What is crowdlending? It is a non-bank financing system based on loans to businesses through a network of investors.
This is a pioneering way to connect organizations or individuals with funds to invest with companies seeking financing through an online auction platform.
This new way of matching supply and demand for capital, which has emerged within the tech world, is gaining popularity in many other sectors.
The main reason these types of platforms are so successful stems from the financial crisis we’ve experienced in recent years, which has made it increasingly difficult for businesses—especially smaller ones—to access credit.
This non-bank financing system can reduce borrowing costs.
Interest rates can be lower than those offered by banks, and businesses can use these savings for other aspects of their operations.
In turn, individual investors can earn higher interest rates than with other types of investments, with rates reaching as high as 8%.
However, like all investment activities, the crowdlending system carries a certain amount of risk for investors.
Nevertheless, compared to other forms of investment, it can be considered lower risk due to the creditworthiness assessments that are conducted.
To reduce this risk, tools similar to those used by banks are employed to examine and verify the creditworthiness of the companies operating on the platform.
If you have any questions about this, Workcapital SA can advise you.