What is a Property-backed Secured Investment and what do you need to know as an investor?
What is a Property-Backed Secured Investment?
A property-backed secured investment is a financing product secured by a mortgage or charge on an immovable property, which serves as collateral for the outstanding financing amount. In the event of default, the pledged property may be liquidated or foreclosed (following the necessary legal proceedings), and the net proceeds—after deducting related costs—will be used to repay investors holding the respective investment notes.
What Types of Properties Can Be Pledged?
Residential properties
Commercial properties
Industrial properties
Who Owns the Pledged Properties?
The pledged property may be owned or co-owned by:
A Director/Owner of the SME
A related entity of the SME
Who Holds the Mortgage or Charge on the Properties?
FS Capital Pte. Ltd. or an appointed agent/custodian will hold the mortgage or charge on the property as security on behalf of all investors
How is the Investment Secured?
The secured notes are backed by Singapore-based residential, commercial, and industrial properties owned by the SME or its Director(s)/Owner(s).
Funding Societies primarily accepts a first mortgage or charge on the property.
Our panel lawyers ensure the proper creation and registration of the mortgage or charge.
FS Capital Pte. Ltd. holds the mortgage/charge on behalf of investors.
What is Loan-to-Value (LTV), and How Does It Affect Financing?
LTV (Loan-to-Value) is a ratio used to determine the maximum financing amount an applicant can obtain against the valuation of the pledged property.
For example:
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Can a Pledged Property Have Existing Loans?
Most pledged properties are unencumbered (free of existing loans). Existing loans will be redeemed prior to Funding Societies placing the mortgage or charge on the property
How Do You Ensure the Property Is Not Mortgaged Multiple Times?
A title search is conducted with the Singapore Land Authority (SLA) by appointed lawyers before accepting a property as collateral.
Once mortgaged with Funding Societies, the property cannot be further mortgaged to another financier or lender without our consent.
What Are the Expected Returns?
Returns for property-backed secured investments typically range between 4% - 8% per annum (simple interest basis). Investors can refer to the fact sheet of each investment note for specific details.
Why Are the Returns Lower Than Business Term or Invoice Financing?
Funding Societies follows a risk-adjusted return approach.
Since these investments are asset-backed, the likelihood of recovering the principal and interest is higher, as the property can be liquidated or foreclosed in case of default.
SMEs are also subject to late interest charges if they delay repayment, which is fully credited to investors.
What Is the Minimum Investment Amount?
The minimum investment typically starts at SGD 20, though it may vary by note. Investors should review individual investment opportunities for specific details.
What Is the Loan Tenor?
The maximum tenor is capped at 12 months, unless extended.
What Are the Fees Involved?
Service fees remain at 18% of the interest earned.
Example: If you earn SGD 100 in interest, Funding Societies retains SGD 18, and SGD 82 is credited to your account.
Are Late Interest Charges Applicable?
Yes, late interest is charged at 0.1% per day on the overdue principal amount.
What Are the Risks?
Market Risk – Property valuations may fluctuate during the note tenor.
Liquidity Risk – In case of default, the principal may be tied up for longer than expected.
When Is a Note Considered in Default?
A note is considered in default if payments are overdue for 90 days.
What Happens If the SME Defaults on Payment?
Debt recovery actions will be initiated, including:
Letters of demand
Legal proceedings
Foreclosure of the property (handled by legal professionals)
What If the Property Sale Proceeds Are Insufficient to Repay the Note?
Any outstanding balance after selling the property will be covered by the SME, Personal Guarantor(s) (PG), or Corporate Guarantor(s) (CG).
What If the Sale Proceeds Exceed the Outstanding Amount?
Any surplus proceeds after full repayment will be returned to the SME.
How Long Does It Take to Liquidate the Property?
Property auctions typically take 6 months to 1 year, with sale proceeds used for investor repayment.
All costs incurred during this process will be either paid by the SME or deducted from the proceeds.