These few months have been extremely trying. Not just for individuals, but for businesses too. Covid-19 has changed everything – from the way we consume to the way we invest. 

Depending on how you see it, now can either be the most opportune or unfortunate time to take the plunge with new investments.

I’ve been an investor with BRDGE as they are now called, for 2 years and have invested in 4 deals to date. I use a couple of other crowdfunding / peer-2-peer sites as well. Without naming names, I’ll be frank and say that one of the two offers more variety in their deals and with greater regularity.

I appreciate this because diversity is key in my portfolio, I don’t believe in being pigeon holed to investing in a specific industry, even though some investment gurus claim that this is the way to go.

My Thoughts on Evaluating a Platform or Deal

That said, BRDGE, remains my preferred platform.

Why? The deals on the platform are well-researched and, transparent. The pros and cons of each deal is stated clearly in the factsheets which makes it easy to understand and make an informed decision: do I invest, or don’t I?. Additionally, BRDGE’s ease of use has improved significantly with constant updates on the mobile app, it has been easier to manage all my investments simultaneously.

Financial statements are transparent. Credit summaries are concise but informative. The repayment schedule is always realistic. I can’t emphasize how important this old adage is: if it sounds too good to be true, it probably is. 

Anyone will tell you that due diligence is key. You should not, and must not expect others to do your homework for you without fact checking. 

As an investor, BRDGE has given me a peace of mind – I still fact check, but out of habit more than the expectation of catching something. Another big plus point is the low default rate of SME deals on BRDGE, which I would attribute to the screening process. This doesn’t mean the SME deals only require small loans (some do, some don’t).

Deals were Impacted by Covid-19 Too

However, even SME deals on BRDGE were affected by Covid-19, which was unsurprising. I participated in this deal for an F&B joint that had to restructure their loan midway.

To sum it up, the F&B establishment found themselves at risk when they were forced to close during circuit breaker. They owed a few months of rent and despite the government announcing measures that were designed to help businesses like theirs, the fact was that the grants were hard to qualify for, so there was no relief to be had on that front.

This business is not alone. There are many, many others in a similarly precarious position. They needed more time and had… no cash flow. For this SME, this was them being stuck between a rock and a hard place, and ultimately what triggered the need for a deal restructuring. 

As investors, it is normal for us to be immediately concerned with the ability to recover our principal investment, once a restructuring deal is announced. However, I do believe that when we invest in a particular SME, a vested interest in them is formed and we want them to use our funds to flourish. Even if there are changes from the initial tenure or repayment schedule due to difficulties faced, we will be willing to listen to their needs and make compromises because we know that by extending a helping hand to them, is akin to helping a fellow Singaporean.

Balancing Investor and SME Needs in Such Situations

What payment restructuring means for a BRDGE investor is that the terms of payment – how the SME repays your loan + the interest payout – changes.

There are 2 types of loans. Equal payment and balloon payment. 

The F&B establishment deal was originally an equal payment deal, hence I was repaid a fraction of my principal investment + interest earned monthly. For the first 4 months, payouts were received as per normal.

Then, BRDGE got in touch (with me + all those who invested in the deal) and laid out the situation candidly. They wanted to help this SME tide through this trying period by giving them what they needed – time to use our investment to cover expenses, grow more money. Time to recover.

BRDGE asked if we were willing to get on board with converting the deal to balloon payment. So, 2 options.

Option 1: Convert from equal payment to balloon payment 

Option 2: Continue with equal payment 

BRDGE appealed to us on the SME’s behalf and was forthcoming with information. The F&B establishment had pivoted and diversified, they branched into catering and was deriving income from that arm, but needed more time to repay the loan.

Earlier in the article, I said doing due diligence on the offered deals is crucial. I will now add on to this and reiterate that information gives us context. 

This context was enough for me. I opted in for the payment restructuring and converted to balloon payment. This meant that every monthly payout, I would now get only the interest earned on my investment, and the rest of my principal investment would be repaid at the end of the loan tenure.

Takeaways

I know my dollars go directly to saving an SME. Straight into our economy. I can’t think of a better way to support local, even as we try to change some of our purchasing habits.

Coming back to why BRDGE is my preferred platform despite some drawbacks… it is very human. Human in the sense that in their communications, they were eager to find a realistic middle ground for that F&B establishment and investors. Nobody got thrown under the bus, or forced to make an impossible choice. 

Make no mistake, it is a very fine line to walk and not all platforms do this well. Defaults on loan repayments are more common than we realise, and what I consider “service recovery” when the need for restructuring arises, makes all the difference.

To sum up, investing in alternative financing is not just a head decision – whether or not the returns are attractive etc. It’s also a heart decision. 

This time, some empathy and understanding went a long way for 1 SME. In 5 months time, I’m hopeful that they will be back on their feet.

My Best,

Jonathan Wong

Disclaimer: The information above reflects the opinion of a BRDGE investor and should not be relied upon as financial advice. You may wish to approach a financial advisor before relying on any advice provided by the website to make any decision to buy, sell or hold any investment product.