Crowdfunding is when a large group of people or “the crowd”, come together to finance organisations or small and medium companies. In crowdlending, a large number of unrelated people pool their monies together and lend monies to organisations or small and medium companies. This relationship is tied together through a commercial loan agreement.
One of the main reasons why certain companies may look to crowdfund is because they cannot get the funds from banks. Also, banks may be more stringent in their requirements and some companies may not be able to fulfil these requirements. For small lenders, the advantages are higher returns as compared to other investments, transparency and the power to make a direct impact on the economy.
Crowdlending has grown rapidly in recent times due to the following factors.
- The rapid development of the Internet and online security.
- People are feeling increasingly more comfortable with making transactions online.
- The lost in trust in the banking sector after the financial crisis and scandals.
- Investors want more transparency and control over their impact on the economy.
Crowdlending is basically crowdfunding loans. The organisation or small and medium companies are the borrowers and the crowd is the lender. Many crowdlending platforms connect companies to investors in a fast, transparent and easy way. There are no intermediaries and the deals are completed very quickly.
The Fund Guru Team