Match with the ideal company: how to invest in crowdlending

Savers who wish to increase their capital while supporting the companies around them can invest in crowdlending

Together we are stronger. Throughout history, joint efforts have made it possible to build and overthrow empires, erect great architectural works and even land man on the moon. Sometimes, the result of this union translates into the launch of a company, which becomes possible when a number of savers decide to invest in crowdlending.

As one of the basic principles of Gestalt psychology says: "The whole is more than the sum of its parts". A group is not the mere sum of the individuals that compose it: there is something that transcends them. And crowdlending, an alternative financing mechanism that has gained remarkable popularity in recent years, shares this commandment.

When the savings of a group of people are accumulated, the result is not only a higher amount of money. It is a springboard that companies use to leapfrog and establish themselves in the market. Thanks to it, they face their debts and obtain the necessary resources to acquire assets and start their activities, creating jobs and generating wealth in their communities.

To invest in crowdlending is not only advantageous for savers. Many families benefit from these operations, which have a very positive impact on society.

The power of the crowd: the basis of crowdlending

Before discovering how to invest in crowdlending, it is essential to understand the basics of this alternative financing system.

Its operation is not very different from that of conventional bank loans. The term comes from the fusion of crowd (crowd) and lending (loan). However, unlike the previous option, crowdlending no longer requires the presence of a banking institution. This has two very important implications, which represent its raison d'être.

To begin with, since the capital is not provided by a bank, there must be another actor to provide the resources. Or rather, actors. It is the individual savers who are in charge of supporting the organizations financially, each of them giving them a small percentage of the total amount they request.

Generally, one person alone would not be enough to reach these figures, especially since this modality is used by many ordinary people, not only by owners of large fortunes. By joining together to invest in crowdlending, they can raise all the money. If they did not join together, even indirectly through a platform, the operation could not start and, consequently, they would not receive the benefits later on.

On the other hand, a new player that we have just mentioned enters the crowdlending scene: alternative financing platforms. Firms that function as intermediaries, connecting investors and projects with each other, and providing them with a safe space in which to close transactions quickly and securely.

In this way, savers easily find initiatives into which to inject their capital, and companies discover investors who are interested in them and grant them the financing they need. To invest in crowdlending is a win-win for both parties.

How to invest in crowdlending?

Unlike other alternative financing systems, such as crowdfunding, crowdlending entails a benefit for the investor. Although alignment with the organization's values is a relevant factor in decision making, the ultimate reason why people decide to invest in crowdlending is to increase their wealth.

As a reward for having granted them the loan, when the maturity date arrives, companies not only return the original amount. They also include an interest, previously established in the contract.

Depending on the economic situation, the duration of the operation and the risk assumed by the investor, the interest rate will be higher or lower. A riskier operation may be rewarded with a higher interest rate, in order to encourage people to invest in crowdlending.

Likewise, Fintech platforms that function as intermediaries usually apply a series of commissions in exchange for their services. In the end, without their work, it would be more complicated for both parties to get to know each other and reach an agreement.

To invest in crowdlending, the investor only has to select a platform and register with it. He will then have access to a very extensive market of projects, where he will be able to find out about the needs and values of each one. Once you find the one that best suits your circumstances, you transfer the money, which is added to the contributions sent by the rest of the people.

When the business receives the full amount, it begins to make use of it, and savers can see first-hand the positive effects of their investment. Finally, when the term runs out, the firm will reimburse the money to the investors, together with the agreed interest.

The advantages of investing in crowdlending

Investing in crowdlending has a series of advantages that seduce all those who are not yet convinced about whether they should bet on this modality.

By turning to a diversity of investors, the company is diversifying its sources of credit. This is a very safe move, since, if it depends on a single entity for financing, it is practically in its own hands.

Suppose, for example, that the bank decides to update the conditions or not to grant new loans to the company. Your financial stability could be in jeopardy, and your bargaining power is quite limited. On the other hand, if you draw on different savers who invest in crowdlending, none of them will have the power to compromise the well-being of your accounts.

This diversification strategy is also very useful for people who are inclined to invest in crowdlending. Some of them will be tempted to direct all their wealth towards a single initiative that promises them a lot of profitability, as it is more convenient and simpler than keeping an eye on different investments.

However, it is much wiser to invest 200 euros in ten projects than 2,000 euros in just one. If one of the ten fails, the loss will not be so significant. But if the investment has been concentrated in only one organization and it fails, the saver could face very serious problems, and his or her financial situation could be in jeopardy.

Is it possible to reduce this risk even further? Yes. By choosing firms from different sectors and investing in other alternative financing mechanisms such as crowdfactoring. A system whereby savers finance business invoices in exchange for interest, through platforms such as Inversa Invoice Market.

Another benefit of investing in crowdlending and, in general, of investing in alternative financing, is that it no longer depends on the approval of banks. Today, any company can register on one of these platforms and find an investor to grant a loan.

This decentralization also benefits investors, who have much more flexibility in choosing which initiatives to put their money into, and can find one that meets their conditions, rather than fighting with the banks.

Matching a company has never been easier.