Advantages and Disadvantages of Crowdlending

Vicentiu Vlad

May 09, 2024

Image of article Advantages and Disadvantages of Crowdlending

Crowdlending has become increasingly popular in recent years, offering both investors and borrowers an attractive alternative to traditional financial institutions.

As you already know, stock.estate is a crowdlending investment platform specialized in identifying, verifying, and facilitating financing for real estate projects and responsible SMEs. Our mission is to provide quick and easy capital for verified SMEs, almost always guaranteed, for investors. We launched in 2023 and since then have focused on investments, but we are also planning to address working capital financing projects, helping companies raise capital up to twice as fast as traditional financial institutions, with four times less bureaucracy and a simplified analysis process. We create value for investors through a low entry barrier (investment tickets start at 100 EUR) to our opportunities, well-defined guarantees, attractive returns (which do not exceed 20% per year in EUR), portfolio diversification, and a fully digitized investment process. Crowdlending, like any form of investment, has both advantages and disadvantages that you should consider before engaging in this financial practice.

Advantages of Crowdlending:

  1. Portfolio Diversification: Investing in various projects and loans can help reduce the overall risk of your portfolio.
  2. Attractive Returns: Crowdlending can offer investors higher returns compared to other more traditional investment options.
  3. Accessibility and Ease: Most crowdlending platforms are accessible online, making the investment process easier and more convenient for investors. There is no need to go to a bank or have a large initial capital sum. In 10 minutes, you can already have an account on such a platform and finalize an investment.
  4. Support for Small and Medium Enterprises: Crowdlending can be an important source of funding for small businesses and startups that may have difficulty obtaining loans from traditional banks or leasing companies.
  5. Flexibility in Choosing Projects: As a crowdlending investor, you have the opportunity to choose the projects in which you want to invest. You can select projects that align with your objectives and values.

Disadvantages of Crowdlending:

  1. Default Risk and Lack of Guarantees: One of the biggest risks is that borrowers may fail to repay their debt. This can lead to losses for investors, especially if the portfolio is not well diversified. Crowdlending sometimes involves unsecured loans, meaning that in case of default, investors may lose the invested amount without any form of material guarantee. Therefore, the stock.estate team focuses on careful and rigorous selection of projects and related documents.
  2. Limited Liquidity: In some cases, crowdlending investments can be difficult to liquidate before the agreed term. This means that you cannot recover the invested money until the loan reaches maturity. To mitigate this challenge, one of the future options to be offered to investors is the 'secondary market', where you can liquidate your investment before maturity by selling it to another person.
  3. Regulations and Supervision: The crowdlending industry is still relatively new and may be subject to regulatory changes. Investors should be aware of these risks and monitor their investments regularly. We try to be proactive in informing you about such business events that may impact you.
  4. Possible Fees and Charges: Certain crowdlending platforms may charge fees and taxes for their services, which can reduce the net return on investment. The level of fees and charges is transparently disclosed in the "Terms and Conditions" section but also in the FAQ section.

In conclusion, crowdlending can be an attractive option for you if you are looking for higher returns and diversification in your portfolio. However, it is important to be aware of all the aspects mentioned above, and we are here to answer your questions with the utmost transparency.

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STOCKESTATE CROWDFUNDING SRL is licensed under the number PJR28FSFPR/400002, since 29.08.2023. Find us in the register of crowdfunding service providers of the European Securities and Market Authority (ESMA).

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All investments involve risks, including loss of invested capital, lack of liquidity, and non-reimbursement on loans, partially or integrally. It is an appropriate investment only for investors able to assess and bear the risks presented above. Before investing, please read the risks of investments warning, and also all the clauses of the loan agreement, which will be provided to you for the campaign in question. Stock.estate Platform is not responsible for the information provided by the project developers, even if it is provided by or through Stock.estate. Stock.estate does not provide you any other advisory services. The decision to invest is entirely yours. We recommend that you consult specialized advisers if you need support in evaluating your investment decision. The messages and documentation you receive from Stock.estate or project developers have not been verified or approved by Romanian or European authorities.