Top 10 Peer-to-Peer Financing Platform in Malaysia
SME
Peer-to-Peer Financing (P2P) platforms, also known as peer-to-peer lending platforms or marketplace lending platforms, are online platforms that directly connect borrowers with lenders, eliminating the need for traditional financial intermediaries.
Through these platforms, borrowers can access funds quickly and easily, often with flexible terms. The platforms conduct credit assessments to evaluate borrowers' creditworthiness, and interest rates are typically based on their risk profile. Investors, on the other hand, can diversify their portfolios and earn returns by lending money to borrowers.
Malaysia Top 10 SC-Licensed Peer-to-Peer Financing (P2P) Platform:
Bay Smart Capital Ventures Sdn Bhd (Capbay)
B2B Finpal Sdn Bhd (B2B Finpal)
CapSphere Services Sdn Bhd (CapSphere)
Crowd Sense Sdn Bhd (cofundr)
FBM Crowdtech Sdn Bhd (Alixco)
Microleap PLT (microLEAP)
Modalku Ventures Sdn Bhd (funding societies)
MoneySave Capital PLT (MoneySave)
Peoplender Sdn Bhd (fundaztic)
QuicKash Malaysia Sdn Bhd (Quickash)
Eligibility
For a company based in Malaysia to borrow money from a Peer-to-Peer Financing (P2P) platform, the eligibility criteria may include the following factors:
Legal Entity: The company should be a legally registered entity in Malaysia, such as a private limited company (Sdn Bhd) or a limited liability partnership (LLP).
Business Registration and Licensing: The company should possess the necessary business registration and licenses required by the relevant authorities in Malaysia, depending on the nature of its operations and industry.
Creditworthiness: P2P platforms may evaluate the company's creditworthiness by reviewing its financial statements, including balance sheets, income statements, and cash flow statements. They may also assess factors such as the company's credit history, repayment capacity, profitability, and debt obligations.
Business Age and Track Record: P2P platforms may consider the company's operational history and track record. Established companies with a proven track record may have a higher likelihood of being approved for a loan. However, some platforms may also provide financing options for startups or companies with shorter operating histories.
Purpose of the Loan: The company should provide a clear and valid purpose for the loan, such as working capital, expansion, equipment purchase, inventory management, or debt consolidation. The purpose should align with the platform's guidelines and the company's business needs.
Compliance with Regulatory Requirements: The company must comply with relevant laws, regulations, and industry-specific requirements in Malaysia. This includes adhering to tax obligations, licensing regulations, and any other legal obligations related to the business activities.
Documentation: The company may be required to provide various documents, including but not limited to its registration documents, business licenses, audited financial statements, bank statements, tax returns, and identification documents of authorized representatives.
Interest Rate
Borrower's Interest Rate: The interest rate charged to borrowers typically varies based on their creditworthiness and risk profile. Prime borrowers with excellent credit may be offered lower interest rates, while higher-risk borrowers may be charged higher rates. The interest rates can range from around 6% to 36% per annum or even higher in some cases.
Lender's Return on Investment: Lenders on P2P platforms earn returns through the interest payments made by borrowers. The range of returns that lenders can expect depends on the risk profile of the loans they choose to invest in. Generally, lenders can earn returns ranging from around 4% to 15% or more annually, depending on the loan's risk level and market conditions.
Other Fees
Borrower Fees:
Origination Fee: Some platforms charge an origination fee, which is a percentage of the loan amount, as a one-time fee for processing and disbursing the loan.
Service Fee: Platforms may impose a service fee or processing fee for managing the loan application, credit assessment, and loan administration.
Late Payment Fees: P2P platforms may impose late payment fees on borrowers who fail to make their loan repayments on time. These fees are typically charged as a percentage of the overdue amount or a fixed penalty.
Prepayment or Early Repayment Fees: In some cases, platforms may charge borrowers a fee if they choose to repay their loan before the scheduled maturity date. This fee compensates for the potential loss of interest income to lenders.
Collection Fees: If a borrower defaults on their loan, P2P platforms may charge collection fees to cover the costs associated with debt recovery efforts.
Lender Fees:
Service Fee or Platform Fee: P2P platforms often charge lenders a service fee or platform fee based on a percentage of the interest earned or the loan amount funded. This fee covers the platform's operating costs and services provided to lenders.
Loan Investment Fee: Some platforms charge a fee when lenders invest in a loan. This fee can be a percentage of the invested amount or a flat fee.
How It Works
Peer-to-Peer Financing (P2P) platforms operate through a straightforward process that connects borrowers and lenders. Here's a general overview of how it works:
Registration: Borrowers and lenders register on the P2P platform, creating their accounts and providing necessary information such as identification, financial details, and loan requirements.
Loan Application: Borrowers submit their loan applications through the platform, specifying the loan amount, purpose, and desired terms. Some platforms may require additional documentation to verify the borrower's identity and financial stability.
Credit Assessment: P2P platforms typically conduct credit assessments to evaluate the creditworthiness of borrowers. This assessment may involve analyzing credit scores, income verification, and other relevant factors. Based on the assessment, borrowers are assigned a risk rating or interest rate.
Loan Listing: Once the borrower's application is approved, the loan details are listed on the platform's marketplace. This listing includes information about the borrower, the loan amount, interest rate, and loan purpose. Investors can review the listings and choose the loans they wish to fund.
Lender Selection: Investors, also known as lenders, review the available loan listings and decide which loans they want to invest in. They can diversify their investment by allocating funds to multiple loans.
Funding and Disbursement: When investors commit to funding a loan, the P2P platform aggregates the contributed amounts from multiple lenders to fulfill the borrower's loan request. Once the loan is fully funded, the funds are disbursed to the borrower.
Repayment: Borrowers make regular repayments to the P2P platform, including both principal and interest. The platform then distributes the repayments to the lenders based on their respective investments. Some platforms offer automated repayment collection, while others rely on borrowers to make manual payments.
Secondary Market (Optional): Some P2P platforms provide a secondary market where lenders can sell their loan parts to other investors. This feature offers liquidity and flexibility for lenders who may want to exit their investments before the loan term ends.
FAQs
What is Peer-to-Peer (P2P) Financing?
Peer-to-Peer (P2P) Financing is a type of crowdfunding that complements traditional funding from financial institutions such as banks. It is a practice of financing businesses via an online platform that matches Issuers and Investors.
Through P2P Financing, the SMEs or the Issuers, have greater access to funding for their business growth, whilst the Investors are provided an alternative investment opportunity for attractive returns from their investments.
What is the criteria for applying to be an Issuer?
The list of criteria that needs to be met are as below:
Registered business in Malaysia under Suruhanjaya Syarikat Malaysia (SSM) and primary business operations in Malaysia.
The business type must be one of the following: sole proprietorship, partnership, limited liability partnership (LLP), private limited company (Sendirian Berhad).
The business must be revenue generating, and have an operating track record of at least 1 year.
How much money can an issuer raise?
There is no limit on how much an issuer raise on the platform. However, an issuer will fail to obtain any fund from the platform if less than 80% of its target amount is subscribed by investors.
On the other hand, it will not obtain anything more than its target amount even if the fundraising is oversubscribed.
Also, the amount an issuer is seeking to raise is furthermore subject to the credit capacity check and approval.
Over what timeframe can an issuer raise finance?
Currently, financing tenures are limited between 1 months to 24months.
How do P2P platform assess the credit worthiness of companies?
At the time of application, Issuers are asked to submit key information on their company; these include:
Financial statements
Bank statements
Information on the management team
Their business model.
In addition, the P2P platform will also rely on credit bureaus to provide information on the Issuer's creditworthiness and previous behaviours (e.g. delinquencies).
Based on the assessment of the issuer's financials, management, operations, and collateral, each issuer is categorised into a range of risk classes ranging from A (low credit risk profile) to F (high credit risk profile). These risk profiles are published on the factsheet to ensure transparency to investors of the risk levels of each issuer.
Throughout the loan tenure, the platform closely monitor changes to the Issuer’s financial and business risks, and repayment behaviours to ensure that their risk classifications are up-to-date.
How long does it take to find investors / funders?
This depends on a variety of factors such as the amount an issuer seeks for financing, the interest rate and the strength of the business. Campaigns will be left open for financing for up to 30 calendar days.
What interest rates can be expected to pay?
8-12 % p.a. is the median. Businesses with very strong fundamentals might be financed at 5% p.a. whereas higher risk issuers will be charged up to 16% if accepted.
Do Issuer require collaterals to apply for loan?
Yes, it will require a personal guarantee by all directors, at least minimum of two guarantors. This serves as a positive signal to investors of the good intention of the issuer to repay the outstanding amount.
Key Takeaways
Throughout the process, P2P platforms typically charge fees to borrowers and lenders to cover their operational costs. It's important for participants to carefully review the terms and conditions, including fees, interest rates, and repayment schedules, before engaging in any transactions on a P2P platform.