Value Nomad

June 2, 2020

Debitum Network: Helping Small Businesses Grow

What is Debitum Network?

Debitum Network is a peer-to-business lending platform. It specializes in small and medium-size business financing.

debitum network

SME’s(small and medium sized enterprises), it’s said, form the backbone of many economies. Debitum aims to tap into that potential. It provides a platform where retail and institutional investors can fund small businesses through loans.

Why does that matter? Because almost 70% of micro and small to medium-sized businesses, especially in emerging markets, do not have access to credit. Experts estimate that there is a $2 trillion credit gap for SMEs globally. The reasons are valid. They range from over-regulation to underdeveloped banking environments.

As such, the industry is ripe for disruption and innovation.

Their model sets it apart from other peer lending platforms that primarily loan funds to individuals. Business financing is a lower risk compared to personal loan financing, and it also has attractive annual returns.

Launched in 2018, Debitum Network has grown exponentially, boasting of more than 4500 investors to date, and more than 17M Euro invested through the platform.

Unlike other platforms, Debitum Network is largely decentralized, with loan rating and other services done through 3rd parties.

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Debitum Network is based in Latvia. Here is a look at other details at a glance:

Debitum Network at a Glance

  • Launched: 2018
  • Country of Operation: Latvia
  • Registered Investors: 4585 (March 2020)
  • Estimated Average Annual Returns: 8.45%
  • AutoInvest Feature: Available
  • Provision Fund: Available
  • Buyback Guarantee: Available
  • Minimum Investment Amount: 10 Euro
  • Accepts Investors: From All Countries
  • Accepted currencies: EUR
  • Defaulted loans: Less than 2%

Debitum Partners – The Loan Originators

Debitum Network relies on its network of providers and loan originators to connect investors with the best possible investments. As such, they put extra caution in who they bring on board. All loan originators must not only be working to improve small and medium-sized business financing but also fit other criteria in loan quality and risk management

loans small business debitum network

The strategy’s success is in the results with less than a 2% default on all loans issued through the platform.

Partner Selection & Due Diligence

Luckily, Debitum Network employs stringent criteria in selecting the loans offered to investors. They only cooperate with companies whose lending portfolios meet low-risk criteria while at the same time, have attractive returns.

Before a partner can join the network, they must undergo thorough screening that takes around three months.

The screening starts with an analysis of the lender’s business models. Most fall off at this point if they are deemed too risky. Potential partners also fill out questionnaires and provide data such as financial reports, contracts, loan logs, loan delays, the company’s financial strength, etc.

Only when satisfied does Debitum Network onboard the new loan originators.

Some of their top and trusted loan originators include:

Cardec factoring – offering invoice factoring assets from lawyers that offer their legal services to their customers and get promissory notes from “Raad voor Rechtsbijstand” RvR (Legal Aid Board) that are fully backed by the government of the Netherlands. More information here.

small business debitum network

Triple Dragon – a London based company that is specialized in the financing of video games (PC and console), mobile games, and mobile applications (apps). All Triple Dragon loans are over-collateralized and have collateral that consists of receivables of well-known technology companies such as Apple and Google, and these receivables can be easily realized. Types of loans available: receivables backed loans and user acquisition loans based on future revenue streams. Details here.

small business debitum network triple dragon

Noviti Finance – a non-bank lender that provides business loans up to 20 thousand euros in Lithuania since 2016. The European investment fund will guarantee a portfolio of up to €10 million in loans issued by Noviti Finance. That means that in case of borrower default the EIF will repay a loan to Noviti. More information here.

How Debitum Helps Small & Medium-Sized Business and Economy Grow

We’ve already pointed to the struggles most SMEs go through in obtaining financing. And they are many: From high interest rates and long credit history requirements, to lengthy approval processes and delays in fund disbursement.

Debitum is helping change that. Working with reputable loan originators, the company aims to provide improved credit access to SMEs, boosting the overall economy in the long run.

Some of the top benefits of Debitum’s peer-to-business lending for small and medium-sized businesses include:

Faster Loan Processing

Debitum Network does not issue loans directly to clients/borrowers. They only refinance already issued loans. Instead, they work with a network of trusted third-party loan originators such as Carden factoring, Triple Dragon, Noviti Finance, among others. The loan originators are carefully selected, thoroughly vetted, and approved after meeting stringent criteria.

Unlike other lend-tech platforms, Debitum works differently. When investors fund a loan through the platform, the money is passed on to the loan originators, who in turn lend it, or pass it forward to their clients – the borrowers.

What might seem like a lengthy process has been streamlined to minimize funding delays and as such, your loan can be approved, funded, and disbursed in a short period.

Better Interest Rates

On average, peer-to-peer lending platforms provide better rates for SMEs. This is especially true since traditional financiers consider them risky and, as such, charge higher rates.

For example, on a three-year loan, SMEs pay an annual APR of just 11% compared to banks 15%. On a five year loan, SMEs are looking at an average of just 14% compared to banks that charge almost 24%.

Stringent due diligence on loan originators also contribute to lower interest rates on the platform. Only established and sustainable loan originators make the cut, and in turn, they charge a fair rate to borrowers for sustainability.

Return for investors, therefore, is directly tied to the risk they are willing to take on.

Final Thoughts

P2P lending is already disrupting global finance. Debitum Network is at the forefront in utilizing emerging technologies such as the blockchain to ease financing for small and medium-sized businesses. Along the way, it’s also reshaping the economy by offering the much-needed growth and working capital. Partnering with strong loan originators ensures that funds only go to strong, deserving, and financially viable businesses.

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