Whether to start a business, face its growth or develop a specific investment, financing is undoubtedly one of the most important aspects, and that is why crowdlending is born. In recent years, due to the scarcity of credit, the market has devised new concepts to obtain financing in an alternative way to banks , something that has favored mainly SMEs, self-employed workers and new entrepreneurs .
That is why we can now find new financing models, which have been created in order to help a project take flight. This is how crowdfunding was born and, later, crowdlending , which we can understand as a specific form of crowdfunding – sometimes we find it written as crowlending, although it is a mistake.
Crowdfunding, in its different modalities, allows the community, usually through the internet, to donate money for the realization of a project or for the implementation of a business idea. However, the passage of time opened the possibility that donations could be converted into loans, and that these were made under certain conditions that would be respected and that would generate a financial return.
What is crowdlending: meaning and definition
Crowdlending is one of the models that currently allows to offer a financing service, without the need to have the support of any type of traditional financial institution . This idea was born in the 90s, when crowdfunding was in its heyday. However, it was not until almost the middle of the second decade of the 21st century, when this model became a popular option.
In this sense, in 2013, crowdlending managed to move up to 3,000 million dollars, an increase of 150% compared to the previous year. This is due to simple factors such as the development of the internet and the increased role of social networks in society.
In this way, crowdlending becomes the monetary impulse that an entrepreneur needs to start his project and achieve success. On the other hand, for the investor, it means the promise of receiving a return balance that will be established according to the terms of the loan made.
After explaining what crowdlending is theoretically, it is essential to detail its operation, which includes a series of steps to follow. In this way, both the investment and the return of it, will be insured, seeking to benefit all parties.
This is how crowdlending works
You can organize the process to participate in crowdlending, as follows:
- First Both the potential investor and the entrepreneur, must be part of a network or a platform that acts as an intermediary throughout the process. This will be responsible for the operations and all aspects related to them.
- Second . The entrepreneur must present the project on the platform in which he is a part . Along with this you must attach the loan application and the terms thereof. This offers the potential investor all the information he needs to make his decision. Normally, in most platforms, the project will be studied and evaluated according to the risk it presents. This is an important fact that is taken into account by investors.
- Third . If approved, the platform will publish the project with the most relevant details, such as the goal to be met and, even, the interests fixed by the platform.
- Fourth The investors will transfer the money into an account in the name of the platform and in the case that the project achieves the goal with the loans, the platform will be in charge of transferring the money to the company’s account.
- Fifth Based on the knowledge of what crowdlending is, how it works and the rate of return that is promised by the platform, it will be the delegate of the process of return on investment. She will be responsible for not only charging fees and fees , but also for dividing and distributing them to all project investors .