The term crowdlending has its origin in the crowdfunding, which appeared in the 90s as a system dedicated to financing small projects of a cultural or artistic nature through so-called patrons or individuals who contributed capital in the form of donations or in exchange for a non-monetary reward.
Crowdfunding evolved over time giving rise to new alternative financing models such as the crowdlending concept, also known as crowdfunding of péstamos, which is when the individuals who provide their capital go from being patrons to investors. This serves so that both companies and individuals have access to loans.
The definition of crowdlending is finance to companies or individuals in charge of individuals. This word is made up of the English terms 'crowd', which means crowd and 'lending', loan. The financing that any business requires is satisfied with the small contributions of many people who offer the money. How contraprestación, these investors will obtain the interest rate paid by the company and the crowdlending platform that participates in the process will receive a commission.
This financing system emerged as an alternative to traditional bank loan methods.
There are a number of crowdlending examples that will help you understand this concept a little better. It is the case of a that demands 10.000 euros for the acquisition of material. The intermediary entity establishes a maximum fixed of 6% and the company accepts these conditions. One investor decides to lend him 4.000 euros at 3%, while another does the same with 2.5000 at 5% and another with 3.500 at 4%. The final type of the loan will be the weighted average of the different participations. In this case 5%.
Difference between crowdlending and crowdfunding
The definition of crowlending should not be confused with crowdfunding. There are some aspects that differentiate them:
- Financial risk: in crowdfunding it is higher, since the money contributed is only recovered if the project is successful. The results will take about five years to appreciate. In the crowdlendng, the agreed payments are received within the set period.
- Benefits: the person who lends the money will get benefits in both situations. In the case of crowdlending, the earnings are linked to the interest rate, while in crowdfunding they will depend on the success of the idea.
- Guarantees: in crowfunding there are no guarantees, you have to look at your intuition to know the profitability of a project.