Update on Envestio – All good?

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Since my last post about envestio some weeks have passed und last week the first repayment of a project was up. As with all interest repayments everything went as planned and I got my principal back on time. End of this week, the next capital repayment is on schedule. Let’s see if this will be on time as well. Frankly speaking I thought there would be some delays. with at least one project. To me it seems weird that there is not the slightest delay anywhere (pretty bizar that I would like to see delays..). Envestio replied my question why there is no single day delay with the argument that the borrowers pay slightly before the schedule we see in our dashboards… I was less then impressed with this answer as in my opinion it does not adress the source of my question. I draw the following conclusions: 1) The marketplace makes an outstanding job and has everything under control (although we should differentiate here as most problems will occur normaly between 6 and 18 months, and the loans are not live that long so far), or 2) I did not fully grasp the risks involved in these types of loans or I do not understand the business, or 3) The multiple tiers are used to generate liquidity. I will describe this point further below.

To be clear: I do not accuse the platform to be a fraud or something, for this I have no evidence (if you have, bring them to me) and it is too early to tell.. For me, it is just weird that everything seems to go very smoothly. For this reason I am thinking through some scenarios. I still believe in the old formula: Very high interest = very high risks.

Multiple tiers

It is obvious that the same companies frequently take more loans. These loans are marked with the different tier. Tier 6 means that the same borrower has 6 loans open. At the moment there is one borrower (container) with 9 live loans in the amount of EUR 650’000 hat. Possible that every loan is secured by some sort of security coming with the loan, but I find this a bit special. One could suspect here that the new loans are just extensions for older tiers. As long as the loan volume stays the same, there is no big issue. If the volume raises over time, then I have questions. Seldom there are new borrowers, mostly I see new tiers from existing borrowers.

Possible strategies

To reduce my exposere I try to invest only in one tier by each borrower and I try to catch an early one. If I am confident, I take a second tier. Further I only invest in secured debt which gives me the instant selling option with 5 percent discount. There might be other loans (subordinated) which do not offer this feature in the future, but as of now I only saw secured debt loans. Moreover I only buy loan parts with a duration higher then 3 months. This for the reason that I can sell without a loss after 3 months (assuming 20%, makes roughly 5% after 3 months). At loan expiration I can only count on 90 percent minimal payback (if the platform can pay that). If I really redeem early is a different story, but I like to have options available. Another question is if the platform has enough liquidity to provide the 95% of capital needed for early sellers, if lots of investors choose to sell. Basically this is the same as if savers call their funds from the banks. Let’s hope that we do not come to this point. As said before, it is possible that my assessment is just wrong.

Something else…

Withdrawals from the marketplace are free of charge, as long as they are higher then 5 Euro. For amounts below there is a handling charge of 2 Euro. Envestio needs to do that as lots of investors required small amounts daily and their bank is charging them for that.

For the end

Maybe I am too hard on Envestio, but I remain sceptical. I believe the marketplace earned a chance, I stay with the platform and hope for new loans. Interest rates of up to 22 percent support me with that 😉 If you decide to give it a try, use this link for registration and you will get 0.5% cashback on your investments for the first 9 months.

One Reply to “Update on Envestio – All good?”

  1. Hi p2p-hero

    I would like to give you my perspective on investing with Envestio.

    I understand your reservations on the many tiers of loans to the same business. I gather they are investment tranches like the development projects on Grupeer. Meaning, the loan to the container business is actually for 650,000 EUR, but they make the loan available in smaller amounts, to only have a few available loans online at one time. This has the effect of making people more inclined to invest, and it may let someone invest in different tranches of the same loan, who might not have otherwise invested more than once in the same big loan.
    Imagine having six different business loans each around 500,000 EUR available on the webpage at the same time. Investors might think that there is no cash flow.

    This information is actually already on the information page for tier 9 of the container renewal page.

    I do not think each tier is an extension of the first loan. 75,000 EUR is not a lot to clean, repair, and commission
    1200 containers.

    I think this is like a bridge loan. The business needs cash for a short term investment to make more cash and make a profit and pay the loan back.

    Looking at percentages not enough but it is definitely also called for. I agree with you that higher risk = higher reward.
    Paying on date or before is probably a good idea when we are talking about paying business partners across country borders.

    Personally, I only invest in the shortest term possible investment opportunities, as I still have reservations about the future of Envestio as a company.

    Regards.

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