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Fundraising thru a crowd, or crowdfunding, is a method that allows everyone to invest in different projects and investors to find financing other than thru the bank ecosystem. But what exactly is real estate crowd financing and how does it work? Who can benefit from it? You will find in this article, the answers to all your questions.

Principles

Collaborative financing is a method of financing medium-term projects in the form of fundraising from individuals or legal entities. Each investor has a choice of the amount he wishes to contribute, and of course he is free to choose the projects he is interested in.

Investors will be remunerated according to several factors, the amount they have paid for the project, the financial tool used by the project owner in return for the sums paid, the duration of the project in financing, the intrinsic risk of the project established by the platform. It is possible to spread your investments over different projects at the same time and take advantage of each of the benefits while diluting the risk.

The actors who can participate in collaborative financing or crowdfunding are individuals or companies. As for the projects that can benefit from financing, they can be, for example:

  • Charitable, associative or humanitarian projects within the framework of a foundation for a charitable association.
  • Cultural projects to produce a record, a play or a musical comedy
  • Professional projects for the creation of a company
  • Real estate projects as part of a construction, renovation or divisio

The different types of crowdfunding

There are several types of participatory financing or crowdfunding:

  • In the form of a donation, an individual or a company invests his or her money in a project without wanting to be remunerated. This is often the case for a charity project.
  • The investor can invest in a project and be rewarded in kind (object or service depending on the conditions), the reward can take different forms and may have no connection with the financed project.
  • The loan is also a participatory financing option. In this case, the investor will have to be reimbursed according to a predefined schedule and rate. We are talking about crowdlending.
  • The equity or capital financing of a company. This participative financing option consists of participating in the capital of the company to be financed. In this way, the investor will become a shareholder and receive dividends on the amount of his investment.
  • Other forms of loans that fall under special mandates such as minibons and bonds.

How does crowd financing work ?

Crowdfunding is carried out via a platform on which investors and the project leader are linked. On platforms using tools such as shares, bonds or certificates (minibon), investors are advised.

The project owner expresses his financial need to the platform committee by specifying the type of funding he is seeking, the amount, duration and purpose of his project. The latter can be accepted or rejected. The investor registers on the platform, his profile is validated, he is advised and finally he chooses the project(s) and the amount he wishes to invest.

Concerning the duration of the collection, the platform defines a deadline for each project in consultation with the project leader. The financing of a project ends when the amount sought or a threshold defined by contract is reached, the amount is then paid to the project owner.

If the amount requested or a specific threshold is not reached within the defined period, no amount will be charged to investors and the project will not receive any funds.

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