Post by bengilbert on Jul 28, 2014 7:53:35 GMT
A few people have asked about invoice trading. I've had a bit of experience with MarketInvoice and Platform Black, so wanted to share it.
I invested on both platforms between November last year and February this year. I stopped because I ended up with a net loss on both platforms, but I've recently started again on MI because I think I was probably just unlucky earlier. MI publish some fairly detailed statistics on returns and defaults, with low levels of losses, and it's easy to invest in all invoices and so get the average return. (I didn't do this earlier - the system didn't allow it then.) 0.89% of invoices have been 'delinquent', of which 83% has already been recovered, so that means 0.15% average default losses per invoice, with recovery ongoing on that amount. Since the average invoice duration is 35 days, I make that about 1.6% per year, vs 11.5 – 13.0% pa yield on the invoices (after fees).
Very briefly – on both platforms, you buy invoices from sellers. If the debtor (who's meant to pay the invoice) doesn't pay it, you can claim the money from the seller. So, you should only lose money if the debtor doesn't/can't pay and the seller is insolvent. The invoices are usually due to be paid in 15 – 90 days time, and you get roughly 1% per month (details depend on the invoice). Platform Black runs an auction system for the invoices, whereas almost all invoices on MI are at a fixed price.
On Platform Black, I was in trades from 4 different invoice sellers. 1 of them went wrong – the debtor found a problem with the goods supplied, only paid about 60% of the invoice, and the seller then went into administration. I generally found communications with the platform frustrating, since important questions I had didn't get answered for days, and it was sometimes impossible to reach the people who knew what was going on.
I found MI much more professional, and generally I think they're quite impressive as an organisation. I was in dozens of trades, but 2 went wrong. One was another situation of faulty goods / seller insolvent, and in the other, the debtor deducted an amount that the seller owed to them from the invoice, and the seller went into administration. MI are still working on getting further recoveries on both trades.
Overall, invoices could be a really good investment since they're high-yield, short-duration, well-secured, and it's easy to diversify (there are 10-20 trades per day on MI, and you can just set up an autobid profile which will get you into all the trades which meet your criteria). However, a couple of losses can wipe out all the small gains you make on each invoice. As I said, I tend to trust the MI statistics, which make me think that expected losses are low, even though I was unlucky first time round. I'll update in a couple of months with how things go this time.
I can explain more about how the two sites work if anyone is interested or has questions. There are some nuances worth explaining if anyone's thinking of investing, but I don't want this to get too long.
I invested on both platforms between November last year and February this year. I stopped because I ended up with a net loss on both platforms, but I've recently started again on MI because I think I was probably just unlucky earlier. MI publish some fairly detailed statistics on returns and defaults, with low levels of losses, and it's easy to invest in all invoices and so get the average return. (I didn't do this earlier - the system didn't allow it then.) 0.89% of invoices have been 'delinquent', of which 83% has already been recovered, so that means 0.15% average default losses per invoice, with recovery ongoing on that amount. Since the average invoice duration is 35 days, I make that about 1.6% per year, vs 11.5 – 13.0% pa yield on the invoices (after fees).
Very briefly – on both platforms, you buy invoices from sellers. If the debtor (who's meant to pay the invoice) doesn't pay it, you can claim the money from the seller. So, you should only lose money if the debtor doesn't/can't pay and the seller is insolvent. The invoices are usually due to be paid in 15 – 90 days time, and you get roughly 1% per month (details depend on the invoice). Platform Black runs an auction system for the invoices, whereas almost all invoices on MI are at a fixed price.
On Platform Black, I was in trades from 4 different invoice sellers. 1 of them went wrong – the debtor found a problem with the goods supplied, only paid about 60% of the invoice, and the seller then went into administration. I generally found communications with the platform frustrating, since important questions I had didn't get answered for days, and it was sometimes impossible to reach the people who knew what was going on.
I found MI much more professional, and generally I think they're quite impressive as an organisation. I was in dozens of trades, but 2 went wrong. One was another situation of faulty goods / seller insolvent, and in the other, the debtor deducted an amount that the seller owed to them from the invoice, and the seller went into administration. MI are still working on getting further recoveries on both trades.
Overall, invoices could be a really good investment since they're high-yield, short-duration, well-secured, and it's easy to diversify (there are 10-20 trades per day on MI, and you can just set up an autobid profile which will get you into all the trades which meet your criteria). However, a couple of losses can wipe out all the small gains you make on each invoice. As I said, I tend to trust the MI statistics, which make me think that expected losses are low, even though I was unlucky first time round. I'll update in a couple of months with how things go this time.
I can explain more about how the two sites work if anyone is interested or has questions. There are some nuances worth explaining if anyone's thinking of investing, but I don't want this to get too long.