Wisefund – a simple review after 3 months

Wisefund is a new and promising p2p business lending platform from Estonia. With an average interest rate of 18% on its loans, it promises its investors good returns. The company was founded only in March 2019, and as of November, it has around 1500 investors who invested a bit over 3 million EUR on the […]

Wisefund is a new and promising p2p business lending platform from Estonia. With an average interest rate of 18% on its loans, it promises its investors good returns.

The company was founded only in March 2019, and as of November, it has around 1500 investors who invested a bit over 3 million EUR on the platform.

Wisefund Highlights

  • Launched: 2019
  • Headquarters: Estonia
  • Loan types: Business Loans
  • Loan terms: 3 – 18 months
  • Loans funded: 4 million EUR
  • Investors: 2100
  • Fees: early exit fee when selling back loans to Wisefund
  • Interest rates: 18% – 19%
  • Minimum investment: 10 EUR
  • Currency: EUR
  • Secondary market: yes
  • Auto-invest: no
  • Buyback guarantee: yes
  • Accepted investor countries: EEA countries, Switzerland

How does Wisefund work

Wisefund acts as an intermediary between businesses looking for funding and lenders looking to invest their funds.

Businesses that look for funding in order to expand their operations contact Wisefund and ask for a loan. Wisefund analyses their operations, assets, financial history and if they qualify for a loan, they’re listed on the website. To help analyze the business, Wisefund teams up with North Capital Markets, a Latvian company specialized in global financial markets and financial analysis.

Investors login to the platform, deposit funds and invest in the loans available on the website. After that, they receive monthly interest payments.

If an investor wants to exit their investment before the loan matures, they can sell it back to Wisefund, against a fee. Wisefund uses a 3rd party partner to buy the loans from the investors. This feature was frozen in January 2020 due to the market panic caused by Envestio and Kuetzal demise. The buyback fund ran out fast.

Investors can sell their loans early on the secondary market if other investors are willing to buy the loan from them.

To protect investors against borrower default, Wisefund says it puts aside a small part of their profits from each loan into a protection fund. In the case of borrower default, this fund will cover legal costs and interest payments during the collection process. However, the investors will recover their full funds only after the collection takes place.

A more in-depth look at Wisefund

Wisefund is located in Tallinn, Estonia and was founded only this year, in March. So far, it managed to attract only 300 investors on the platform, that invested a bit over 100.000 EUR in the 3 projects available.

Social footprint

You can follow Wisefund on Twitter, Facebook or Linkedin.

Key people:

  • Olga Bobrova – founder, with 20 years’ experience in finance
  • Rinalds Ters – CEO, with more than 10 years of management experience
  • Ingus Linkevics – CMO (Chief Marketing Officer), Legal and Platform Operations, since April 2019; also CEO of Andromo, a mobile app builder
  • Georgijs Bodonenko – Chief Technology Officer, with around 7 years of experience in software development; given his relative lack of experience, I wouldn’t be surprised if CTO is just a glorified title and he’s the only one working on the technical side of the platform; if this is so, he’s done a good job, the website looks great
  • Diana Ozolina – customer support; her Linkedin profile just says “self-employed”
  • Dmitrijs Gamajunovs – Head of Partnerships, no public profile

Regulations and how safe are my investments

Because Wisefund doesn’t keep investors funds into their account, it doesn’t need to be regulated by FSA (Estonian Financial Supervision Authority). Although I wouldn’t mind if they tried to be regulated by FSA, in order to improve their trustworthiness.

Becoming a Wisefund investor

You need to be a European Union resident in order to open an account on Wisefund. After registration, you’ll need to provide a copy of your ID, in order to verify your profile. This being done, you can fund your account through bank transfer and start investing in the available projects.

I did a test transfer using my Revolut account. For some reason, Wisefund didn’t see the reference number attached to the transfer and they contacted me by email to confirm the transaction. This being said, I did manage to fund my account and invest in a project in just a few hours after I created my account.

Wisefund fees and taxes

There’s a fee when you want to sell back your loan investment before the loan maturity. This feature was frozen in January 2020.

You can only sell your loans on the secondary market at a discount, so you’re guaranteed to lose money when you use the secondary market option.

Wisefund doesn’t automatically withhold taxes from the interest payments, so you’ll need to do it yourself in your own country.

Wisefund risks

While p2p lending has its inherent risks, there are others that apply specifically to Wisefund.

Platform risks

Wisefund is new, with only a handful of small loans funded, and may default at any time. While the loan contracts are between the investors and borrowing companies, we don’t know how easy it will be to still receive payments from the borrowers after a potential Wisefund default. In addition, in case of platform default, any administrator that will take over the business will take their own fees, thus reducing the investors’ returns.

Regulatory risks

Crowdfunding is a fairly unregulated domain in most of Europe. Any changes could affect existing platforms. This means Wisefund 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

Businesses may default and fail to pay their loans back. Wisefund has an agreement with a 3rd party to buy loans that are more than 60 days late with their payment, but that will only cover the principal invested.

The missed interest is covered by a protection fund Wisefund is currently growing. This might not cover all your missed interest payments.

Liquidity risks

Wisefund recently introduced a secondary market. This means investors can sell their loans to other investors. In practice, the liquidity of the secondary market can be very low if there are more sellers than buyers.

Platform experience

I like the simplicity of the platform and the clear way in which the information is presented. The user dashboard is complete with everything you need to understand how your investments are performing. You get nice statistics, list of transactions, current investments and accrued interest.

wisefund projects

The projects have good details in them, describing the company, payment schedules, pledges. Unfortunately, they’re missing credit risk assessment or any financial statements.

Given that the platform doesn’t offer any buyback guarantee in case of borrower default, the lack of concrete details on borrower’s creditworthiness makes it hard to invest in the available loans.

There’s no auto-invest tool offered (not needed due to the low number of loans) or a secondary market.

The secondary market, while a great recent addition to Wisefund, doesn’t seem to liquid at the moment, especially for large invested sums.

My portfolio

While I was a bit sceptical a few months back, I started in August to slowly increase my portfolio here. I’ve invested since 1200 EUR in a few of the available projects, with an average interest rate of 18.3%.

wisefund portfolio evolution from august to november

All payments come on the last day of the month. So far my earnings amount to 26 EUR, with an annual return of over 20%.

Conclusions on Wisefund

Given the information I currently have on Wisefund, I don’t feel comfortable yet to invest in any of the loans available. I’ll keep an eye on the platform and if it takes off and it provides more loan details I’ll reconsider investing in it.

I really start to like Wisefund. I’ve studied it a lot in the past months, and I feel confident to invest a bigger part of my funds on the platform.

Positive aspects

On a positive note, Wisefund does provide some good incentives to invest in their loans:

  • At 19%, the interest rates offered are very appealing
  • a secondary market where (in theory) you can exit early from your investments
  • the loans have a buyback guarantee in case of default, even though it covers only the invested principal
  • Wisefund builds up a protection fund to cover for missed interest payments and make the collection process smoother in case of borrower default
  • the number of investors is growing steadily, moving from 300 in August to 700 in September
  • there’s a constant flow of projects available
  • the website is well built, with great statistics page and dashboard

Negative aspects

While Wisefund does have a protection fund, I have no details on how large that is, how many payments will it cover or how long will the collection process take.

The platform is new and untried and there are only 2000 investors on the website. While this is not a problem yet, if the platform doesn’t take off and attract more projects and investors, it will eventually run out of funds and close.

The loans available on the platform have enough details to give you an idea about the company looking for the loan, its history and what it intends to do with the funds. However, it’s hard to invest in any loans only based on these details. There’s no credit risk assessment or company financial statement offered. It’s hard to invest based only on the hope Wisefund did their due diligence and chose only good companies.

Risk and returns summary

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

Final score: 3

Wisefund is a new platform, featuring high-risk and high-returns investment opportunities.