Due to the complications that exist when applying for a bank loan, loan platforms such as crowdlending appeared years ago, platforms that connect companies or individuals that need to obtain financing with those who want to invest in exchange for obtaining a return on their money.
What is crowdlending?
As we have said, crowdlending is a financing alternative that allows any person, individual or small business, who needs financing to start their business to get in touch with other investors who want to obtain a higher return than the savings products of the market. That is, they invest directly in a project.
Therefore, these platforms are made up of lenders and borrowers. The lenders are those people who request financing and the borrowers will be the investors.
Crowdlending platforms allow the investor to select, from a list of projects, the one that is most attractive according to their capital and term preferences.
How is crowdlending regulated?
Currently, both crowdlending and crowdfunding are regulated by Law 5/2015 of April 27, of the Promotion of Business Financing, published in the Official State Gazette of April 28, 2015. In addition, crowdlending platforms are supervised by the CNMV
The main objective of this law is to guarantee the protection of investors and promote a new financing tool for direct business projects.
Within this law, investors are classified in two ways:
- Accredited: institutional investors that exceed one million dollars of assets, 2 million dollars of turnover or $ 300,000 of own resources
- Not accredited: they do not meet the above requirements and will have a maximum limit of $ 3,000 per project and up to $ 10,000 of total investment in the set of platforms.
L ado by lenders who want to choose this path as a way of funding the maximum funding limit of 5 million dollars is established if investors are accredited. If they are not accredited investors, the limit drops to 2 million dollars.
What facilities does crowdlending offer against personal payday loans?
It is true that in many cases it is difficult to apply for a personal payday loan in a bank due to a large number of requirements that are requested. In order to avoid these long processes, crowdlending platforms began to appear, which, as we have said before, lenders contact investors.
Although we find advantages in loans through crowdlending, we can also see some drawbacks. Below we show you the advantages and disadvantages of crowdlending compared to personal payday loans.
- In personal payday loans, it is the bank that gives us the financing we need. In the case of crowdlending loans, it is not necessary, since the total financing will come from the small contributions of investors.
- The profitability that investors can achieve will be higher than risk-free savings products, such as deposits.
- The minimum amount when investing is very low.
- In the face of small businesses, the project is announced.
- Eliminates the additional commitments of banks, such as the contracting of insurance or other services, direct debits, etc.
- These are online platforms, which will make the process simple and convenient.
- By simplifying the process and eliminating bureaucratic and intermediary structures such as the banks have, prices for borrower financing are lowered and offer greater returns for investors.
- It is possible that there are few people willing to make investments in these projects because they are in the early stages.
- In crowdlending platforms there is usually a certain time to obtain financing, if the necessary amount is not completed, investors will be returned what they have contributed.
- The project must be publicly exposed.
- There are funding limits as we have seen previously
How do crowdlending platforms work?
In Spain, there are numerous crowdlending platforms where we can go to request financing, we will take as an example Excellent to explain what steps to follow to apply for a loan.
- The first step will be to expose the need for financing. Excellent studies the case in detail and then offers the return deadlines and the fee that best suits your profile.
- An analysis and risk team verifies that the documentation presented is true and accepts or denies the loan application.
- If the funding request has been accepted, the project will be published on the platform along with the rest
- Now it will be the investors who will have all the necessary information to choose in which project they want to invest.
- When an investor has chosen the project to choose from, the platform will contact the applicant with the investor.
Before requesting financing, Excellent allows you to calculate what the fee you will have to pay and the term based on the amount requested, fulfilling that, several characteristics:
- Amount to request between $ 3,000 and $ 15,000
- Return period between 1 and 5 years
- What do we want the loan for?
- Professional situation
- Monthly income
- Monthly expenses
Finally, it will be necessary to register to check what the final fee to be paid will be.