Real Estate Crowdlending
You have probably already heard about real estate crowdfunding, real estate crowdlending is based on the same principle, with a few details. In this article you will see exactly what real estate crowdlending is all about. Its definition, functioning, advantages, but also its risks will be explained here so that you can better understand its mechanism.
Real estate crowdlending definition
As a reminder, crowdfunding is a generic term that represents fundraising from groups of individuals or legal entities. The crowdfunding aims to finance real estate projects via a web platform. In return, investors will be reimbursed with a profit based on the amount invested and the risk taken.
Real estate crowdfunding as specifically defined can only be done through participatory investment advisory platforms. Financial products are shares, bonds and savings bonds. Investors are natural or legal persons who can invest without any real limit.
Real estate crowdlending is part of the said participatory financing, except that the latter collects funds through interest-bearing loans or loans that can be amortised on platforms with the status of intermediary in crowdlending (IFP in French). Lenders (natural persons) may finance a loan to a legal person that carries out a specific project with a duration of less than 7 years. The lender may not lend more than € 2000 per project.
How crowdlending works: on the one hand, there is a promoter or company looking for funding for their project, and on the other hand, there is an individual who participates in the collection.
There are three types of crowdlending:
There are three types of crowdlending :
- Amortizing loans to individuals: without going through a bank, loans are granted to individuals wishing to finance a project.
- Amortizing loans to companies: this is financing for SMEs to support them on high-growth projects.
- Finally, the unremunerated (zero-interest) loan: which allows the financing of non-profit projects.
Real estate crowdlending is therefore an ideal solution to get rid of banks and make short-term loans with high profitability. On a crowdlending platform, even projects that have already been rejected by the bank still have a chance to find investors. However, as we have understood, there are risks.
How real estate crowdlending works ?
If you are a private individual, projects are proposed to you on the platform, so it is up to you to choose the one that suits you best. The process is simple to access projects, simply register on the platform by completing the form as a lender and providing the documents required for the validation of your profile.
When a project interests you, you can invest the amount you want by respecting the minimum scale indicated by the platform. You will then be paid according to the amount you have invested. It is possible for you to invest in several projects at the same time.
In the case where you are a project leader, i. e. a company looking for funds, you must subscribe your project by providing the necessary criteria to the platform. Depending on the crowdlending platform, different criteria are required during the selection, the three main conditions are:
- Seniority: a company must have at least two balance sheets.
- Its level of activity: a minimum amount of turnover is required, always depending on the platform.
- The profitability calculated in order to allow investors to be reimbursed the following month.
In order to receive funding, it is therefore important to properly meet the selection criteria.
Advantages and risks of real estate crowdlending
Like any type of investment, there are advantages and risks in real estate crowdlending. Its first advantage is of course, the ease of borrowing money. Lending to a bank is less flexible than on a crowdlending platform. Thus, the concept of crowdlending is easy, and also fast, because it allows banking independence and does not require any guarantee.
Borrowers quickly obtain the requested funds, the files are very simple to set up. The information required from companies concerns the duration, the amount of the loan and the financial objective to be achieved. It is also necessary to provide the identity of the manager and the company’s SIREN number.
Crowdlending does not require you to sign a loan agreement with a bank, which allows you to gain freedom and reduces the stress of managing a bank loan. In addition, unlike traditional loans, you can repay your credit at any time without incurring a significant penalty.
And of course, you do not need to provide a guarantee when you lend to individuals, which is the case if you apply to traditional banking institutions. Our crowdlending platform sorts real estate projects by hand and selects the most solvent and least risky projects.