stuck for two years with a real-estate investment can be annoying. Don’t invest money you need !
Real-estate and business crowdfunding platforms overview
We’ll compare the following remaining platforms :
BulkEstate is a company focusing on bulk real-estate deals; however, they also provide real-estate crowdlending projects.
CrowdEstate is a large platform for both real-estate and business crowdfunding loans.
Crowdestor features a very large array of real-estate and business crowdfunding projects.
Debitum Network offers a small volume of business loans; this platforms focuses on investments safety, thanks to a rigorous due diligence process and independent loan originators ratings.
EstateGuru is a direct competitor to CrowdEstate.
Flender allows to lend money to Irish small and medium businesses.
Detailed platforms comparison
I will compare the platforms using different criteria.
We’ll first examine the loans themselves : loans volume, interest rate, projects diversity, cash-flow regularity.
Then, we’ll evaluate the platform’s track record : how many projects were already successfully exited ? Are there late reimbursements, or even worse, defaulted projects ? Then, more generally, we’ll examine the platform’s transparency and reliability.
Finally, we’ll have a look at the features provided by the platform’s website : secondary market, auto-invest feature and platform usability.
Several platforms add large loans very regularly, with a total volume that meets or exceeds investors’ demand :
- EstateGuru feature many large projects; there are sometimes several new opportunities daily !
- In addition to a few very large loans (around one million euros), Crowdestor features a very large amount of smaller loans.
- The loans supply at CrowdEstate has improved, and it’s much easier than before to invest, even manually.
On the other hand, the loan volume at Flender is still rather low, although it increased in early 2020. Now that the Brexit is much less of a concern and many SMEs need cash, I expect the number of loans to keep in increasing.
Debitum Network also offers only a small volume of loans – in part because they’re rather strict about which loan originators they work with -.
EstateGuru is probably the most conservative platform, with interests rates around 11%; CrowdEstate’s real-estate loans usually yield slightly more.
Flender is a special case : most loans offer interest rates below 12%, but they also have speculative loans yielding as much as 15.9% !
The main choice for investors looking for speculative loans is Crowdestor, where interest rates sometimes reach 30%. This platform may also appeal to more conservative investors, as the large amount of investment opportunities on the platform means there will be something for everyone.
Finally, interest rates at Debitum Network are among the lowest for business loans; they’re usually below 11% annually.
It’s actually rather hard to pick up a winner, especially when considering the risk associated with greater returns. The great news is that every investor will probably find at least one platform that suits him !
BulkEstate is the only platform that only focuses on real-estate investments; similarly, Flender only lends to businesses. All other feature both real-estate and business loans.
Crowdestor features very diversified opportunities. Flender also lends to many different kinds of businesses, but the total loans volume is much smaller.
Loans on most platforms pay interests monthly. However, there are several exceptions.
CrowdEstate‘s real-estate projects and nearly all of BulkEstate‘s projects usually reimburse the principal and interests only once the project is completed. For EstateGuru‘s projects, the reimbursement frequency varies from one loan to another. It may be monthly, or happen at the end of the project’s duration, at the same time as the interests. Finally, Crowdestor started listing more and more projects which only reimburse interests after a given delay (usually 6 months).
This is an essential criterion when evaluating a platform. Indeed, most of us will be hesitant to invest large amounts without a solid track record !
CrowdEstate and EstateGuru has been there for a several years time. In term of track record, EstateGuru is the clear winner when considering. Indeed, there were more than two hundred for repaid loans; moreover, as highlighted in our article regarding borrower’s default, EstateGuru’s recovery process is very efficient. Until now, in spite of many borrowers defaulting, there was zero capital loss for investors.
On the other hand, while there were more than one hundred and twenty exited investment opportunities at CrowdEstate, the platform’s loans selection and management of defaulted loans somehow leaves to be desired. Indeed, one of them lead to a 70% capital loss for investors, while at least two other projects proved to be scams.
The number of fully reimbursed loans at BulkEstate has grown significantly since the last time I updated this article; there are now nearly forty of them ! Although there are a few delayed loans, investors seem overall pleased by the way the platform handles these.
As of early January 2021, Flender‘s default rate is 1.8%, which is very reasonable – but much higher than the 0.2% in May 2019 ! -. However, part of the management seems to have left the platform, which is clearly a red flag for me.
Although Crowdestor had an excellent track record before the Covid-19 hit, this platform now suffers of a very large volume of delayed loans. Indeed, as of January 2021, only 45% of the overall portfolio is current – in addition to 21% being repaid -. In other words, at least one third of the portfolio is delayed. More than 10% of the portfolio is even delayed by more than 90 days !
CrowdEstate was the first platform to feature a secondary market[lexicon anchor=”secondary-market”]. Initially, it was both a curse and a blessing, however, as it lead to a lot of speculation. Indeed, many investments were on sale on the secondary market for a price higher than what was originally paid ! However, due to the platform’s poor track record, the demand and supply are now much more balanced, and there’s much less speculation taking place.
EstateGuru introduced a secondary market in October 2019; the loans amount is currently rather low. There’s a 2% fee paid by the seller.
Crowdestor‘s long-awaited secondary market was introduced in late 2020. Although it was initially poorly designed, things have much improved. Many investors who weren’t satisfied by the way the platform manages late or defaulted projects used this opportunity to get rid of their portfolios, while other went shopping for discounted investment opportunities. In term of fees, there’s a lack of transparency compared to competing platforms. Indeed, they currently aren’t displayed on the website; moreover, the pricing is rather opaque. The seller pays a 2% fee, while the buyer’s commission depends on the discount – between 0% and 5% –
Finally, BulkEstate, Debitum Network and Flender are stuck with their investments until the project’s completion.
I don’t really consider auto-invest[lexicon anchor=”auto-invest”] a necessity when investing through real-estate and business crowdfunding platforms; indeed, as the projects are often less standard than individual loans, manual investing is often a wiser choice.
Debitum Network‘s loans are overall rather standard compared to their competitors; the opportunity to invest automatically is thus welcome.
CrowdEstate features an auto-invest. For a long time, due to the platform’s success and speculation on the secondary market, it was impossible to invest without using it. However, recent changes in the way bookings are processed now make manual investment a possibility. This allows investors to study them before committing their funds.
Similarly, Flender also features an auto-invest but investing manually is recommended, due to the risky nature of the loans.
Investors at EstateGuru also have access to this feature, although it will be restricted for most of them; indeed, it’s necessary to invest at least €250 per project in order to have access to all filters. As a result, investing manually is often a better choice.
CrowdEstate‘s platform is by far the most user-friendly; projects are extremely detailed and reporting is rather complete. Crowdestor‘s website was upgraded in late 2019, and now features an improved dashboard and better reporting. Similarly, the upgraded website at EstateGuru has improved usability a lot.
Another platform that benefited of a large upgrade is Debitum Network. I used to hate their first website (and actually didn’t review it because of this aspect), but now it’s pleasant to use.
In spite of a few issues with navigation, using Flender is very enjoyable and straightforward.
Finally, BulkEstate‘s platform still has room for improvement; however, in all fairness, it has improved a lot since the initial version !
Choosing the right real-estate and business crowdfunding platforms
Your choice should be based mostly on your risk tolerance.
Conservative investors will love EstateGuru; the platform’s main strengths are the large loans volume and the excellent recovery process.
Debitum Network is also a good choice, although the loans volume is rather small, which makes it harder to get a diversified portfolio.
BulkEstate is great for those who want to invest in relatively conservative real-estate projects, while still getting good returns.
Crowdestor is my #1 choice for these investments. There’s a very large loans volume, and investments are very diversified.