Debitum Review 2023: Regulated SME Loans for 10%?

Debitum is positioned in a very specific niche in the P2P environment. It operates as a regulated P2P platform, follows a marketplace model and it offers a buyback guarantee for secured business loans. This results in a combination that cannot be found on any other platform in this form.

However, this individual character is also accompanied by some risks. In this Debitum review you will get a bettter understanding about the current risk-reward profile of the platform and in which circumstances Debitum might be a good addition to your P2P portfolio. 

All the information that are covered in this Debitum review are based on my own personal experiences with the platform for the past 4+ years. Please make sure to do your own due diligence before investing on any platform. More information can be found in the Disclaimer.

Further analyses of other platforms can be found on my P2P Platform Review page.

Last Update: May 2023

Debitum Overview  

Before we get started, here is a quick summary with the most important information about Debitum.

About Debitum

Debitum (formerly Debitum Network) is a Latvian P2P marketplace, launched in September 2018, where retail investors can invest in business loans from SMEs, earning returns of 8% to 10% on average. Technically, Debitum is therefore not a P2P but a P2B (peer-to-business) platform.

Although Debitum is still a small marketplace, in terms of loan volume and number of investors, the platform belongs to the better-known providers in the P2P environment. Since September 2021, Debitum has also been one of only four platforms to be controlled and supervised by the Latvian financial regulator FCMC.

The Latvian word “Debitum” translates as “credit debt”.

The Origin Story

The idea of Debitum, then called Debitum Network, was born in 2017. The founders at the time included Martins Liberts, Donatas Juodelis and Justas Šaltinis.

Before founding Debitum, both Martins and Justas set up the Lithuanian company DEBIFO. This was a lender specialising in invoice financing for small and medium-sized enterprises (SMEs) from Lithuania. The lender, which has also been financing some of its loans via Mintos, is now known as Factris.

Due to regulatory problems, DEBIFO had difficulties expanding its lending operations in other EU countries at the time. This problem initiated the idea of setting up a marketplace for similar lenders where they could offer their loans for financing. The idea of Debitum was born.

Who owns Debitum?

The platform is operated by the company “SIA DN Operator”. This company is in turn controlled by “SIA OFS“, whose ultimate beneficiary is the Latvian Martins Liberts. As the sole shareholder, he owns 100% of the company’s shares.

Martins is a charismatic and enthusiastic FinTech entrepreneur who is well connected and has plenty of knowledge about the credit industry. Throughout the years I have met him several times in person and we have had regular chats about the P2P environment.

Debitum Management

Latvian Henrijs Jansons is CEO of Debitum since January 2022. He has already gained some industry-specific experiences in the past. This includes his work at the Eleving Group (formerly Mogo) and his work at the Latvian P2P platform DoFinance.

Interested investors can find more information about the platform’s team members on the “About Us” page.

Business Model & Finances

Throughout the process of due diligence, investors should also have a look at the business model of a P2P platform as well as the overall financial situation. How does the company earn money? Does the platform operate profitably? And how well is the company positioned financially? In the following paragraphs of this Debitum review, you can follow-up on those questions.

How does Debitum earn money?

At Debitum, revenue is generated exclusively through commission income from the lenders who offer their loans for financing on the marketplace.

The company pursues two different models:

• On one hand, there is a classic and fixed brokerage fee, which usually averages 2% p.a. of the financed loan volume.
• On the other hand, there is an “all-in” approach, in which a certain interest rate is fixed in advance for the financed loan volume. Debitum can then offer the interest rates variably on the platform and earn money from the interest margin. According to Debitum, this is currently between 2% and 3% p.a.

The second model, which was first introduced by the lender Noviti Finance in February 2020, is currently also the predominantly used system for remuneration.

Is Debitum profitable?

Debitum is currently not profitable. The loss in 2021 was about €84,000.

To become profitable, the platform needs an outstanding loan volume of about €12 M. In this case the current cost structure of about €20,000 per month would be covered. At the end of 2022, the portfolio under management was around €7 M.

Sign Up and Bonus bei Debitum

In order to invest on Debitum, investors must meet two requirements: A minimum age of 18 years and a bank account in one’s own name. If these requirements are met, registration on Debitum can be completed in a few steps.

• Register: Enter name, email, date of birth, password, etc.
• Provide financial information: Planned investment amount, state citizenship, country of residence, tax residence, etc.
• Upload documents: Copy of identity card, proof of residence

Also legal entities have the opportunity to register on Debitum.

Bonus for New Investors

Investors have the opportunity to receive a €25 bonus from Debitum. Two conditions must be met for this: a new registration via this link and an investment of at least €1,000 on the platform. In this case, the bonus corresponds to a cashback of 2%.

Investing on Debitum

How does Debitum work and what should investors know and consider when investing on the plaform? In the following sections of my Debitum review you will find all the necessary information that you need.

The Loan Offering

Debitum has been a regulated P2P platform, controlled by the Latvian financial regulator FCMC since 2021. Since this change happened, investors no longer invest in claim rights, but in asset-backed-securities (“notes”).

These are financial instruments that are composed of a bundle of different loans. The focus of Debitum is on business loans, which are offered by international lenders.

Debitum is very careful when assessing new lenders, which is why there are only a few long-term partners on the marketplace. These include Evergreen Capital (Estonia), Flexidea (Latvia and Poland) and Triple Dragon (UK).

There is a fixed interest rate for the securities. This is amortised over the entire term as the underlying loans are repaid. The range on Debitum is between 8% and 11%. The minimum investment amount is €50.

Costs and Fees

There are no fees or hidden costs for private investors on Debitum. Neither for deposits or withdrawals, nor for the functionalities when investing on the platform.

Expected Returns on Debitum

The average interest rate on Debitum is between 8% and 11%. Personally, I have been an investor on the platform since June 2019. In this time span, my total return is 8.90%, which should be a realistic return expectation for other investors.

Debitum Auto Invest

Since the transition to a regulated P2P marketplace happened, Debitum has no longer an Auto Invest feature. Accordingly, the securities on Debitum have to be selected manually. Because the range of asset-backed securities is very limited, there are few arguments why the platform will offer an automated investment strategy in the near future.

Debitum Buyback Guarantee

All assets offered on Debitum have a buyback guarantee issued by the lenders. This means that if the repayment of a particular loan is delay for an extended period of time (usually 90 days), the lender is obliged to buy it back and cover the remaining principal, as well as the outstanding interest.

In general, this buyback mechanism has always worked well. There is an exception with the Ukrainian lender Chain Finance though, where the repayment could not be met due to the war in Ukraine. Here, the platform invokes a force majeure.

Debitum Forum

If you have questions about Debitum, other platforms or different p2p-related topics, you can join the re:think P2P Community on Facebook and engage in discussions with more than 1,000 other private retail investors.

Debitum Taxes

In principle, interest income generated by loan financing is considered investment income and must be reported as such in the tax declaration. After obtaining the investment brokerage firm license in 2021, Viainvest is now legally required to also withhold taxes on interest income that is collected through regulated financial instruments.

The applied tax rate is based on the country of tax residency and the tax information that are submitted.

• 20% for investors from Latvia
• 20% for investors outside the EU or EEA
• 5% for investors with residency in the EU or EEA (except Latvia)
• 0% for investors from Lithuania (tax certificate required)
• 0% for legal entities

When paying taxes in your county of residence, the withheld taxes can usually be deducted from the overall balance. This means that the effective taxation rate will be the same as it has been before when investing into claim rights. To get access to the relevant data, Debitum offers to download tax reports and income statements from the platform.

Debitum Risks

Investors should look very carefully at the potential risk factors when evaluating a P2P platform. What is it that investors need to be aware of when it comes to Debitum? Where are the underlying risks and how are they assessed?

Corona Crisis / Covid-19 Pandemic

Debitum, like other P2P platforms, has also been strongly affected by the spread of the Covid-19 pandemic. While it was still possible to finance a loan volume of €1.88 M in February 2020, this subsequently fell to as little as €620,000 (June 2020).

However, this development is only partly due to the declining interest on the part of investors, as many lenders were able to take out SME support loans at very favourable conditions at that time – whether through EU support programmes or through national governments. In this respect, the supply on Debitum was also severely limited.

Overall, during the Corona crisis, Debitum tried to show the highest degree of transparency regarding business and company development. The monitoring and control of their lenders can also be seen as positive, as there were no payment delays or defaults as a result. 

War in Ukraine

Unfortunately, the war in Ukraine had also a direct impact on Debitum. At the time of the outbreak of the war, the Ukrainian lender Chain Finance had an outstanding portfolio in the amount of €1.9 M on Debitum. The repayment of these loans has been frozen until further notice, citing a force majeure.

Only when the war in Ukraine is officially over, there will be a repayment of the receivables recovered by then. As of February 2023, approximately €590,000 in loans have been deposited in an independent account for Debitum investors.

Currently, it can be assumed that affected investors should expect a loss of capital.

Is Debitum a Scam?

Debitum has had to deal with scam accusations more often in the past. The background here is a crowdsale funding (token generation event) from 2017, from which Debitum emerged. The accusation: Many investors felt deceived by Debitum in the promise to give the DEB token a meaningful use. Instead, it was only intended to provide funding for a business model primarily based on a FIAT currency. 

Is Debitum a Safe Platform?

Investors should be aware of the risks involved when investing on Debitum.

• There is no deposit insurance that protects the investment in any way.
• The buyback guarantee depends on the financial situation of the issuer
• The platform is still not profitable

On the positive side, one can point out that the platform is now regulated and therefore has to meet a higher standard of compliance and transparency.

Pros & Cons

In this section I have listed the biggest advantages and disadvantages of Debitum.

Advantages

• Regulation: The platform obtained the Investment Brokerage Firm licence in September 2021. 
• Transparency: The platform is very open and transparent with regards to business processes and business development.
• Diversification: Meaningful diversification options away from traditional consumer loans.
• User-friendliness: Debitum is a simple and intuitively easy-to-understand P2P platform.

Disadvantages

• Auto Invest: On Debitum, investors can only invest manually.
• Liquidity: There are no short-term assets, secondary market or other early exit opportunities on the platform.
• Profitability: Due to the difficult market circumstances since 2020, the platform has not yet managed to reach profitability.
• Scam Accusations: Whether justified or not, the scam accusations in the room provide a negative taste.

Debitum Alternatives

There is no clear Debitum alternative. When focusing on business loans, one could think of the crowdfunding platform Crowdestor, which is not to be recommended. With regards to the marketplace model, alternatives such as Mintos (also regulated in Latvia), PeerBerry or Income Marketplace would come to mind.

You can find other Debitum alternatives on the P2P Platform Comparison page.

Debitum Community Feedback

The Debitum experiences within the P2P community are rated as slightly below average. In the 2023 community voting, a score of 2.72 was achieved with 32 votes. In 2022, the score was 2.46 and in 2021 it was 2.98.

The most popular platforms in 2023 included Esketit, Robocash, PeerBerry, LANDE and Income Marketplace.

Summary Debitum Review 2023

Overall, I would rate my Debitum experience as positive, although my interest in the platform has waned somewhat recently.

The reasons for this include 1) the high turnover in the Debitum team, which as a result suffered in a less strong communication, 2) the passive and non-transparent handling of the frozen Chain Finance assets and 3) the stagnation in the development of the platform. Limited supply, little demand, no growth of the outstanding portfolio, no profitability.

With obtaining the Investment Brokerage Firm licence, a positive signal has definitely been sent. However, the platform must now also deliver on attracting new investors as well as lenders, in order to overcome the trend of stagnation.

For investors who prefer to invest in regulated platforms and who want to diversify their loan portfolio away from consumer loans, Debitum could be an interesting alternative.

FAQ Debitum Review