“Don’t work for money. Make it work for you.” Robert Kiyosaki
You’ve worked hard for your money. Make sure it doesn’t lose value.
How does money lose value? Putting it in bank deposits is one way. Banks in Singapore offer returns of less than 1% per annum versus an average inflation of more than 3% per annum in the past four years.
One can look at other investment options. However, investing and growing your money in current markets is not easy. Below we summarise the dismal performance of other popular investment vehicles in Singapore:
- Stocks: The Singapore stock market (FT ST All Share) has fallen by 15% in the past two months. The trend is unlikely to reverse soon on still unattractive valuations and weaknesses in several large global markets (e.g. China and EU).
- Commodities: This asset class has been one of the worst performing in the past year. Prices are likely to remain depressed in the near term on supply glut and concerns over slowing global economic growth.
- Property: Singapore property are past their cyclical peak and is currently facing a ~5% y/y decline. Oversupply issues and a likely increase in interest rates could put further pressure on prices.
A smarter way to invest
Kapital Boost offers a better way of investing. For a minimum investment of S$1,000, our members have access to funding deals which offers:
- High returns of up to 32% (on an annual basis)
- Short-term tenor
- Strong legal structure
- Low correlation to movements in the capital market
- More importantly, you can feel good about investing in Kapital Boost. Your money is used to help small businesses, which forms the backbone of our community.
“Risk comes from not knowing what you are doing.” Warren Buffet
Investing in small businesses can be risky. Proper due diligence on the company and its owners, however, can significantly lower the risk.
Kapital Boost does the dirty job of screening for solid businesses deserving of your funding, and ensuring that repayment risk is minimised. We have a team experienced in credit research, Islamic finance, and entrepreneurship. We know what to look out for.
Our rigid risk management process is as follows:
1. Initial screening of businesses. Small businesses have to meet the following criteria for funding eligibility:
- At least one year of operations
- Annual sales of at > S$100,000
- Positive free cash flow
2. In-depth credit risk analysis. We utilise a proprietary credit scoring system, which looks at the company’s business, financial, and corporate governance risks. This involves analysing relevant information on the business (e.g. financial statements, registration, on-going sales contracts) and interviewing business owners.
3. We prioritise small businesses with existing purchase orders/receivables to support near-term funding of the agreed asset purchase from Kapital Boost members. If no purchase orders are available, we look at the stability of historical cash flow to ensure there is sufficient cash flow buffer for asset purchase in future. We may also require a personal guarantee by business owners.
4. For funding longer than 3 months, monthly asset purchase payments are required. This reduces the risk of a huge lump-sum payment for small businesses, at the end of the funding period.
While we believe our risk management process reduces payment risk, it is the onus of Kapital Boost members to perform their own due diligence on any funding opportunities.
We provide as much relevant information as possible to our members in order for them to make a sound decision. If you require more information on a certain funding campaign, please don’t hesitate to contact us at firstname.lastname@example.org. We are more than happy to help. Alternatively, you can directly contact the business owner to request for information.
Overseas investing – higher risk?
We understand that funding businesses in developing markets like Indonesia pose higher risks. To mitigate this, we have partnered with Indonesia’s largest entrepreneur community Tangan di Atas (TDA) to seek funding opportunities from their members. This gives us the benefits of initial screening and background checks by TDA’s management team and assistance in ensuring timely payments to Kapital Boost members.
To offset the higher risks in Indonesia, we also offer higher profit margins versus Singapore deals.
Investing overseas involve exchange rate risk. For most of our Indonesian projects, however, this risk will be borne by Kapital Boost and the small businesses.
The need to diversify
“Diversification is an established tenet of conservative investment.” Benjamin Graham
Who better than investment guru Warren Buffet to offer investment advise? His mentor, of course - Benjamin Graham.
We cannot stress enough the importance of investment diversification to reduce overall risk. We advise Kapital Boost members to invest smaller amounts in different funding campaigns, rather than putting all their investments into one.
Invest wisely. Take part in Kapital Boost-led investment to start earning attractive returns while supporting the growth of the community. Visit www.kapitalboost.com/campaigns.