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Crowdfactoring is a fixed-return investment mechanism that offers savers more interest than Treasury bills
For the first time this year in August, the interest offered on Treasury bills fell compared to the previous month’s auctions. This was due to the high demand for a product that attracts the attention of thousands of small savers. Faced with this scenario, retail investors can resort to an alternative investment mechanism to public debt, such as crowdfactoring.
In this month’s auctions, the Treasury managed to award six-month and one-year bills at an average interest rate of around 3.6%. In the case of the three-month bills, the yield was one-tenth of a percent lower, at 3.5%. On the other hand, on Inversa Invoice Market’s crowdfactoring platform, the average return on invoices last year was 7.9%, making it a desirable alternative investment mechanism for small investors.
Below, we will analyze why retail investors can bet on crowdfactoring to obtain a return on their savings and complete their investment strategies.
Treasury bills, a safe product to fight inflation
Why has the demand for Treasury bills soared recently? The high inflation suffered by Europe in recent years has encouraged thousands of people on the sidelines of the investment sector to decide to make their savings profitable and thus avoid their savings being devalued by the increase in the cost of living.
In addition, the low-interest rates banks offer for time deposits have also encouraged savers to opt for Treasury bills.
This month, the average yield on term deposits of up to one year in Spain stood at 2.22%, more than one point below the interest on Treasury bills and a great distance from an alternative investment mechanism such as crowdfactoring.
Precisely, the low-interest rates offered, for the time being, by time deposits, the investment product par excellence of savers who do not wish to design investment strategies proactively, has been the reason why many small investors have turned to the Treasury auctions, trusting, mainly, in the payment security offered by the State.
This has triggered an extraordinary increase in the demand for these products, doubling their supply and lowering the interest that can be obtained.
An investment mechanism for retailers who have run out of bills
Given this scenario, crowdfactoring has become an ideal alternative investment mechanism for small savers who do not have large amounts of money or extensive experience in the investment sector. Why? On the Inversa platform, the minimum investment is only 20 euros, and the investment mechanism is effortless to operate:
- Companies in the real economy upload to the marketplace the invoices they have issued to their customers but have not yet been paid to finance them and obtain liquidity in the short term. In exchange for funding, investors can get a fixed return, for example, 8% of the amount invested.
- Investors can view all available invoices, analyzing the term, interest, credit rating of the debtor company, etc.
- Once an invoice is financed, investors receive the interest in advance.
- Investors get their money back when the debtor business pays the invoice amount.
In this way, those small savers who have not been able to acquire a Treasury bill due to the high demand for these products can invest their money through this investment mechanism.
Likewise, retail investors who wish to obtain a higher return than that currently offered by the Treasury can also resort to a crowdfactoring platform such as Inversa to receive higher interest rates for their money than those offered by banks through term deposits.
A product as easy to understand as Treasury Bills
If there is one factor that has traditionally kept small savers away from the investment sector, it is the complexity of some financial products, such as futures or derivatives. As well as the need for a high level of knowledge to successfully manage products such as stock market shares.
In contrast, Treasury bills have been characterized as simple products to understand and accessible to the entire population. The State must finance itself and issue public debt with a fixed repayment term and interest for investors. In this way, thousands of investors contribute to providing the State with the financing it needs.
In a certain way, crowdfactoring is an investment mechanism that works similarly. Instead of the State needing financing, companies in the real economy wish to obtain liquidity. To this end, they offer their uncollected invoices in exchange for fixed interest rates. In this way, dozens of small savers invest in an invoice to obtain the agreed return.
In both cases, the issuer (the State or a company) obtains the liquidity it needs to make investments, meet expenses, etc. And the investors get a return on their money.
Short-term and fixed-yield investments
Likewise, three-, six- and twelve-month Treasury bills and invoices are short-term, fixed-return investments.
Moreover, in the case of the Inversa Invoice Market, the maturity of the invoices offered by the companies is, at most, 180 days, i.e., six months. And the usual term is usually shorter, around 90 days, as is the case with three-month bills. Hence, small savers who prefer to make short-term investments may find crowdfactoring an investment mechanism ideally suited to their investment strategies.
Moreover, compared to the uncertainty associated with variable return investments, such as shares, treasury bills, invoices, or time deposits, it offers the certainty of knowing how much interest will be earned when the operation is carried out.
On the other hand, it is worth highlighting an essential aspect that differentiates crowdfactoring from Treasury bills, and that is related to interest and time: when the return is collected.
In the case of Treasury bills, interest is paid when the money invested is returned. In the Inversa Invoice Market, retail investors are paid the interest on the operation in advance.
Higher profitability and full investment management autonomy
The fact that interest is charged when the financing of an invoice is completed and not when the debtor business pays it adds to the main attraction of crowdfactoring as an alternative investment mechanism to Treasury bills: its higher profitability.
If interest rates on term deposits narrowly exceed 2% and the yield on Treasury bills falls due to high demand, invoices are becoming an increasingly interesting investment mechanism for retail investors.
In addition, Inversa’s platform allows users to manage their investments freely. Not only do they have all the critical data on each bill, but they can also design proactive investment strategies and turn the act of investing into a daily activity, thus maximizing their savings and boosting their investments.
Risk-averse investors can also bet on crowdfactoring
What about those savers who only invest in Treasury bills because it is a product that offers extraordinary security? Isn’t crowdfactoring an investment mechanism for them? Of course, it is.
First, Inversa makes it possible for companies to issue insured invoices. In other words, an insurance company guarantees the repayment of the money invested. These invoices offer a lower return but may suit more conservative or risk-averse investors.
Secondly, it is essential to note that the marketplace often offers invoices that public administrations, e.g., municipalities, must pay. So, these invoices provide an extra guarantee to investors who have more confidence in the payment capacity of public institutions.
An investment mechanism to support companies in their search for finance
Many people opt for an investment mechanism such as Treasury bills because they know that their money will be used, among other things, to finance public services such as healthcare, education, or infrastructure.
Using crowdfactoring as an investment mechanism means helping companies in the real economy to obtain liquidity to face the challenges and opportunities of the present and future.
Many factors come into play in a company’s success, and one of the most important, though often overlooked, is its ability to finance itself. Companies need liquidity to cope with turbulent times, and money is vital to funding the growth of a business and its consolidation.
Retail investors who are betting on invoices from actual economy companies are helping provide them with short-term liquidity and offer an alternative financing channel to traditional banking institutions. These businesses are the foundation on which the productive fabric is based, create millions of jobs, generate wealth, and are essential in innovation.
In short, crowdfactoring is an alternative investment mechanism to Treasury Bills, which has many of the virtues of the latter and, in addition, offers a higher return and is charged in advance, as well as the possibility of contributing to the success of companies in the real economy.