There is a Wealth Machine that people are chattering about.
What gripped people the most is the above 10% interest that you can earn from the short term investment.
We are talking about crowdfunding lending here. It is your chance to be a loan shark in somewhat of a legalize manner. You will however, not be MAS approved though.
You might think this is a scam. “Those stuff that gives you 18% yearly returns must think we would so easily part with our money!” Well, it seems there are many Singaporeans who part with their money easily.
It is especially so when they parted ways with their money 3 times when listed Apple Reseller Epicenter raised 1.5 mil dollars with an interest of 13.5%. Why would a listed company stoop so low?
DBS have got into the act as well, where they signed cross-referral agreements with 2 crowdfunding companies Funding Societies and Moolah Sense. This means that where the SME in question may not meet the criteria to borrow from the bank, they can choose to refer them to these platform.
But Is your money safe?
In the past, we heard of at least 2 prominent defaults, where the companies you lent to, have “cash flow issues”. Here is an article on one of them. The other one is Indian Beauty firm Rupini which loan from 2 of the platforms and ran into cash flow problems.
Understanding the High Level Mechanics of Debt Crowdfunding
I advised this Sunday that, whether you feel this Wealth Machine suit you or not, you need to learn to have a mental model of how some wealth machine works. Learning from another way of building wealth contrast with your way of doing it and asks some question of your wealth machine and yourself.
Remember, this is a form of lending, and if you invest in traditional bonds, but are not sure about some of the workings, you might learn some parallels.
To deconstruct this whole world of Crowdfunding, BIGScribe have got together 4 of the crowdfunding companies and 2 bloggers and put together a resource that will give the wealth builder something digestible to understand this form of wealth building better.
It will try to help you answer the following questions:
- Where does debt based crowd funding belong in this overall picture
- Some of the potential pitfalls of putting your money this way
- The unique features of some of these platforms
- Some of the common terms in this debt crowdfunding world
The 2 bloggers, Jun from Let’s Crowd Smarter and Chris Ng from Growing your Tree of Prosperity touches on their experiences when dealing with the platforms, how to go about determining the probable of default and a reward that matches.