Author Topic: Kickfurther - Earn 20% Annualized Returns  (Read 10205 times)

Michael in ABQ

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Kickfurther - Earn 20% Annualized Returns
« on: November 12, 2019, 07:57:04 PM »
Bottom Line Up Front: Invest in inventory for eCommerce/retail businesses with KickFurther and earn up to 20% annualized returns for 4-8 month investments.

Kickfurther is a platform that was created to pickup where Kickstarter leaves off. Growing companies need funding to purchase inventory for resale. If they're eCommerce businesses or relatively new they'll be unable to get funding from a bank and have to rely on high-interest loans (25%+ annual interest rates) from Amazon, Kabbage, or other providers. eCommerce is a cash-intensive business because you have to purchase the inventory, wait for it to be produced, wait for it to be shipped (if it's from China that can be 30+ days), get it into whatever distribution channel, sell it, and finally get your original cash back plus profit. Meanwhile, you've had to place another order or two so you don't run out of inventory waiting to get paid for the first production run to sell through. This process from first deposit to finally getting paid for the last product selling can take 6+ months. So if you have $50,000 in product you might double or triple your investment but before you even sell through that production run you need to order more which means you might need $150,000 in cash for that year, a significant portion of which is tied up in inventory - not leaving enough cash to fund further growth.

Kickfurther lets businesses crowdsource funding and they offer very attractive returns with relatively low risk. They've been operating for a few years and they've gotten down to a delinquency rate of about 1% by improving their vetting process. The requirements for businesses seeking funding include $250k+ in revenue, generally a personal guarantee, and they limit the amount of funding until the business has established a record of paying it back on time. Typically these businesses offer 5-10% returns for about an investment that might be 4-8 months, so 10-20% annualized. That's still cheaper than using a factoring service or loans from online lenders.

For legal purposes you are purchasing inventory on consignment, not investing directly in the company. When the company raising money sells that product, they pay you back with a pre-specified amount of profit. Each co-op funding is setup a little differently. The minimum investment might be $25 for a pack of products or it might be $1,000. For instance there is a beauty supply company that recently raised money for buying a hair removal product. The price for one package is $864.99. The profit is $81.69 per package for a return of 9.44% over an expected period of 10.5 months, or 10.78% annualized. A co-op I recently invested in had a price of $24.86 per pack with a profit of $2.53 for a return of 10.17% over an expected period of 6.2 months, or 19.68% annualized.

One thing to note is that the supply of investors outweighs the supply of companies raising money. So those that offer the best deal typically fund in a couple of hours, or sometimes in a couple of minutes if they've got a high return or a short payback period (i.e. 20% annualized or payback in 2-3 months instead of 6-10). Each deal opens at 5 PM EST but you can also reserve a spot beforehand on a limited number of deals.

A bonus is that you can use a credit card for funding the purchases so it's a great way to manufacture spending for earning credit card rewards.

I've invested about $3,000 so far in 8 deals and should get a profit of about $250 on those deals - most of which start paying out in January and will be completed a few months later. The average payback timeline for those deals is 5.1 months and my weighted average return is expected to be about 22% on an annualized basis. Also, there are usually several payback periods so you aren't waiting the whole time to get your money back. Usually the first payout is in a few months then every 2-4 weeks after that.

The worst case scenario is the company can't sell the product and you end up getting possession of it (very rare). Usually if something goes wrong (sales aren't as fast as anticipated, production delays, etc.) instead of getting paid back in 6 months it takes 9 and so that 20% return becomes 13%. In some cases the return will actually be higher because they sell through faster and payback quicker. You can browse through every single past deal to see the results https://www.kickfurther.com/coops 

Update: The second deal I funded back in September just made the final payment.
"You funded $306.12 of inventory and just received your last payout for a total of $335.62. You earned $29.50 of profit in 5.1 months, an annualized 23%."

If you found this information helpful and are interested in signing up I'd appreciate if you used my referral code in my signature. If you do we each get $10.
[MOD EDIT: Links removed. PM OP if you want their referral code.]
« Last Edit: April 18, 2020, 02:49:23 PM by Michael in ABQ »

BECABECA

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #1 on: November 13, 2019, 12:10:55 PM »
While not for me (I’m too lazy to deal with anything but passive Vanguard indexes nowadays), its interesting info so thanks for sharing.

I think some people from the Lending Club experiment might want to try this out, especially as things over there seem to have fizzled out and they may be looking for a new experiment. You should mention it over on this post:
https://forum.mrmoneymustache.com/investor-alley/lending-club-time-to-panic/

Padonak

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #2 on: November 13, 2019, 12:23:44 PM »
I can smell a rat.

Businesses with a 1% delinquency rate that are willing to borrow at 20% annualized rate (actually more if you account for kickfurther's cut). Banks and other small business lenders that are apparently too stupid to lend to these businesses. Yeah right.
« Last Edit: November 13, 2019, 12:25:56 PM by Padonak »

RWD

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #3 on: November 13, 2019, 12:35:56 PM »
They've been operating for a few years and they've gotten down to a delinquency rate of about 1% by improving their vetting process.

That's really not long enough to establish a track record. The last few years have been quite good for businesses. 170k small businesses failed outright in the Great Recession. Prosper looked pretty good for the first couple years too.

haflander

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #4 on: November 13, 2019, 12:38:19 PM »
I'm interested in short-term experiments like this, but would need to learn a lot more info and hear from others before making any kind of investment. I was too late for the LC or Peerstreet surge years ago before they started going the wrong direction. I've always liked the idea of ecommerce and Amazon/eBay arbitrage, but too lazy and noncommittal to actually do all the work of hunting, buying, listing, shipping, etc. This seems like a cool way to be involved in the business without any of the work and making plenty of interest. That sounds way too good to be true to this skeptic.

Does anyone else have experience with this or other similar platforms? I like the data from OP's experience but would love that of others as well. Dissenting opinions too!

Michael in ABQ

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #5 on: November 13, 2019, 01:12:24 PM »
I can smell a rat.

Businesses with a 1% delinquency rate that are willing to borrow at 20% annualized rate (actually more if you account for kickfurther's cut). Banks and other small business lenders that are apparently too stupid to lend to these businesses. Yeah right.

You can go look through hundreds of past deals. The platform has been going for a few years and early on they had a higher delinquency rate. With several hundred deals since then they've been able to do a better job screening deals and lowered their delinquency rate to about 1%.

Banks and other traditional lenders won't give you a $100,000 line of credit for inventory purchases unless you have two years of tax returns, which could mean almost three years in business. There are plenty of eCommerce businesses with 6- or even 7-figure revenues that don't have two years of tax returns. Even then they may not be interested, or they may only offer a relatively small line of credit. It also takes a while to get a bank loan whereas through this platform businesses can get funding in a couple of weeks. If these businesses could get bank loans for $50,000 - $150,000 at 5-6% interest I'm sure they would in most cases. However, there is obviously a large need based on how many other short-term lenders are operating in this space.

If the alternative is lost sales or using a loan or factoring service with higher rates then a 20% annualized cost of capital can still be more attractive. Amazon offers loans on an invitation only basis at around 10-15% APR but they can only be used for purchasing inventory to send into Amazon, not for fulfilling retail or wholesale orders through other channels. Kabbage offers loans at 30-40%. Factoring services charge 2-3% per month which works out to a much higher rate as well.

Michael in ABQ

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #6 on: November 13, 2019, 01:23:11 PM »
I'm interested in short-term experiments like this, but would need to learn a lot more info and hear from others before making any kind of investment. I was too late for the LC or Peerstreet surge years ago before they started going the wrong direction. I've always liked the idea of ecommerce and Amazon/eBay arbitrage, but too lazy and noncommittal to actually do all the work of hunting, buying, listing, shipping, etc. This seems like a cool way to be involved in the business without any of the work and making plenty of interest. That sounds way too good to be true to this skeptic.

Does anyone else have experience with this or other similar platforms? I like the data from OP's experience but would love that of others as well. Dissenting opinions too!

I heard about the platform a year or two ago on the Side Hustle Nation podcast as just a brief mention. At the time there weren't any deals available so I didn't really look any further. I heard the co-founders on another podcast a couple of months ago and decided to give it a try. https://www.ecomcrew.com/e280-inventory-funding-solutions-with-sean-david-of-kickfurther/ full disclosure, the podcast host has personally invested 6-figures on the platform but since you can look through all the past deals and read comments from investors I personally think the risk/reward is worth it.

Car Jack

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #7 on: November 18, 2019, 01:09:56 PM »
It's high reward, so just consider it high risk.  Invest only what you're ok losing completely and you won't be killed if things go like LC did.  I was lucky enough to get into LC before things swirled into the toilet and followed Pete and how he invested......and did the opposite.  :D  I was all in A and B loans.  I never had a write off, had only one late payment ever and received 10%+ every year.  I bailed before the rats all got off the ship and although my return was reduced, selling notes at a discount to get out, I still made money on every note.

Full disclosure....I won't invest in this.

SwordGuy

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #8 on: November 18, 2019, 04:45:39 PM »
I can smell a rat.

Businesses with a 1% delinquency rate that are willing to borrow at 20% annualized rate (actually more if you account for kickfurther's cut). Banks and other small business lenders that are apparently too stupid to lend to these businesses. Yeah right.

That would be a big rat.   I would want nothing to do with this.

efree

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #9 on: December 25, 2019, 08:46:41 AM »
I don't know about this one specifically but I'm invested in several similar European platforms (Envestio, Crowdestor, Monethera, Wisefund, Kuetzal) so I definitely understand and trust the business model. It all depends on how well each platform performs its due diligence when selecting the projects to finance. I'm not sure which one to trust more so I've diversified.

Michael in ABQ

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #10 on: January 02, 2020, 02:31:43 PM »
I just received my first payout from an investment I made in early November. The original deal terms were an 8.04% expected return over 5.9 months, or just over 16% annualized. This was going to be eight payments starting in January and then every two weeks through mid-April. Sales over Black Friday were better than expected and they just paid out about half of the total amount today. A few other investments should start paying out this month as well since many of these companies were purchasing inventory for sales around Christmas.

At this point I've invested about $5,500 over 13 consignments and I should receive about $400 in profit over the next few months. I'm just going to reinvest it for now. That also earned me 2% on my credit card I used to fund all of this so that's worth another $110. Albeit, there is a fee of 1.5% when you withdraw your money, so that pretty much offsets the 2% on the credit card.

Michael in ABQ

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #11 on: February 24, 2020, 11:32:38 AM »
Since September I've invested about $6,400 through this platform and reinvested another $1,000 or so.

My first coop finished paying out in full today. This was the second one I invested in back in September.
"You funded $306.12 of inventory and just received your last payout for a total of $335.62. You earned $29.50 of profit in 5.1 months, an annualized 23%."

At this point I have 12 more coops, seven of which have started to pay back already. Of those 12, three are behind on their payments and one is ahead. One of those that's behind is about three weeks late and should pay out in full in the next few days. Assuming it does, that's still about a 20% annualized return on that one (would have been 26% if paid out on schedule). I'm generally investing about $300-500 per company to make sure I'm well diversified.

There's definitely still a lot more demand than supply. Many of the coops fund within a few minutes of opening up, though a couple that were not offering great returns and/or had a product that didn't seem very good didn't fund at all.

ostornadoe1

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #12 on: May 14, 2020, 02:22:21 PM »
Just curious Michael, do you still have money invested in Kickfurther? If so, how are they doing currently? Any increase in delinquencies due to the pandemic?

I'm considering using it as a backup form of MS, but not sure if I want to take on huge risks in the current environment.

Michael in ABQ

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #13 on: May 14, 2020, 02:54:56 PM »
Just curious Michael, do you still have money invested in Kickfurther? If so, how are they doing currently? Any increase in delinquencies due to the pandemic?

I'm considering using it as a backup form of MS, but not sure if I want to take on huge risks in the current environment.

Yes, I've been rolling pretty much all the money back into it. My total investment to date is $8,496.
I've been paid out $5,783 and I have $7,889 still outstanding.

One of the first co-ops I backed for about $900 has been a bust and gone into collections - this was well before COVID-19 was an issue. The seller reported that they sold the product then a month later said payment would be a bit late, no more than a few more weeks. Since then, nothing. The company is still in business and Kickfurther has a UCC lien on the funds from that inventory so we'll see how much money the collection agency can get out of them. That one alone has wiped out most of my profit so far. Since then I've generally limited my investments to $300-500 per coop unless they've got a strong track record of multiple successful coops.

I still have 18 active coops that I'm invested in which are either paying back now or were recently funded and will start paying back soon. Two of those have run into trouble and made partial payments. One is still trying and I think will ultimately be ok, albeit the return will be lower if they take 12 months to pay back instead of 6. The other pretty much said they're prioritizing other payments for now to keep their business afloat. The product is still selling well on Amazon so I'm optimistic I'll get paid. I've had 10 coops that completed successfully and paid out on time or early.

Since most of these are ecommerce brands they've generally continued to do well. If they have Chinese suppliers they either had inventory already on the way or their factories have reopened. Most new coops are being proactive about communicating how the pandemic is affecting their sales or suppliers - often with increased sales. On average there's probably 6-10 new coops a month. So you can wait a few weeks to find one that has a track record if your primary goal is manufactured spending versus pure investment return. Obviously those might not offer as attractive rates, but even one company that's had a couple dozen coops still offers about 9-10% annualized returns for 8-12 month investments.

edit: part of the first line got cutoff for some reason.
« Last Edit: May 15, 2020, 11:53:10 AM by Michael in ABQ »

ostornadoe1

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #14 on: May 15, 2020, 11:03:56 AM »
Thanks for taking the time to give an in-depth response!

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #15 on: May 20, 2020, 07:43:50 AM »
I was screwed over with shag supply and glacé.  I think this model of business encourages fraud.  Companies do not have any consequences if they don’t pay back. 
Shag supply for example sold all inventory.  And then they stopped paying back.   KF is slow with updates.   They claim it is in collections.  But, how much will we get back a dime on the dollar in years from now? 
KF collects their graft upfront.   They are already paid.  They have as little incentive as the companies they “vetted” to complete the contract. 

Padonak

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #16 on: July 06, 2020, 09:51:31 AM »
I was screwed over with shag supply and glacé.  I think this model of business encourages fraud.  Companies do not have any consequences if they don’t pay back. 
Shag supply for example sold all inventory.  And then they stopped paying back.   KF is slow with updates.   They claim it is in collections.  But, how much will we get back a dime on the dollar in years from now? 
KF collects their graft upfront.   They are already paid.  They have as little incentive as the companies they “vetted” to complete the contract.

What's shag supply? Sounds like a brothel.

Michael in ABQ

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #17 on: July 06, 2020, 10:56:07 AM »
I was screwed over with shag supply and glacé.  I think this model of business encourages fraud.  Companies do not have any consequences if they don’t pay back. 
Shag supply for example sold all inventory.  And then they stopped paying back.   KF is slow with updates.   They claim it is in collections.  But, how much will we get back a dime on the dollar in years from now? 
KF collects their graft upfront.   They are already paid.  They have as little incentive as the companies they “vetted” to complete the contract.

So far I've backed 32 co-ops. Of those about 25 have started to pay back. One straight up took the money, sold the inventory, and has never responded since. That one finally went to collections a couple months ago, nothing yet. Unfortunately it was a larger consignment and since then I've limited my investment to generally about $500 on any consignment unless they have a solid track record. Two more have fallen behind. One of those has been very communicative and is making regular smaller payments and should end up paying off in about 8-9 months instead of 4. So it will probably still be a 10-12% annualized return. The second one has been mostly silent and made one more small payment but will probably go to collections soon if they don't start paying again.

So 3 out of 25, and on those remaining several have paid back early meaning my annualized return was over 20%. The rest have been pretty solidly in the 15-20% annualized return range.

chuckster

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #18 on: October 25, 2020, 01:26:23 PM »
Any advice on how to handle profits on my tax return?

Is it all "short term capital gains"? Is it possible/beneficial to think of this as "small business/solo proprietorship" income?

It's not technically an "investment" in a company, it's consignment inventory sales. I'm not buying a piece of the company. I'm pre-purchasing merchandise that the company then sells on my behalf.

So I'm not sure if the money I'm making should be taxed like an investment, or, taxed like my purchases are my business.

Would rather not consult a tax attorney over $100 though lol.

Michael in ABQ

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #19 on: October 27, 2020, 03:51:49 PM »
Any advice on how to handle profits on my tax return?

Is it all "short term capital gains"? Is it possible/beneficial to think of this as "small business/solo proprietorship" income?

It's not technically an "investment" in a company, it's consignment inventory sales. I'm not buying a piece of the company. I'm pre-purchasing merchandise that the company then sells on my behalf.

So I'm not sure if the money I'm making should be taxed like an investment, or, taxed like my purchases are my business.

Would rather not consult a tax attorney over $100 though lol.

I believe it would go in "Other Income" similar to winnings from gambling. In my case I did have one co-op go bad that I don't expect to recover any money from. I plan on deducting that loss from my profits - as well as the 1.5% withdrawal fee. 

One downside is they don't seem to provide any sort of tax information like a 1099. You can download all your transaction date in a .CSV file to determine your original investment/basis and then what your gains were. However, the IRS is probably not tracking any of this so you're basically on your honor to report the income.

If you treat it as a business income you'll owe self-employment taxes.

chuckster

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Re: Kickfurther - Earn 20% Annualized Returns
« Reply #20 on: October 29, 2020, 06:15:01 PM »

If you treat it as a business income you'll owe self-employment taxes.

Thanks for the detailed info! Much appreciated.

I guess I'll have to take a look and compare how it would affect me if it was taxed as other income as short-term capital gains at my marginal rates vs. as business income and pay the self-employment taxes. The minor upside on the latter is that I could then take a portion of it into a SEP-IRA I guess.