Crowdlending platforms: how to use and which one should you choose

Written by Davies on lending / Reading time: 5 minutes.

Crowdlending platforms: how to use and which one should you choose

You may think everything has been already invented, and it’s all just about moving money, but actually the finance and economy world is in constant evolution.

From time to time new concepts pop up. If you don’t pay attention to the news, you may get lost.

Luckily, we at Davies are always ready to give you advice and help you understand those weird words that emerge occasionally. Many of them are scary at first, but as soon as you realize what are they about, maybe you’ll even start thinking about them as excellent ideas in which you can take part.

So we’re telling you today what is crowdlending.

It’s a new collaborative funding method for businesses which, even if you don’t own any company, can be very interesting for you, since it is a different investment system with which you can make a great profit.

Would you like to know how does it work? Keep reading!


What is crowdlending?

Crowdlending is a financing technique for companies based on obtaining funds not from a single money source (such as a bank or a credit entity), but from many diverse ones.

Instead of having someone giving you suddenly a large amount, you have many small loaners who contribute each one with a smaller quantity.

This is highly beneficial for businesses that need financing.


Advantages of crowdlending funding for investors

Many companies have decided to go into this system due to many reasons:

  • They have more financing alternatives.
  • They have more bargaining power than if they had to deal with a single, more powerful loaner.
  • They can contact with specialized investors in their activity sector.
  • They can become more notorious within their own sector: crowdlending can work as a sort of advertising campaign.

These are the positive aspects for companies who dare to turn to crowdlending. But for loaners to give their money to companies, they should find taking part in a campaign an interesting deal.

What are the advantages for potential loaners to put their money in crowdlending platforms rather than investing in other kinds of business?

There are many that may convince you:

  • Absolute control of your money. You decide where will it go and which companies will be funded with your capital. There’s no bank doing that for you with their own customer base without letting you know.
  • High profit. Currently, some crowdlending platforms offering benefits above 10% can be found. However, beware: the higher the profit, the more default risk you’ll face.
  • Modest budget. You don’t need to invest fortunes. Even 10 euros are enough to start funding a company. Anyway, nobody will prevent you to invest more if you want to.
  • Easy procedure. You only need to register in a crowdlending platform, which is usually a simple and not too messy formality, to start operating from home and at any time.
  • No correlation with the stock market. A crack should not necessarily affect your investments: the system is independent.

Keeping all this in mind, and with the usual caution you’d have when “playing” with real money, now you only have to search for a crowdlending platform to start.


Some platforms to invest in crowdlending

In order to make things easier either for investors who may not always know which companies need funds, or for companies themselves who need financing but don’t have time to find loaners one by one, crowdfunding platforms have been developed to contact both parts.

Here are some of the most popular ones:

  • Based in Latvia but with fully operative multilingual versions. It’s the most popular crowdlending platform in Europe. It works like a marketplace, that is, the platform itself doesn’t provide any funds, but is only an intermediary between candidates to receive money and people willing to offer cash, starting with amounts as low as 10 euros. There is also a secondary market in which you can sell your credit to another investor if you need to recover quickly part of your money. About 5 billion euros are estimated to have moved through this platform since it was founded in 2015.
  • Many investors use it as a complement for Mintos; indeed, at first it was only a part of the latter, until they split in 2017. It doesn’t have a secondary market and their versions in languages other than English need to be improved. It’s interesting because it offers slightly higher profit rates, although, of course, the default risk is also higher.
  • Previously known as Lendix, it is the main Spain-based crowdlending platform nowadays, although the company behind it has French capital. Apart from being a marketplace for small investors, the platform itself backs 51% of all loans. This means they investigate thoroughly all businesses that want to take part before accepting them. It’s specialized in Spanish, French, Italian and Dutch markets, so it’s an ideal option if you wish to work in these countries.


Cryptocurrencies in crowdlending

Crytptocurrencies can be very useful resources when starting a crowdlending platform.

Some of them, such as Davies, let users set a loan system among private individuals. Nothing prevents the borrower to be a company rather than a person who may need the cash for personal expenses.

Some of their features make them especially valuable for this purpose:

  • Virtual currencies. As they work on the Internet, they don’t depend on time or space, so any company can use them to engage investors from anywhere in the world and receive the money instantly, saving bureaucracy.
  • Non fiat money. That is, they’re not the currency you use to pay in high-street shopping. Therefore, no central bank from any country issues them. This is especially useful when financing international projects, because there is no need for currency exchange.
  • Since they don’t depend on any entity to adjust their value (users themselves do that via demand and supply), the procedure is totally independent from any external entity. A purer form of crowdlending can be achieved.
  • Loans are always delicate and risky operations. Cryptocurrencies are based on blockchain technology, that keeps an unchangeable log of all operations performed with them. The risk of scams is minimal.

Do you still have doubts about crowdlending platforms and new financing forms for businesses that you can use to manage your investments? We’re here for you! Ask us any doubt you may have!