A short review on TFG Crowd after 6 months

TFG Crowd is one of the newest p2p business lending platforms from Europe. Registered in Estonia, it has offices in Tallinn, Riga, London and Berlin.

TFG Crowd is one of the newest p2p business lending platforms from Europe. Registered in Estonia, it has offices in Tallinn, Riga, London and Berlin.

TFG Crowd highlights

  • Launched: 2019
  • Headquarters: Estonia
  • Loan types: Business loans, Invoice finance, Mortgage loans, Trade finance
  • Loans from: UK, Germany, the Baltics
  • Loans funded: > 3 million EUR
  • Loan terms: up to 2 years
  • Interest rates: 5-17%
  • Fees: no fees
  • Minimum investment: 100 EUR
  • Currency: EUR
  • Secondary market: no
  • Auto-invest: no
  • Accepted investor countries: EEZ (European Economic Zone)
  • Buyback guarantee: yes

How does TFG Crowd work

TFG Crowd acts as an intermediary between businesses looking for finances and investors willing to lend their funds. The company looking for funding contacts TFG Crowd and asks for a loan. TFG Crowd verifies the borrower and checks their financials, business plan and loan securities. If the loan is approved, it gets published on the website and enters the funding stage.

The investors start accruing interest from the day they invested in a project. They don’t have to wait until the project is funded in order to get paid for their investment.

If the loan is not funded in a month, the investors’ funds are returned back to them. If the loan gets funded, the borrower will receive the funds and start paying interest according to the loan agreement. Most of the loans pay interest monthly.

TFG Crowd also invests in the loans it provides on the platform, up to 50% of the entire sum, keeping skin in the game.

The loans available come with different securities: personal guarantees, loan insurance, company pledges.

In addition, TFG Crowd covers all loans with a buyback guarantee policy. If the borrower fails to make their payments in 60 days, TFG Crowd will return to the investors the invested principal and the accrued interest.

To cover for the buyback guarantee, TFG Crowd created a special buyback fund in September and 2% of every funded project goes into this fund. Currently, the fund is worth around 150.000 EUR. TFG Crowd will also make use of its own funds or its parent company funds (TFG Limited) to cover the buyback guarantee until the end of 2020 when the buyback fund should be large enough to sustain any defaults by itself.

A more in-depth look at TFG Crowd

TFG Crowd is the newest offspring of TFG (The Finance Group Limited), which also includes

  • TFG Pay – an alternative banking solution for businesses in the EU
  • TFG Logistics – managing logistics all over the world
  • TFG Real Estate – dealing with real estate development and management

While TFG Crowd started its crowdlending operations only in 2019, the TFG group has been involved in business financing since 2015.

There’s not much to find online about any of these 3 businesses online, besides companies incorporation data.

Social footprint

Combining the Linkedin company profile and the website’s about us page, I gather this is the TFG Crowd team:

  • Emil Kerimov – CEO, also the founder of TFG Limited
  • Natalja Nikitina – Commercial Officer
  • Elans Dimitrijevs – Business Development Partner
  • Vladislavs Ovcarovs – Technology Officer and marketing specialist

They also keep an active presence on Facebook and Instagram.

One thing I don’t like about TFG Crowd’s online presence is that it almost doesn’t exist.

Regulations and how safe are my investments

TFG Crowd is registered in Estonia, a country that doesn’t have specific crowdfunding regulations.

The investors’ funds are protected by being kept in account separated from the TFG Crowd company assets. In case of bankruptcy, in theory, those funds can’t be used to pay company debts.

Becoming a TFG Crowd investor

As with most crowdlending platforms, you’ll need to perform these steps in order to become an investor.

You need to be at least 18 years old and have a bank account in the EEZ (European Economic Zone) in order to open an account with TFG Crowd.

You’ll also need a copy of an ID and a utility bill for proof of address. The process is really smooth and the verification process takes less than a day.

You can fund your account through bank transfer. I’ve used my Revolut account to do this, and it usually takes only a few hours for the funds to reach my account.

Take a look at the available projects (there are always a few) and choose the ones you like. Read the project documentation, and if it suits your interests, invest in it. The minimum investment in each project is 100 EUR.

TFG Crowd risks

As with many other p2p lending platforms, investing in TFG Crowd projects comes with many risks. Before you start investing in TFG Crowd, you should take these into account.

Platform risks

While TFG was involved in business financing since 2015 (says them), the TFG Crowd platform is still very young, as it only started its operations in 2019.

According to TFG Crowd, in the unlikely event that they go bankrupt, the investments are secured through their own funds, those of their sister-companies (e.g. The Finance Group Limited), as well as insurance of the projects and pledges on immovable property.

Are these assurances enough? Not really. Those sister companies are also small, with almost zero equity.

One other risk involving the platform is due to the website’s security. The website doesn’t use 2-factor authentication, and this makes investors accounts more un-secure.

To mitigate this security risk, there is stuff investors can do as well:

  • Try not to use the same password on 2 different websites
  • Don’t use easy passwords like “123456” or “password”
  • Don’t keep your passwords written on post-its
  • Use a specialized password manager to keep track of your passwords

Regulatory risks

Crowdlending is a fairly unregulated domain in most of Europe. Any changes could affect existing platforms. This means TFG Crowd might find it hard to comply with the regulation changes and at the worst, they’ll have to suspend their activity.

Market risks

The small and medium enterprises are the first to fall during economic downturns. If the economy hits a rough patch, your p2p lending portfolio will suffer on any platform you’ve invested in.

Performance risks

All projects are secured with a buyback guarantee and TFG Crowd tries to be transparent about it. In September, it created a special fund that is currently worth around 120.000 EUR. In the case of borrower default, it will be used to cover for the invested funds and accrued interest. 2% of any funded project goes to this buyback guarantee fund.

While the buyback fund is still relatively small, TFG Crowd promises to also cover from its own funds any default that occurs until the end of 2020. By that time, the buyback fund should be large enough to cover for defaults by itself.

Still, most projects available miss important financial data, and that increases the risk of investing in any of them.

Liquidity risks

The platform doesn’t have a secondary market, so, for now, there’s no possibility to exit your investment before the loan term. TFG Crowd does say though they’re currently working on this feature, and it should be available in the near future.

Platform experience

There is a constant stream of projects available for investment. Their activity domain is varied, including real estate, restaurants, cosmetics, pharmaceuticals, logistics.

TFG Crowd lets you invest in different types of investments:

  • Business loans
  • Business shares
  • Invoice finance
  • Mortgage loans
  • Trade finance

The current loan sizes range from 15.000 EUR to 400.000 EUR and the minimum investment in a project is 100 EUR.

One annoying thing is that you can only invest multiple of 10 EUR (100, 110, 120…). I currently have 102.68 EUR in my account and I can either invest 100 or 110 EUR.

And the minimum withdrawal amount is 10 EUR, so I’ll have 2.68 EUR just sitting around not doing anything.

Each loan presented on the platform contain details about the company, the use of the funds, market details and loan security. A few projects also include a business plan, and sometimes financials, although not all of them are written in English, so they’re a bit hard to digest.

Some of the projects even come with investors perks, like getting a shampoo when investing in the “Laya Cosmetics” project. They’re nice, but that’s not what I’m after for.

My portfolio

I’ve created my account in June 2019 and so far I’ve invested 1500 EUR in 14 of the projects published on the platform. So far, I’ve received 67 EUR in interest payments from the projects I’ve invested in (a 16.15% annual return)

tfg crowd portfolio evolution from may to november

Why should I invest in TFG Crowd

All investments come with a buyback guarantee. If the loan payments are late for 60 days, TFG Crowd will buy back the loan from the investors and will pay also the interest accrued.

The buyback is secured through different methods – a special buyback fund where 2% of every funded project goes to, TFG Crowd’s own funds, those of their sister companies (e.g. The Finance Group) as well as insurance on the projects and pledges on immovable property.

There are no fees for investing in any loans. TFG Crowd takes a fee from the lender, but it doesn’t disclose how much that is.

The investments come with good interest rates. The current active projects have interest rates ranging from 15% to 17%.

Even more, investors get paid interest on their invested funds from the first day they invested in a project. While the project is still in the funding phase, your funds still accrue interest.

While the platform is registered and regulated in Estonia, the projects available on the platform come from all over Europe (the Baltics, Germany, the UK). It’s a good platform to diversify your portfolio.

Why not invest in TFG Crowd

TFG Crowd is a young platform with almost no track record. A few projects have successfully exited so far, but that’s no guarantee for the future.

Most projects available lack the full information needed to make an informed investment in them. For example, borrower guarantees are just displayed as a bullet point list, with no documents backing that up.

Also, the platform doesn’t have a secondary market, so, for now, there’s no possibility to exit your investment before the loan term. They do say though they’re currently working on this feature, and it should be available in the near future.

TFG Crowd conclusions

I like the fresh look of the platform and the details displayed for each project.

The projects available have good interest rates and they also come with a buyback guarantee. They also start paying interest from the day I invest, and I don’t need to wait for the project to get funded to get paid for my investments.

On the other hand, the platform is still young and I’m still trying to find out how are they expecting to handle defaults, what’s their future plans, do they intend to add at some point a secondary market or not.

For now, I’ll be investing in a couple of projects on the platform, to keep my interest active. And then I’ll see if it’s worth investing more.

Some things have changed since I wrote this review. The biggest is that TFG Crowd created the special buyback fund and 2% of every funded project goes into it. I like the way they implemented this and also the fact that they’re transparent about it.

Risk and returns summary

  • Transparency: 2/5
  • Loan security: 2/5
  • Liquidity: 3/5
  • Account security: 3/5
  • Track record: 3/5
  • Returns: 5/5

Final score: 3

TFG Crowd is a high-return, medium to high risk platform. The platform is still new and has many things to improve regarding transparency, account security and loan security.