Wisefund E-mail: Wisefund Update

April 22, 2020

E-mail from Wisefund

Wisefund has been closely monitoring the economic impact of Coronavirus on European companies, and more importantly, on the borrowers who have obtained loans through Wisefund. The spread of the virus is likely to have severe consequences on SMEs, from slowdowns in production to unstable cash flows and future financial difficulties.

We all want those businesses to withstand this time and recover quickly. As many of you noticed, some of the current borrowers have missed their payments due, and that is the direct result of the uncertainty of the future.

Up to date we hope you’ve noticed, Wisefund has never made hasty decisions, and this case is no different. Though on this date, after extensive talks with borrower representatives and our Estonian legal advisers, we’ve come to a conclusion where we have to put our focus on actions that will benefit all parties involved in the long run.

Though we’re not planning to do that without additional approval from you, end lenders whose funds are at stake.

Well, you have to understand – the future of those businesses is at stake as well, and here Wisefund will function as a mediator between lenders and borrowers putting maximum effort and resources to benefit of all. We also acknowledge that the way we deal with this will surely put a foundation to our further operations, future, and trust from you, the crowd who trusts the funds to SMEs we choose.

One of the main options we’re planning to implement is to extend the maturity of loans by 2-3 months (the amount depends on how long pandemic restrictions will be kept active), ease the burden of current interest payments for months of April, May and possibly June 2020. In our opinion, this is the best chance of getting your investment back – supporting businesses to overcome the crisis.

While one of the approaches was to make this case by case solution to borrowers who are in need of it, extensive analysis and brainstorming have shown that even if some of the businesses don’t appear to have immediate issues in their operations, the possibility of that occurring in near future is very high, and providing same terms for all of the borrowers will show equal and undivided care and support towards everybody.

Certainly, you are not the one who should suffer in this case, and nobody is amending any contractual return on the capital you invested. Even banks who impose credit vacation to their retail borrowers, they don’t offer it for free. Well, they offer changes without commissions, but the interest is calculated as always. The same will apply here – if the maturity of the loan is extended, interest calculation will happen the same way – your schedules will be updated accordingly.

Though the question remains, how interest payments due should be managed? It’s understandable that during the current situation for businesses to be able to restructure their current business plans, understand the further plan of actions and get on a path of recovery, ease on monthly payments would be a great help. (please note, for you those might be 1, 2, 10, maybe 50 EUR, and it might not make a big difference in the short term, but for the borrower, it is a sum of all interest payments due and this could be a big difference-maker in the long run).

Let’s touch the topic of current late payments. 30% of the borrowers didn’t fulfill their obligations on March 31, 2020 and have missed their payments for almost one month now. Each case is both, different and the same – all have been affected due to Coronavirus. I.e., many articles are written about how hundreds of million tulips are destroyed in the Netherlands due to falling demand amid COVID-19, direct impact on one of our borrowers. For others, there are problems getting final payments from customers who have suspended payments until further notice, and there are simply no funds to release to cover obligations. And then there are those who just have a 90% drop in the turnover and have to restructure their business with immediate effect or just fill for bankruptcy. Currently, as to our knowledge (and we’re not just believing but monitoring it closely as well through external sources), none of the borrowers have filed for insolvency, and we hope for recovery instead of being involved in insolvency processes for years.

For your information, in Estonia, the bankruptcy law changes were approved recently, and thankfully it’s in our favor where the moratorium on creditor insolvency applications was not implemented. The only change is that debtor management members are exempt from the obligation to file for bankruptcy during the state of emergency, the deadlines for reversal claims of harmful transactions were also extended in the same proportion. So overall no damage to creditors and some relief to debtors. But this concerns Estonia, and while our current approach is to further on keep a major part of the portfolio locally, we’re still platform supporting businesses from various European countries, and each of them have their own laws, restrictions, and procedures on submitting claims.

What we are certain of, currently, submitting claims in any place will be a long road to go, and there are many factors behind it. Simply put, in most of the countries there’s work from home or forced leave due to imposed restrictions, and this means less workforce to take care of the applications. Then there’s concentration on COVID-19 matters, and all other cases are being put on the end of the waiting list. Probably, most of you have faced this kind of delays already. And this simply means – all such actions from our side currently can do more harm than protect your investment.