Debitum Investments Review
- Written by
- Just P2P
- •
- Updated October 1, 2024
Debitum Investments (formerly known as Debitum Network) is a Latvian peer-to-business (P2B) lending marketplace specialized in small business financing. Investors can invest in asset-backed business loans through financial instruments offered under the supervision of the Central Bank of Latvia.
Recently, Debitum Investments has been through a number of changes, with the granting of its investment brokerage licence, a change of shareholders, the arrival of a new management team, and its separation from the DEB token.
Let’s perform their review.
Table des matières
What is Debitum Investments ?
Debitum Investments is a peer-to-business lending platform operating from Latvia that connects investors with loan originators in Europe. Starting from €10, the funds raised are used to lend money to borrowers, namely business owners needing capital to invest in resources and manpower in order to scale their revenue and profits.
Company “SIA DN Operator”
As a company, “SIA DN Operator” started its activity in April 2019 in Riga, Latvia under the unified registration number 42103092209. The base capital of the company is €758K, above the amounts observed in the P2P industry.
Supervised by the Financial and Capital Market Commission from the Central Bank of Latvia, Debitum Investments is authorized to provide investment and ancillary (non-core) investment services through its FinTech platform to European investors.
Their history
Initially, Debitum was founded by Mārtiņš Libert, Donatas Juodelis, and Justas Šaltinis, three Latvian entrepreneurs who had together founded Debifo in mid-2015 to provide invoice financing solutions for small and medium-sized businesses in Lithuania.
But even though Debifo was successful, the company could not expand its lending operations in other EU countries due to regulatory problems.
That is why the founders initiated the idea of setting up a marketplace where lenders could offer their loans for financing. And in 2017, the idea of creating the platform Debitum Network was born.
In 2019, Debifo had a leading position in Lithuania providing €85M+ in working capital to more than 350 companies (financing some of its loans via Mintos). This is when Martins, Donatas, and Justas decided to sell Debifo to Factris, a leader in credit solutions.
Although Donatas and Justas continued to work for Factris, Mārtiņš Libert is the one who started to develop Debitum Network. Mārtiņš entrusted the creation of the platform to INNTEC, an IT company he founded in 2012 with Donatas.
Actual shareholders
Although Mārtiņš Libert was the sole shareholder until 2023, he sold 100% of his shares. Currently, the company is owned by two Latvian entrepreneurs with economic, finance, and banking experience : Ingus Salmiņš and Ēriks Reņģītis.
Ingus Salmiņš is the majority shareholder with 67% of shares owned through the limited liability company SIA ZIdea. After a law degree and a Master’s in accounting and finance, Ingus has spent his career in the banking and financial services sector.
Ēriks Reņģītis owns 33% through the limited liability company SIA Amplo. After a Master in Business Administration obtained in Riga Technical University, Ēriks has spent most of his career within Auctus Capital SIA, a corporate finance advisory company, first as Associate Director and then as Partner.
Ingus Salmiņš
Ēriks Reņģītis
The management team
Co-owner of Debitum Investments since September 2023, Eriks Rengitis, stepped in as full-time CEO in June 2024, but also stays as part-time partner within Auctus Capital. Although skilled in finance, capital raising, Mergers & Acquisitions, Eriks has no experience in P2P lending, unlike his predecessor Henrijs Jansons.
At his side, we have Kristine Lapina, as Head of Anti-Money Laundering (AML) and Risk assessment since October 2023. She has also been a Board Member since June 2024 thanks to her knowledge of Debitum core activities.
Kristine had various but complementary professional experiences in the banking sector (Rietumu Banka, Baltic international Bank), in the payment solutions industry (EcommPay) and within lending companies (Aizdevums).
Anatolijs Putņa has been the Chief Operating Officer of Debitum Investments since 2023. After graduating in economics, he worked a few years in the banking sector and then joined Crowdestor as COO from 2020 to 2023.
Kristine Lapina
Anatolijs Putņa
Debitum statistics in 2024
Here are some statistics for the current year:
- Total funds invested : 98.4M€
- Total interests paid to investors : 3,7M€
- Average annual return : 12.22%
- Number of investors : 15,850+
- Average portfolio per investor : 3,828€
In 2023, investments on the platform averaged 1M€ per month, in the same order of magnitude as 2022 but below 2021, when volumes financed could reach up to €3M in a single month.
In 2024, volumes funded are clearly on the rise, with returns ranging from 11% to 15%, depending on the project and the lending company. All in all, we can feel the upward trend taking shape.
How does Debitum work ?
Debitum Investments is a marketplace where lending companies offer individual and corporate investors the opportunity to fund development projects from small businesses. The investments are guaranteed and backed with collaterals, and in return, investors receive their capital and interest payments according to a predefined schedule.
Debitum is a P2B marketplace
Debitum Investments is a peer-to-business (P2B) lending platform focused on small business financing (like Maclear AG). The platform connects investors with loan originators looking for funds for their customers, mainly SMEs.
On one side, we have investors (individuals or companies) looking for financial opportunities to increase their capital. To do so, they lend money to small businesses and receive compensation in the form of interests.
On the other side, loan originators lend money to SMEs that simply need additional cash flow to meet larger orders than the company is used to handling. Their objective is to get temporary additional liquidity.
These businesses (small local shops, restaurants, etc.) turn to these loan originators because of the excessive bureaucracy that has developed within the banks. This makes it impossible to obtain short-term loans quickly.
In this way, these businesses gain access to an additional source of funding, in return for which they provide collateral as guarantee.
As collateral for a temporary boost to their liquidity, these companies present invoices, for example, indicating that they will receive payments from their customers equal to or greater than this financing within a certain period of time (usually 3-4 months).
By connecting loan originators to investors, Debitum marketplace helps them to raise more capital, meet greater demand and expand their business activities.
They pay a commission to the platform in return for the funding they receive (generally between 2%-3%).
Private investors pay no fees to the platform for deposits, withdrawals, or any other functionality used when investing. From the interest rate indicated on each investment, investors can calculate the profit to be received.
Loan originators
Debitum Investments currently works with 7 loan originators, including the long-established Evergreen Capital, Triple Dragon, and Sandbox Funding. They have recently been joined by Bono House, Foresto, JSC Juno, and Juno Finance.
Bono House, a Latvian 🇱🇻 subsidiary of BONO Group, a 90M€ turn-over company, is specialized in the assembly and the development of eco-friendly house projects.
Foresto is a Latvian company 🇱🇻 specialized in the acquisition and merger of forest properties that resells this real estate to Nordic, Baltic or Polish real estate or forest funds.
JSC Juno offers expert services to maximize assets value in forestry and agriculture industries in Latvia 🇱🇻 since 2016. JSC Juno owns Juno Finance, Juno Estate, and Juno Energy.
Juno Finance provides financing to Latvian companies 🇱🇻 in the forestry and agriculture sectors. Investments are secured by collateral such as commercial pledges and mortgages.
Evergreen Capital has been providing funding to Estonian SMEs 🇪🇪 since 2013 backed by a personal guarantee from the company director or owner.
Sandbox Funding is a non-bank lender to Latvian SMEs 🇱🇻 whose loans are mainly secured by business pledges, receivables, and mortgages.
Triple Dragon is a fundraising company founded in London 🇬🇧 in 2016 that specializes in the video game and mobile app industry, offering receivables-backed loans.
Chronology of a P2B investment
The minimum amount that can be invested in one asset is €10 and the maximum is indicated in the box “Remaining principal”. This amount has recently changed as before that, it was set up at 50€.
This amount is generally invested for periods ranging from 2 months to 24 months but most investments last less than 1 year.
Most of the assets proposed for investment are amortized with bullet repayments, meaning that the borrower pays the interest on a monthly basis (interest rates range from 9,75% to 13,5%) and the principal amount at the end of the loan term.
But investors may also find assets amortized with “declining balance” : interests are paid monthly too, but moreover borrowers make partial principal repayments every month.
At the end of the payment term, the borrower still has a 7-day grace period during which they can repay the loan without additional penalty, but during that, they still have to pay a daily interest fee.
After that, a penalty fee is applied on top of the interest (generally 10% to 18%).
If the repayment of a particular loan is more than 90 days late, then the loan originator has the obligation to buy back the loan and cover remaining principal as well as outstanding interest.
Investing on Debitum
Who can invest ?
To invest on Debitum Investments, you just need to be at least 18 years old and hold a bank account. But Debitum does not specify in its investment services agreement that the bank account needs to be located in the European Economic Area.
Therefore, a bank account located in a country that has Anti-Money Laundering / Combating the Financing of Terrorism (AML / CFT) controls should be able to be accepted.
It is also possible to invest in loans through a company account. The person who opens the account simply needs to have the right to do financial operations in the name of this company.
According to their latest statistics, investors on the platform mainly come from the following countries :
- 🇩🇪 Germany 30.7%
- 🇪🇸 Spain 12.6%
- 🇵🇹 Portugal 10.5%
- 🇱🇹 Lithuania 9.7%
- 🇫🇷 France 8.9%
- 🇱🇻 Latvia 4.3%
- 🇳🇱 Netherlands 2.6%
- 🇧🇬 Bulgaria 2.4%
This ranking seems to reflect the languages in which Debitum’s interface is available : German, Spanish, Lithuanian, French, and Russian.
What do we invest in ?
Debitum Investments offer to invest in two different financial instruments following different processes approved and monitored by the regulator : the Central Bank of Latvia.
Asset-backed securities (ABS) consist in a pooling of 5 or more underlying business and factoring loans acquired from loan originators. They are issued by a special purpose vehicule owned by Debitum Investments, and payments to investors are directly tied to the underlying assets.
Buyback obligation applies to loan originators which must maintain a coverage ratio of 100% on the underlying assets. To service their financial obligations, loan originators cover ABS with collateral (pledge on assets or on receivables, unpaid invoices, 3rd-party guarantee, owner’s personal guarantee).
Promissory Notes consist in a financial product issued directly by each loan originator to help fund their clients’ business explansion. Payments are not connected to the underlying assets but to the lending company as legal entity.
The buyback obligation applies to the shareholders of the loan originator. It is secured by a commercial pledge or other types of guarantee provided by the lending company or its shareholders (for ex. a commercial pledge over the claims against the debtors).
Asset-backed securities tend to be more diversified than Notes and offer a better control to investors. But in the case of Notes, buyback obligation applies directly to the shareholders of the loan originators and returns are generally higher.
Where do we invest ?
Before the recent change in Debitum’s ownership, as shown on the map below, the funded loans were widespread in Europe and North America.
Since then, the list of loan originators has been shortened and the loans proposed (through ABS) are mainly located in the UK, Estonia, Latvia, and Poland.
Registration process
As with most FinTech platforms, registering on this platform is a straightforward procedure which takes only a few minutes. To prepare for the registration process, simply have your ID card or passport, your personal email address, and your mobile phone number at hand.
To get a special 1% cashback, you need to register through our affiliate link (no referral code needed). As such, you will get this cashback on all investments made during 30 days after your registration in asset-backed securities with a term of at least 90 days.
During your registration, you will go through Know-Your-Client (KYC) verification, simply to check you are the person on the passport, and to comply with Anti-Money Laundering procedures.
After that you will be able to transfer money to your account and to invest your funds as per your wishes depending on your investment strategy.
It generally takes 1-3 business days for funds to appear in your account, especially if you go with international online banks such as Wise, which does not charge fees for euro deposits (Debitum does not charge any fees for deposits and withdrawals).
How to invest on Debitum ?
The P2B marketplace Debitum offers both manual and automatic investment (exactly like PeerBerry). After transferring their capital, Investors may choose between these two options according to their preference.
Manual investment
Like many other platforms (with the exception of Swaper and Robocash), Debitum offers manual investing. To select asset-backed securities (ABS) and Notes, investors should focus on 5 important criteria :
- Underlying assets: The higher this figure, the more diversified the financial instrument, thereby reducing the associated risk.
- Loan originator: The choice should be based on their experience, financial health, and our objectives as investors in terms of geographic diversification.
- Trust score: Assessed by in-house experts and 3rd-party professionals, the trust score gives factual information on borrower’s reliability.
- Annual interest rate: This is the annual return on the proposed investment. Below this, one can find the interest rate in case of late payment.
- Loan timeline: This is the contractual duration of the investment, which serves as the basis for calculating the annual interest rate.
Automatic investment
Since December 2023, Debitum Investments also offers the auto-invest feature, which automates investments according to the criteria chosen by each investor. As a result, investors no longer have to choose which ABS or Notes to invest in one by one.
This auto-invest functionality was designed and agreed with the regulator in order to comply with the brokerage license held by the platform.
After creating their auto-invest strategy, investors can customize the following settings :
- Maximum amount dedicated to auto-invest,
- Minimum and maximum rate of return,
- Specific investment period,
- Maximum single investment amount,
- Selection of loan originators,
- Minimum wallet balance (funds set apart from Auto-Invest that investors can withdraw or manually invest).
We may also highlight the auto-withdrawal functionality with which each investor can set conditions under which the monthly interest earned from active investments is automatically transferred to their bank account.
No secondary market
Debitum Investments does not offer any secondary market, despite the duration of the investments listed, which may be an obstacle for short-term investors. For these investors, it is best to limit the proportion of their investments on the platform.
For medium- and long-term investors, the absence of a secondary market is not a problem.
Their time horizon pushes them towards investments of several months, which means that the presence or absence of a secondary market is of little importance to them.
On the contrary, on some platforms, the secondary market is a way for speculators to massively invest and then resell at a premium (as on Esketit, for example). In this sense, the absence of a secondary market prevents speculation.
Is it safe to invest on Debitum ?
Debitum is a regulated platform that offers a trust score that proved to be efficient in the past when assessing loan originators. Moreover, the platform offers a buyback obligation on 100% of the investments, and loan originators have always fulfilled their commitments (except in case of a war situation).
Pros to investing on Debitum
Regulated platform
Debitum is a licensed investment brokerage company (License No. 06.06.08.728/537) supervised by the Financial and Capital Market Commission from the Central Bank of Latvia since 2021, one of the most protective in Europe.
The platform is regulated under the legislative framework created by the European Union to regulate financial markets in the bloc and improve protections for investors (MiFID II).
Therefore, the company goes through regular audits and must comply with multiple reporting processes.
According to MiFID II regulations, investors’ funds are kept separately from the platform’s own funds and protected by the investment brokerage law. In case of insolvency, the bailiff cannot use investors’ funds to cover any creditor claim.
In-house Trust Score
Prior to its buyout, Debitum used services of credit rating agencies to provide an objective third-party risk assessment based on the probability of default. But this decentralized scoring has been replaced by their in-house Trust Score.
Before offering asset-backed securities (ABS) and Notes to investors, the platform applies a score between A+ and F to each of these financial products.
This Trust score is based on their due diligence analysis of the loans listed and of the loan originators’ performance, considering the following business metrics parameters :
- ✅ Loan portfolio quality
- 💯 Financial ratios
- 💠 Organizational structure
- 🔰 Loan underwriting principles
- ➰ Business practices
- ♻️ Debt collection successful
Although this scoring process is a very positive point when it comes to assessing the safety of our investments, the past outsourced and independent risk assessment was much better and proved its efficiency.
As an example, it enabled Debitum Investments to identify risky loan originators like Aforti in the past.
Originally, this was the only company to use independent professionals for risk scoring of assets and loan originators. Therefore, we expect this innovative process that ensured a good reputation for the platform to come back and show how safe our investments are.
Buyback obligation
On all listed investments, Debitum offers a buyback obligation to protect investors in case of a loan default. If a borrower fails to meet their contractual obligations, after 90 days, the loan originator has the obligation to buy the loan back from the investor.
When a buyback obligation is activated, the loan originator reimburses the remaining principal and pays the outstanding interest as well as the late penalty fee.
But as all the financial instruments listed are secured, when such a situation happens, the loan originator has the legal possibility to sell some of the borrower’s collateral (stock, property, invoice, inventory) to recover the funds.
The buyback obligation has been triggered on less than 2% of the loans listed on Debitum, which is a very low rate when we compare to similar P2B lending platforms. And more importantly, the default rate remains at 0%.
(Almost) zero default
Up to now, legally speaking, Debitum has always maintained a zero default rate, since loan originators have always fulfilled their contractual obligations to investors. In fact, this is one of the statistics displayed by the platform.
In the cases where borrowers defaulted on their repayments, the loan originators paid the principal and interest due to the investors from the profits generated by their business.
But the war that broke out in Ukraine in early 2022 had repercussions, especially for Ukrainian loan originator Chain Finance. The company was unable to mitigate the consequences of the war.
However, contractually speaking, war is a case of force majeure and cannot be invoked to force any repayments. This is actually impossible at the moment, given the country’s economic situation.
Overall, if we look at the total volumes traded on Debitum, the impact remains relatively limited, amounting to €1,9M.
In addition to this, the loan originator has already recovered some of these funds through the sale of associated collateral (cars in this case). This money will be paid to investors as soon as transfers between Ukraine and Europe are possible (martial law in Ukraine).
Cons to investing on Debitum
Not profitable (yet)
To date, Debitum has published four annual reports : 2019-2020, 2021, 2022 and 2023. The most recent report details the whole strategy of the platform including their consolidated financial statements, their recent investments, their yearly statistics, and objectives for 2024.
For the moment, the platform is not profitable, but we can see that the company has doubled its revenue between 2022 and 2023, which is very encouraging.
After an income of €138K in 2021 and €185K in 2022, it jumped to 348K€ in 2023. Meanwhile, operating and administrative expenses have also increased which is a normal situation for a company in its infancy. The year 2024 is a cornerstone during which they should be able to harvest the fruits of the past years.
Skin in the game
When loan originators listed on P2P platforms have a skin in the game for the investments they offer, investors have a sort of guarantee that their interests are in line with theirs. A skin in the game of 20% on an investment of 100K€ means the loan originator invest 20K€ and investors 80K€.
But in the case of Debitum Investments, only 2 out of 7 loan originators offer a skin in the game, meaning that 5 of them do not invest at all but simply facilitate the process of investment.
As such, two loan originators Evergreen Capital and Triple Dragon offer a skin in the game of 10%. All other loan originators and note issuers have no skin in the game. This is especially preoccupying in the case of Sandbox Funding which belongs to the platform shareholders.
Loan originators reports
We have very little financial information on the loan originators which are the companies we invest with and that are the legal entities behind the buyback guarantee.
It would be good if Debitum could share this type of information with us before we decide to enter into a partnership with these loan originators.
Because, in addition to the solidity of the companies to which we lend, as assessed by the Trust score, it’s also the solidity of our partners and co-investors that we should consider before investing together.
Opinion on Debitum Investments
Debitum Investments offers attractive yields on investments that are not only secured by a buyback obligation, but also backed by a wide range of collateral types. On top of this, the investor experience is made quite easy thanks to a professional and intuitive interface.
In addition, the platform enables P2P investors to diversify their portfolio both in terms of nature of the loans (borrowers are companies), and geographically, with Triple Dragon, a loan originator based in the United Kingdom.
But diversifying among different loans does not change the fundamental principle that the buyback obligation is only as strong as the loan originator. No matter how you mix loans from different borrowers, in the end it’s the loan originator who stands as guarantor to investors.
But from this point of view, it’s worth noting that this investment platform has no default on its record, and that the rate of investments on which the buyback obligation has been activated is extremely low for now (approx. 1,5%).
Some will point to the Ukrainian loan originator situation, but in our humble opinion, it’s hard to hold Debitum responsible for a situation created by the outbreak of war on Europe’s borders.
Nevertheless, the loan originators and note issuers, apart from historical ones, do not show a long track record, and a financial stability. Moreover, Flexidea, appreciated by investors, has left the platform. Therefore, a real effort needs to be done to attract serious and dynamic loan originators .
Additionnally, some investors would like to see the emergence of a secondary market (planned but still not implemented). Some time ago, it was possible to invest in loans of just 3 months with some listed companies, But this is not the case any more and the minimum duration is now 6 months.
Lastly, the most sensitive point concerns human resources. While the management has some experience in banking and financial services, with the departure of the last CEO, P2P lending skills have left the company. Moreover, for such a young company, the turnover of both shareholders and staff is a cause for concern in a sector that requires stability.
The main challenge for Debitum is to show that this new management team is strong and inventive enough to energize the platform by attracting new companies and more investors. If their team proves up to this challenge, they can target financial stability and envisage an interesting future.
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Article sources
1. https://debitum.investments/en/partners
2. https://debitum.investments/en/stats
3. https://debitum.investments/en/about
4. https://www.youtube.com/c/DebitumNetwork
5. https://debitum.investments/blog/changes-in-debitum-ownership-structure/
6. https://just-p2p.com/p2p-lending-platforms-annual-reports/
7. https://p2pmarketdata.com/platforms/debitum/analysis/
8. https://info.ur.gov.lv/#/legal-entity/42103092209
9. https://www.investopedia.com/terms/p/promissorynote.asp
10. https://www.investopedia.com/terms/c/coverageratio.asp
11. https://www.investopedia.com/terms/n/note.asp
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