Although Q1 in factoring is usually a low season and current numbers are also affected by extraordinary circumstances, we can say that our volumes have been at least 20% higher than they were in the same period last year. Based what we currently have seen, we are predicting volume growth also in Q2, as more and more companies looking for factoring turn to us. Changes in interest rates also indicate an increase in demand. While in January-February the average annual interest rate for each euro invested was 8.93% and 9.32%, March average interest rate was 10.37%.
Our requirements and standards have worked well
A large influx of new leads may be tempting, but Investly will not lower its standards. Before allowing any new Invoice Seller to use our service, we always consider the financial characteristics, background, history, needs, and various risks of both Seller and Buyer. In doing so, we have created a dense filter, for example 30% of last year's new requests received a negative response simply because of their poor credit picture. Success in our mind is, when risks of investing are well managed, while at the same clients are provided with a high quality and fast service.
This filter has worked well. The last invoices financed on 2019 will be paid back by the middle of April – the monetary amount of these invoices is 0.048% of all the investments made in Estonia last year. The likelihood of those invoices not being paid is low, so it's already possible to make a preliminary conclusion of the proportion of problematic invoices from last year. Altogether 0.082% of the invoices funded in Estonia last year are defaulted or are likely to default. From the total monetary amount of investments made in Estonia in 2019, the outstanding debt of these investments is 0.78%. These are primarily invoices arising from two different Seller / Buyer relationships. We estimate that one of them has a 10% recovery and on the other will have a 100% recovery within a year. As a result, the proportion of 2019 defaulted invoices should fall to 0.049% from the total amount of invoices and to 0.18% of the total monetary investment volume.
Managing risk with short-term investments
Undoubtedly, the virus outbreak will raise many questions about the near future of crowdfunding. While several crowdfunding platforms have created secondary markets to allow investors to liquidate their investments if needed, we have seen that with the overall market situation changing, the liquidity of the secondary market will take a heavy hit or might even disappear. Investly, however, is different - investors can make short-term investments, as the due date for most of the invoices is less than 45 days. Of course there are also no restrictions for investors withdrawing funds and investing on our platform is free. These characteristics allow and create opportunities for investors to make short-term investments and manage their risk better.
From a larger economic point of view - we do have a different market situation right now, and we will certainly take it into account in our processes and activities. In a turbulent economy, creditors are reducing possibilities available to entrepreneurs. Although it may offer many business opportunities to us, we will continue our conservative approach in the future. In the current situation, investors certainly have many opportunities as well. As our platform finances invoices on an auction, where demand and supply determines the price, we have seen some very attractive annual interest rates offered to investors in recent weeks.