What Is Grupeer
Grupeer is the Latvian startup providing investing through the online marketplace for loans founded in 2017 by Andrejs Kisiks (former Angel Investor in real estate all over the Europe) and his sister Alla Kisika (former Project Manager and Designer). The idea to establish the company is dated back to a few years when the founder has been looking for investors for real estate projects, but they couldn’t agree on financing structure and the presence of some other investors so the project was not undertaken. The idea was to create a platform where investors wouldn’t need to agree with each other to collect enough cash to finance large development projects. Thus, Grupeer provides retail investors with an easy way to invest in financing of loan originators around the world. In loan marketplace industry is it basically younger brother of Mintos.
Grupeer vs. Mintos
The Grupeer’s business model is very similar to Mintos’ except for one detail. In Mintos, you have to select individual loans issues by loan originators to different customers but on Grupeer, you are providing loan directly to loan originators. You can read about Mintos and How Does “P2P” Loan Marketplace Work in my previous articles. Let’s go through main differences between Grupeer and Mintos to understand whether Grupeer is also a relevant player in the industry, even if Mintos has the highest number of investors and the largest volumes of investments through its platform.
Grupeer promotes the average project interest rate of 13.2% compared to 11.7%, which is promoted rate by Mintos. In general, rates on both platforms fluctuate over time, but in my perception, interest rates on Grupeer are indeed a little bit higher. This is of course also dependent in which loan originators you wanna invest. On Grupeer, loan originators are obliged to pay interest for late payments before the buy back guarantee is activated in comparison to Mintos, where the loan originator can choose whether he will provide it or not.
Grupeer is not reporting detailed statistics about loan performance as Mintos does. However, the investors’ community considers loan performance on Grupeer to be better (but to be honest loan performance on Mintos is currently exceptionally bad with around 24% of the loans being overdue). This might have a lot to do with the fact that through Grupeer, investors are providing loans directly to loan originators and every delay in payment brings suspicions about the financial troubles of the loan originator. This might make investors less likely to invest in any further loans and therefore, loan originators are trying their best to be always on schedule.
Both platforms offer a buy back guarantee as an assurance for investors that a loan originator will buy back the principal if the payment becomes 60 days late. All loans on Grupeer are protected by buyback guarantee and around 95% of loans are under this guarantee on Mintos. Since Grupeer also offers development project financing loan, those comes also with the traditional collateral of the construction site or buildings. As the buy back guarantee is offered also for this type of loan, the investor is a little safer than usual since he doesn’t have to wait for bankruptcy proceedings if it comes to that. Even though the credit risk of loan originator is present in both companies, because of those development project collateral, Grupeer investors are a little bit better off.
There were no loan originator defaults on Grupeer in history compared to few defaults / problems on Mintos. This is however not a guarantee of future development.
Number of Loan Originators
There are more than 70 loan originators registered on Mintos compared to around 20 on Grupeer. To summarize the quality of those companies, ratings provided by both sites are available even though I would not rely on those ratings very much as they might be biased a little. For most of those loan originators external ratings by well-known agencies are not available.
Mintos’ secondary market is the biggest secondary market in loan marketplace industry. Compared to that, Grupeer isn’t offering secondary market yet (it is planned to start in the near future).
Grupeer plans to introduce the Stability Fund as an opportunity to buy a square meter in a real estate property and earn rental with a possibility to sell your share. Moreover, Grupeer introduced also development project loan investing, which is an interesting choice for investors looking for real asset collateral to back their investment.
Mintos on the other hand is focusing solely for loan marketplace business for now.
Regulatory Environment and Transparency
Mintos is currently at break-even and audited by Ernst & Young Latvia. Grupeer is currently loss making and is not audited by external auditor. Both of those companies are not regulated by any Financial Authority.
Grupeer offers up to 1.25% cash-back on all investments up to 6 months after registration (maximum cash-back for investments with duration at least 9 months) after the registration through this LINK.
Mintos offers up to 2% cashback for all investments up to 30 days after registration (maximum cashback for investment in total of EUR 1,000 with slowly decreasing rate then) after registration through this LINK.
Strengths And Weaknesses
Let’s start again with the statement that I consider the Grupeer product to be providing loans to loan originators rather than P2P investing as it’s often considered. Read the article How Does “P2P” Loan Marketplace Work to understand my reasoning. To be fair, Grupeer is really transparent in this matter and it’s not a secret that all loans are provided directly to loan originators. However, sometimes I can still see Grupeer advertisements inviting you to participate in “P2P” investing.
Grupeer, similarly to Mintos provides a complex platform to finance loan originators. This provides diversification tools for investors who want to invest in the companies providing personal loans as they are usually not listed on the stock exchange and don’t have publicly traded bonds. Therefore, investing through platforms like Grupeer is usually the only way to participate in this sector.
Grupeer is relatively innovative platform. It has already introduced development financing projects with buy back guarantee which is an interesting idea for investors looking for additional assurance in terms of collateral and still have the buy back guarantee which will help them to get their principal back before possible bankruptcy proceedings or sale of collateral. Moreover, Grupeer plans to introduce the Stability Fund, which is an opportunity to buy share in a real estate property and earn rental with a possibility to sell your share to fellow investors. However, this has not been implemented yet.
Regarding auto invest feature, there is automated option created by a user based on types of loans, countries, loan originators, interest offered and loan duration according to your preferences. This is a traditional auto-invest feature for investors wishing to invest passively at the predefined criteria.
Regarding weaknesses, same as Mintos’, Grupeer’s internal ratings of loan originators are questionable. Due to the nature of the business, they are always biased as the Company revenues are dependent on the investor’s perception of loan originators’ quality. I always recommend to look up some independent ratings before investing. Differences between quality of loan originators is significant and might not correspond to the offered return. The risk reward relationship is indeed not working properly sometimes. Grupeer itself doesn’t provide lot of details about loan originators on its platform – refer to the risks section below.
When Grupeer started to work with real estate companies, they decided that in order to better control the use of funds and project execution, they need to expand the control and oversight over them. They decided to become a shareholder in the company providing finance to gain not just shareholder control, the capacity to decide on the use of funds, as well as oversight in all financial operations. One of the examples in such business model is the loan originator “Primo Invest”. I consider this to be pretty innovative idea on one hand and its giving Grupeer ability to know everything about the project and have real “skin in the game”, but on the other hand, Grupeer cannot actually believe that its rating of “Primo Invest” is unbiased in these conditions.
There are some drawbacks of the platform I have identified for Mintos already within its review. Some of them such as ethical dilemmas regarding payday loans and possible future payday loans APR restrictions apply for Grupeer as well. However, regarding others (related to the lack of trust towards the platform), I have to honestly say that so far those don’t apply for Grupeer from my point of view (that might be related that loan originators are more motivated to pay on time under Grupeer model). I can also feel much better payment discipline compared to Mintos.
What Are The Risks
All loans are backed by buy back guarantee. This guarantee is provided by loan originators, not Grupeer. Essentially, your capital if safe till the moment when a loan originator goes into trouble. The main risk in investing through Grupeer is that a loan originator will not be able to repay its liabilities towards investors. As through Grupeer, loans are provided directly to loan originators, buy back guarantee is not relevant as it’s just the promise that loan originator will pay the money back.
Risk of default of loan originator is partially mitigated in development projects where all projects are backed also by collateral. In case of loan originator’s problems, investors have additional assurance that loan originator still has the possibility to cash out the collateral.
Grupeer is not publishing loan performance details, but as there were no loan originator defaults in the past, I can only assume that all loans are current at the moment (with an insignificant percentage to be a little late due to timing issues).
When reviewing loan originators, there are some details available, but those contain only basic information. Current financial statements are not present, even though the internal rating is granted for each loan originator. In case of development loans, there are at least a few details about the project. I would expect much more details, such as financial statements, budgets and cash flow analysis to be able to access a loan originator properly.
Remember that with investing through loan marketplace, your capital is at risk. Grupeer is not covered by the Deposit Guarantee Scheme or the Investor Compensation Scheme. This is a standard practice in the industry as currently loan marketplace financing in general doesn’t require any license from the regulator.
What Are The Possible Returns
Grupeer promotes a return at around 13.2% p.a. For my own filter which consists only of development loans provided only by 1 loan originator, my investment gain is between 13-14%. Promoted return is therefore definitely achievable.
Currently, Grupeer offers sign-up bonus for new investors who registers via referral link based on investments made within first 90 days after registration. The bonus is 1% of all investments. Additionally, EUR 10 is given as sign-up bonus after the registration.
Grupeer is operated by GRUPEER SIA, registered in Ireland. Balance sheet as at 31.12.2018 shows that assets consists mainly of receivables of EUR 421 thousand and fixed assets of EUR 80 thousand. Surprisingly intangible assets (website) are valued only at EUR 5 thousand, which is unexpectedly low compared to its competitors. The company is financed by a loan of EUR 776 thousand and has negative equity of EUR – 77 thousand.
Profit and loss statement shows that the company is loss making (EUR 46 thousand compared to prior year’s loss of EUR 32 thousand). Company’s revenue increased massively from EUR 41 thousand to EUR 584 thousand which is promising. All costs are, however, reported under distribution costs only which isn’t very transparent. It’s not clear how much of an interest Company pays since the interest expenses are empty as a I assume those are reported under distribution costs as well. There are no notes to the financial statements so I can only goes that the main source of revenue for Grupeer is a service fee charged to the loan originators and this is directly related to the volume of funded loans.
Annual report in a form that has been publicly disclosed on platforms’ website is basically worthless. It has not been audited by external auditor and is only 2 pages long. I would expect much more transparency towards investors from Grupeer in this manner (regardless of local requirements). If you want to read through the financial statements, click HERE.
Summary And Recommendation
|Market Position||One of the biggest European platforms in loan originator financing|
|Risk||– Default risk of loan originator|
– Default risk of Grupeer
|Loan Performance||No statistics available. Almost 100% of loans should be current due to direct loan originators financing though|
|Loan Details||Only current payment schedule and general information about borrower visible|
|Auto-Invest||Yes, managed by investor|
|Financial Performance||– Loss making for last 2 consecutive financial years |
– Negative equity
– Annual report not audited by external auditor
Grupeer offers an online platform for loan marketplace. An investor can earn returns by financing of various loan originators through Grupeer’s platform. Historically, investors were able to receive around 13% p.a. interest. The platform is user-friendly and as is the industry standard, auto-invest features are available for passive investors.
As I already mentioned, I invest only in one originator who is financing development projects and Grupeer is a shareholder in this originator. It seems to me like an interesting business model and I think it might be adopted by other players as well. I cannot reasonably assess the quality of loan originators due to insufficient data provided and therefore, I don’t plan to invest large amounts here. I also consider transparency towards investors regarding annual report disclosures to be very low. Even though there hasn’t been any default yet, market sure hasn’t been tested in this area well. I’ll be following any news from Grupeer and especially I’m looking forward to promised stability fund. And who knows, maybe one day my faith in the platform will be much higher.
I’m also discouraged by the meaning of buy back guarantee on Grupeer. As the loan originator promises that loan will be bought back if is overdue for more than 60 days and the loan is provided directly to the loan originator, this effectively means that collateral provided to me as an investor is just a promise and nothing tangible (in case there is no pledge of assets which I identified to be the case only for few loan originators and even in that case there is no detailed information about such pledge).
Try go to the bank and offer them that if you’re going to be late with your payments, you will pay back the whole principal with delayed interest to see their reaction. And that is exactly why I’m so skeptical. In case of default, I believe that my claim would be ranked after any secured borrowers as my investment would be considered only as an unsecured receivable. This is slightly different compared to Mintos as I believe my loan is at least a little backed by the borrower’s ability to repay the loan under a direct investment model which is not provided by Grupeer.
To recap, if you would like to participate in crowdfunding of loan originators through platform with no default on its record, you understand the risks and uncertainties involved, you can join me and thousands of others and SIGN-UP HERE. After that, you can communicate directly with other investors via group on Facebook HERE.