KUALA LUMPUR: Peer-to-Peer (P2P) financing platform Funding Societies Malaysia, has launched Dealer Financing, the latest addition to its investment products, for the purchase of used cars by identified used car dealers.
Dealer Financing is not only the first P2P dealer financing product, but it is also the first collateralised P2P investment in Malaysia, whereby it is backed by additional security which is the ownership claim on the financed used cars.
The product’s introduction is in line with the financing platform’s objective to provide different products that can cater to different risk appetites.
Co-founder and chief executive officer Wong Kah Meng said as an alternative financing platform that serves diverse segments of clients and partners, Funding Societies continuously gather feedback from SME clients and investors on how they want to grow further.
"Among those feedback include the investors’ preference for shorter-term financing that provides lower risk, and this is part of the reason we are launching Dealer Financing,” he said in a statement today.
Dealer Financing caters to the more risk-averse investors, who prefer shorter-term investments with collateral as a means for investors to diversify their investment portfolio.
Simultaneously, the product also aims to offer additional financing opportunity for the underserved small and medium-sized enterprises (SMEs) in the country, particularly from the used car industry, subsequently providing short term financing to used car dealers in helping them grow their businesses.
"A major difference of Dealer Financing compared to our other financing products is that it is backed by additional security, and that is the ownership claim on the financed used cars.
"Accordingly, this ownership claim acts as a safeguard to prevent the used car dealers from transferring the ownership or selling the cars to any third party prior to full repayment to the investors. This additional security would then further encourage repayment from the issuers,” Wong said.
For the new product offering, Funding Societies is also working with independent car bidding platforms including MyTukar, MUV and CarlistBid, and has since disbursed financing to more than 100 used car dealers.
The partnered car bidding platforms will inspect the condition and verify the value and identity of the used cars before putting them up for bidding.
By on-boarding used car dealers with proven track records based on their repayment capabilities, business history and performance, Funding Societies is able to further control the risk for its investors.
Around 40 percent of the one million car units sold in 2018 are used cars, which points to a relatively high demand for the industry.
However, used car dealers often face issues when it comes to obtaining capital to expand their businesses as traditional financing avenues do not usually cater to used car dealers that are sole proprietors.
This is where P2P financing fits right into the picture by providing financing opportunity for used car dealers to increase their cash flow for stocks purchase, for instance.
An alternative financing platform that has been gaining momentum in recent years, P2P financing narrows the funding gap of SMEs by providing an attractive alternative source of capital for up-and-coming businesses to fund business expansions and meet other financial requirements.
Since introducing the new product, Funding Societies has successfully given out close to RM20 million disbursement across 1000 notes as of August 2019.
Dealer financing investors stand to gain a net return of more than 8 percent per annum before taxes and defaults, while the minimum investment amount is as low as RM100.