Crowdlending For Startup Businesses
Finding the capital of a start-up can be as difficult as any other sub-business and sometimes stressful because everyone seems to have an opinion on your concept. Borrowing money from a bank can be just as stressful, but borrowing money from the “crowd” via the Internet is one of the new and fascinating ways companies can raise capital.
Who is the lender?
It is a means of raising capital through which wealthy individuals (corporations, trusts, other institutions, etc.) can invest in companies through debt.
Lenders discover investment opportunities through general advertising on sites like Swishfund or through a public forum (social networks, wikis for investors, etc.).
Benefits of Crowdlending
Crowdlending offers many benefits. Some of them are:
It is a new source of capital for start-ups. The volume of bank loans is even lower in absolute terms than in 2008. This is particularly important for new businesses (of all types, not just technology companies), because they are the ones that generate the most a larger number jobs in each segment of the company’s maturity,
Crowd lending can create a source of capital for communities that have been neglected by traditional lending institutions.
This way of raising capital can reduce the cost of borrowing. Interest rates can be lower and also rates. New Companies can use these savings to increase wages, improve sustainability and energy efficiency programs, and improve health service delivery.
As with all other investment activities, crowdlending is a risk for lenders. However, other forms of investment activity may be considered more risky because of the community aspect of the practice. Crowdlending usually means investing in a business in your community
Many researchers have published studies on the relationship between community loans and default rates compared to loans from non-community banks. A recent study by the Federal Reserve concluded that credit risk in credit institutions appears to be lower at the local level.
To determine creditworthiness, Crowdlender uses the same tools of diligence as banks like Experian and Dun and Bradstreet. In addition, individual lenders use the same service models as institutions. Items such as UCC’s fillings, collection activities and distressed asset sales are now also available.
Crowdlending offers the community the opportunity to partner to lend money to a business, launch it or overcome difficult moments in a controlled and consistent manner. People have been doing it for years, but this way there is a bridge between relationship and investment.