“The critical ingredient is getting off your butt and doing something. It’s as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.”
By Nolan Bushnell.
Crowdlending has its origin in Crowdfunding, which emerged in the 90s as a funding model to finance small projects of artistic or cultural nature through the function of the so-called patrons or individuals who contributed their money in the form of a donation or in exchange for a non-monetary reward.
Over the years, Crowdfunding has evolved and developed new models of alternative financing such as Equity Crowdfunding or Crowdfunding of loans called Crowdlending, where individuals who offer their money go from being patrons to investors and individuals and companies They can get loans through this method.
What is Crowdlending?
Crowdlending is financing through loans to companies or individuals that are funded by individuals. The financing requested by the company is covered thanks to many small contributions from large people who lend their money. These investors receive a monetary consideration in return, that is, the interest rate paid by the SME or company, and the intermediary crowdlending platform remains a small commission.
Why does Crowdlending arise?
Over the last few years, a series of factors have been generated that have led to the emergence and consolidation of Crowdlending as an alternative financing system for both business and private projects:
- The contraction of bank loans: Before the outbreak of the economic crisis, at the time of requesting and obtaining a bank loan, there were hardly any obstacles. Since a few years ago, the picture is very different, banks cut their financing tap and companies and individuals have had to find new methods and alternatives to get financed, a solution they have found through Crowdlending.
- The rise of the Internet: Internet has been a revolution for many aspects of today’s society. Online communities have allowed many individuals to be contacted in order to unite interests, as is the case with Crowdlending platforms.
- The rise of the collaborative economy: Share instead of own, is the phrase that summarizes the new economy of today’s society. Only through collaboration between individuals, without the intermediation of large institutions or companies, can the needs of purchasing products, acquiring services or obtaining financing be met, as in the case of Crowdlending.
How does a Crowdlending platform work?
The Crowdlending platform exercises all the actions prior to the publication of the project: documentation request, study of the operation … Once approved, it is published on the platform, which is where investors will lend their money. Once the project collects all the funds requested, it becomes a loan and the platform is responsible for collecting the fees and distributing the corresponding amount to each investor.
Requesting financing for companies by crowdlending is extremely easy. These are the steps.
1. Complete the application
It is necessary to complete a simple and quick assistant in the section request a loan from the platform itself. Once the application is completed with the required documentation, we can proceed to the next phase.
2. Study and evaluation of the operation
The platform performs the study of the operation and evaluates it with a rating. Based on this rating, the platform sets a maximum and fair interest rate for both parties.
3. Publication of the operation
The approved operation is published in the Marketplace and that is where investors lend their money at the interest rate set by the platform. Even if they wish, they may reduce their profitability in favor of lowering the interest rate of the company.
4. The money in your checking account
Once the amount is completed by the contributions of multiple investors, the money is transferred to the company.
5. Unique dedication to your business
From this moment you can focus only on your business. The platform will be responsible for collecting the fees and distributing it among the investors who have participated.