All you need to know about Profitus: Interview with Monika Lencickaite, CMO at Profitus

If you want to start investing in real estate projects and make returns up to 15% p.a. you definitely have to explore investment opportunities offered by the real estate crowdfunding platform from Lithuania Profitus!

Today we will have an interview with Chief marketing officer, Monika Lencickaite at Profitus and learn more about how Profitus helps people make money by investing in real estate.

Monika thank you for joining today, please tell us how Profitus works and what investment opportunities does platform offers.

Profitus acts as an intermediary between investors and business owners seeking to implement their business projects. We carefully evaluate and select business projects, and then offer them to our investors. The entire administration process is carried out by a team of professionals consisting of real estate, risk management, legal, financial analysts and other specialists.

Key Investment Parameters on the Profitus Platform:

Duration: Projects are typically financed for 3-36 months, with most projects being financed for 9-12 months.
Collateral: Real estate collateral is used as collateral in all projects. There are also projects with legal entity guarantees.
Minimum Investment: 100 euros
Fees: No administrative fees are charged to investors on the platform.
Pledged Asset: This asset is appraised separately by both internal and external independent appraisers to ensure that the pledged asset value is in line with market value.
Investment return. The annual interest rates for projects offered on the Profitus platform range from 6.5% to 15%. The average return is 10%, but considering all increased interest rates, the average real return can reach around 12% per annum.

In simple terms, the process is as follows:

Businesses seeking financing for their business plans approach us.
We conduct a thorough screening of projects, using not only our accumulated knowledge but also a unique algorithm we have developed. The algorithm assesses a multitude of criteria and helps us decide whether a project is suitable for our platform.
Based on the algorithm's data, the risk management department assigns a rating to the project. Currently, the platform uses 10 different risk categories - from A+ to D. A+ rated projects are the least risky, while D rated projects are the riskiest, but also with the highest interest rates. Well, you will be able to see the changes on the Profitus platform in June, as we will be switching to an international model, taking into account the needs of experienced market participants. These changes will further tighten and strengthen our project selection criteria. Although, to be honest, we are already receiving feedback from investors that we are quite strict in our project evaluation. Of course, we take this as a compliment.
We also have E and F ratings, however, these do not meet our platform criteria as they are too risky. We strive to maintain a healthy loan portfolio with the lowest possible percentage of delinquent and recoverable loans. Overall, our risk tolerance is quite low, and we only accept low-risk projects. We continuously monitor the weighted risk rating of our active portfolio and strive to keep it within the norm. We prioritize portfolio quality, which builds trust and demonstrates the Platform's commitment to selecting only reliable and high-quality projects.
As a result, only 1 out of 5 projects from businesses that contact us meet our requirements and are published on the platform. This strategy pays off, as our loan portfolio is currently very reliable - only 2.13% of loans are delinquent and 0.88% are in default. To date, all investors have recovered their full investments and have not suffered any losses.

We are constantly evolving:

In order to improve the experience of both investors and project developers, we are expanding the range of services we offer and financing various types of loans, taking into account the needs of real estate developers and allowing investors to diversify their investments. So on the Profitus platform, you can invest in refinancing, real estate development, acquisition, rental and renovation loans.

In the early stages of our operations, when the investor community was small, we mainly financed residential projects (houses, apartment buildings and quarters), however, as our financing capabilities have grown and more and more large investors, legal entities, banks and credit unions have joined the community, our financing capabilities have grown much faster, so we are now increasingly financing commercial projects, lending not only in Lithuania but also in Estonia, Spain and Latvia, for example, the expansion of the PRO BRO tunnel car wash in Latvia.

Additional points to mention:

Profitus has a strong track record, with a 0% investor loss.
The Profitus platform is regulated by European regulations and supervised by the Bank of Lithuania. We are also listed in Germany, Latvia, Estonia and Spain. This means that we operate not only legally but also under the supervision of institutions.
While our risk tolerance is low, we do have a separate, riskier product for those who want to earn more - where you can earn 12-15% annual interest.
Profitus has a team of experienced professionals with a proven track record in the real estate and finance industries.

No doubt Profitus receives hundreds of loan applications but selects only a few best of them, so could you please guide us through the selection process?

Profitus has established a stringent selection process to ensure that only the most viable and promising projects are funded on our platform. This approach safeguards our investors' interests and minimizes the risk of defaults.

Key Selection Criteria

When evaluating projects, Profitus carefully considers a comprehensive set of factors, including:

Business Plan: We thoroughly assess the project's business plan, evaluating its feasibility, market potential, and potential return on investment.
Developer Reputation and Experience: We check the developer's track record, expertise, and financial standing to ensure they have the capabilities to successfully execute the project.
Economic and Geopolitical Conditions: We analyze the economic and geopolitical climate of the project's location to assess potential risks and opportunities.
Stress Testing: We conduct stress testing to evaluate the project's resilience under adverse economic conditions,ensuring the developer's ability to fulfill their financial obligations.
Collateral: We meticulously evaluate the collateral offered, typically first-rank mortgages, to ensure its value adequately covers the loan amount. The LTV (loan-to-value) ratio is typically kept below 70% to maintain a healthy margin of safety.

Delving into Project Owner Creditworthiness

Beyond the project itself, Profitus delves into the project owner's creditworthiness to assess their ability to repay the loan.This involves:

Financial Information Gathering: We gather comprehensive financial information from the project owner,including financial statements, tax returns, and debt obligations.
Public and Paid Database Checks: We conduct thorough checks through public and paid databases to verify the project owner's financial history and reputation.
Structural and Financial Analysis: We analyze the project owner's financial structure, profitability, and cash flow to assess their overall financial health.
Audited Financial Statements: Whenever possible, we obtain and review the project owner's audited financial statements for the past three years, prepared under IFRS standards.
Alternative Financial Evaluations: For cases where audited financial statements are unavailable, we accept financial evaluations prepared by certified professionals adhering to strict quality assurance standards.
Credit History and Legal Proceedings: We investigate the project owner's credit history and any past legal proceedings to identify potential red flags.
Industry Expertise and Experience: We assess the project owner's knowledge and experience in the relevant industry and their track record in successfully executing similar projects.
Financing Objectives and Usage: We evaluate the project owner's financing objectives, the need for funds, and the planned use of the proceeds, ensuring alignment with the project's goals.
Collateral Valuation and Assessment: We meticulously appraise the collateral offered, considering its intrinsic value, marketability, and potential price fluctuations.
LTV Ratio Analysis: We closely monitor the LTV ratio to ensure it remains within acceptable risk parameters.
Project Owner's Operating History: We evaluate the project owner's operating history and track record to assess their ability to manage the project effectively.
Third-Party Evaluations: We consider third-party evaluations and ratings from reputable sources to gain additional insights into the project's viability.
Overall Project Assessment: We conduct a comprehensive assessment of the project itself, evaluating its rationale,alignment with the project owner's business strategy, and potential impact on stakeholders.

Conclusion

Profitus' rigorous project selection process ensures that only the most promising and well-structured projects are presented to our investors. This approach minimizes risk, maximizes potential returns, and upholds our commitment to providing a secure and transparent investment platform.

How do you make sure that investors provided money is spent on the intended purpose and is well spent?

Profitus employs a comprehensive project monitoring and investor protection strategy to safeguard the interests of our investors throughout the project lifecycle.

Active Project Management

Ongoing Communication: Our project managers maintain regular communication with developers to ensure project progress aligns with expectations.
Site Visits: Regular site visits allow us to directly observe project progress and identify any potential issues early on.
Targeted Fund Utilization: Prior to loan disbursement, we collaborate with project owners to establish a clear plan for fund utilization, ensuring funds are directed solely towards project completion.
Collateralized Protection: In the event of project delays or misappropriation of funds, we have the recourse to seize the pledged real estate collateral, safeguarding investor capital.

Stage-Based Loan Disbursement

For projects involving multiple stages, Profitus implements a rigorous stage-based loan disbursement process:

Performance Evaluation: After each stage of project completion, we conduct a thorough evaluation to assess whether the developer has fulfilled the agreed-upon deliverables.
Conditional Funding Release: Further funding is contingent upon satisfactory performance at each stage, ensuring that funds are allocated responsibly and project milestones are met.

Conclusion

Profitus' proactive project management and investor protection measures provide multiple layers of safeguards, ensuring that our investors' funds are utilized effectively and responsibly throughout the project lifecycle. Our commitment to transparency and accountability remains at the forefront of our operations, fostering trust and confidence among our valued investors.

How do you protect collateral value during the landing period?

To safeguard investor interests and protect the value of collateral, Profitus mandates comprehensive insurance coverage for all projects seeking funding on our platform.

Mandatory Collateral Insurance

Developers seeking financing on Profitus must ensure that the pledged collateral is adequately insured against a range of potential risks. Such as fire, natural forces, and other risks, with general civil liability insurance.

Profitus as Beneficiary

Profitus is designated as the beneficiary of the collateral insurance policy, acting as the representative of investors and overseeing the entire insurance process. This ensures that in the event of a loss, the insurance proceeds are directed towards protecting investor interests and restoring the value of the collateral.

Developer's Insurance Obligations

The developer is responsible for procuring and maintaining the required insurance coverage throughout the project lifecycle. They must provide Profitus with evidence of valid insurance policies and maintain regular communication regarding any policy changes or renewals.

Conclusion

Profitus' strict insurance requirements serve as a crucial safeguard for our investors, ensuring that their investments are protected against a variety of potential risks. By mandating comprehensive collateral insurance, we minimize potential losses and uphold our commitment to investor protection.

Profitus has recently implemented a latest version of the loan documentation package that includes several additional measures to safeguard the collateral. These measures encompass stricter requirements for mortgaged properties (e.g.,valuation standards), monitoring of value preservation throughout the loan agreement period (including factual oversight of financed real estate projects under construction), and borrower obligations towards Profitus. These obligations include providing supplementary documents, valuation reports, and obtaining Profitus consent for specific actions related to the mortgaged property.

Furthermore, Profitus has recently established new positions within the organization, such as loan administrator,specifically dedicated to overseeing loan agreement execution at various stages. The risk management team has also been recently bolstered by the addition of an internal property valuation position.

Overall, Profitus management dedicates a significant amount of time to monitoring financed projects, focusing on value changes (typically gradual increases).

How do you monitor project progress to make sure that the loan will be repaid on time?

Profitus employs a rigorous multi-pronged approach to debt prevention, safeguarding investor interests and minimizing the risk of defaults on our platform.

Comprehensive Pre-Funding Assessment

Prior to project listing on our platform, Profitus conducts a thorough evaluation of the project owner's financial standing,creditworthiness, and overall ability to fulfill their financial obligations to investors. This assessment encompasses:

Credit History and Financial Analysis: We scrutinize the project owner's credit history, financial statements, and debt-to-income ratio to assess their financial stability and repayment capacity.
Business Viability and Market Potential: We evaluate the project's business plan, market potential, and projected profitability to ensure its long-term viability and ability to generate sufficient returns for investors.
Collateral Valuation and Risk Assessment: We meticulously appraise the collateral offered, considering its intrinsic value, marketability, and potential price fluctuations to mitigate potential losses.

Robust Contractual Safeguards

Profitus' investment agreements are meticulously crafted to clearly define the rights and obligations of both investors and project owners, ensuring transparency and accountability throughout the project lifecycle. Key provisions include:

Clear and Specific Obligations: The project owner's obligations to investors are clearly outlined, including repayment schedules, interest rates, and performance benchmarks.
Consequences for Breach of Contract: The agreement stipulates the consequences of any breach of contract,including default penalties, legal recourse, and potential loss of collateral.
Dispute Resolution Mechanisms: Effective dispute resolution mechanisms are established to address any disagreements that may arise between investors and project owners.

Continuous Monitoring and Proactive Intervention

Profitus maintains ongoing monitoring of all projects on our platform, closely tracking project progress, financial performance, and compliance with contractual obligations. We proactively address any potential issues that could jeopardize investor repayments, implementing preventive measures as needed.

Regular Financial Reporting: Project owners are required to submit regular financial reports to Profitus, providing transparency into project finances and enabling timely identification of potential risks.
Early Warning Indicators: Profitus employs sophisticated risk management tools to identify early warning indicators of potential defaults, allowing for early intervention and corrective actions.
Communication and Collaboration: Profitus maintains open communication channels with both investors and project owners, fostering collaboration and ensuring timely resolution of any concerns.

Conclusion

Profitus' unwavering commitment to debt prevention safeguards investor interests, minimizing the risk of defaults and fostering a secure and transparent investment environment. Our comprehensive pre-funding assessment, robust contractual safeguards, and continuous monitoring practices provide multiple layers of protection for our valued investors.

If the worst thing happens and the borrower defaults how will you help investors?

Here is a summary of the default process and how Profitus protects investor interests in the event of a borrower's default:

Default Process

Late Payments: Profitus closely monitors borrowers' payment obligations and sends reminders to borrowers who are late in making their payments.
Default Notification: If a borrower fails to make a payment within the specified grace period, Profitus sends a formal default notice to the borrower.
Negotiation and Recovery Efforts: Profitus attempts to negotiate with the borrower to resolve the default and recover the outstanding amount. This may involve restructuring the loan terms, extending the repayment period, or seeking additional collateral.
Legal Action and Enforcement: If negotiations fail, Profitus may initiate legal action to enforce the terms of the loan agreement and recover the outstanding amount. This may involve pursuing legal remedies such as foreclosure on collateral or initiating bankruptcy proceedings.

Investor Protection Measures

Comprehensive Due Diligence: Profitus conducts a thorough due diligence process on all potential borrowers to assess their creditworthiness and ability to repay the loan.
Collateralization: Profitus requires borrowers to pledge collateral to secure the loan, which can be used to recover the outstanding amount in case of default.
Rigorous Contractual Provisions: The loan agreements between Profitus and borrowers include clear and enforceable terms that protect investor interests in case of default.
Dedicated Debt Collection Team: Profitus maintains a team of experienced debt collection professionals who are responsible for managing defaulted loans and recovering outstanding amounts.
Transparency and Communication: Profitus keeps investors informed throughout the default process, providing regular updates on the status of recovery efforts.

Additional Considerations

Timeframe for Insolvency or Collateral Sale: The timeframe for initiating insolvency proceedings or selling collateral varies depending on the specific circumstances of each case and the applicable legal jurisdictions.
Legal Support: Profitus has a team of in-house legal experts and collaborates with external legal counsel to ensure compliance with legal requirements and protect investor interests.
Third-Party Involvement: Profitus may engage third-party specialists, such as debt collection agencies or insolvency practitioners, to assist with specific aspects of the default process.
Out-of-Court Restructuring: Profitus may explore out-of-court restructuring options with borrowers to avoid the formal insolvency process and expedite debt recovery.

Conclusion

Profitus is committed to protecting investor interests and has implemented a robust default management framework to address borrower defaults effectively. By employing a combination of preventive measures, proactive recovery efforts,and legal expertise, Profitus strives to minimize investor losses and maximize debt recovery in the event of borrower defaults.

What are other tools and processes Profitus is using to protect investors?

Since our inception, real estate mortgages have served as the bedrock of our platform, ensuring the safety and security of investor funds. In the event of project setbacks, real estate assets remain tangible and can be liquidated through auctions to recover investments for our valued investors.

Additional Security Measures: Personal Guarantees

While real estate mortgages form the primary security mechanism, our platform also incorporates personal guarantees for certain projects. These guarantees, typically provided by the borrowing entities, their parent companies, or individuals,serve as an additional layer of risk mitigation.

Risk Mitigation vs. Investment Protection

It is important to note that personal guarantees do not guarantee the absolute protection of investments. However, they do serve to reduce the overall investment risk by providing additional recourse for potential losses.

Our Commitment to Investor Security

At the heart of our operations lies an unwavering commitment to safeguarding investor interests. We employ a comprehensive approach to risk management, leveraging real estate mortgages, personal guarantees, and rigorous due diligence to minimize potential investor losses and maximize their returns.

Please tell us about Profitus future development plans.

The year 2024 promises to be a transformative one for the Profitus platform and the entire Profitus investor community.We are thrilled to announce a series of groundbreaking enhancements designed to elevate your investment experience to new heights.

Automated Investing: Personalizing Your Investment Journey

Our revamped automated investing tool empowers you to craft personalized investment strategies that align with your unique goals. No longer are you limited to simply selecting an investment amount; soon it will be possible to define a multitude of criteria to tailor your investment approach.

Imagine the convenience of setting up your investment preferences once and letting the tool handle the rest. With our enhanced automated investing, you can effortlessly invest in projects that match your criteria, whether it's projects based in Lithuania, those with an A rating, offering an 8% interest rate, or a 6-month term. This level of customization brings passive investing to a whole new level, simplifying and streamlining your investment journey.

Secondary Market: Enhancing Liquidity and Flexibility

The highly anticipated secondary market is set to launch alongside our automated investing tool, marking the return of this popular feature following its temporary suspension for adaptation to our new crowdfunding license. The secondary market will provide investors with greater liquidity and flexibility, enabling them to buy and sell project shares at their convenience.

Mobile App: Investing at Your Fingertips

In our unwavering commitment to enhancing the user experience, we are excited to introduce our mobile application,elevating crowdfunding platforms to a new dimension of accessibility. With our mobile app, you can effortlessly invest,stay updated on the latest news, and manage your account seamlessly.

As a pioneering Fintech company, we are constantly exploring innovative ways to leverage technology to deliver an exceptional customer experience and empower you to make informed investment decisions that shape your financial future.

Monika, thank you very much for joining and answering all the questions, I believe after reading this Profitu's existing and new inventors feel safer and more keen to invest.

Dear investors, I hope you now understand better how Profitus works and how it helps you protect your investments, but remember when investing there are always risks of losing all funds thus you should always conduct your own analysis.

Start investing on Profitus and make up to 15 % p.a. and rate your experience and leave a review - Profitus review.

Have a good day and we wish you successful investing!

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