Crowdlending is a recently born practice that is becoming more and more popular. It is about investing in SMEs as well as in the real economy through online platforms.
A new law in 2014 put an end to the monopoly of banks for investment, which allowed participatory financing systems, such as crowdlending, to emerge.
From now on, we can, as an individual, decide to invest to support start-ups under development. Moreover, you don’t have to be rich to do crowdlending. Today, on some platforms, you can invest at least €50 or €100, which is relatively low.
In fact, the basic concept is crowdfunding: SMEs or VSEs create their projects, and put them online in order to benefit from multiple funding. Crowdlending is, so to speak, a subcategory of this concept. It represents the action of an individual to make a loan to an SME, and to wait to have a profit a few years later. It is indeed the most dynamic form of crowdfunding in France with 97 million euros collected by companies in 2016.
Source: Investment comparator
You have to be careful when choosing your platform. The first step is to check that it is legal and has one of the two approvals imposed by Ordinance No. 2014-559 of May 30, 2014. platforms registered with ORIAS (Organization for the Single Register of Insurance Intermediaries).
For more information, the two approvals issued by ORIAS are the IFP and the CIP.
The IFP (Intermediary in Participatory Financing) gives the possibility of connecting people with a project with people wishing to invest in this project by making a loan with/without interest, or even a donation. The maximum authorized amount to lend is €2,000 per project and per year. In addition, each project benefits from a maximum collection threshold of 1 million euros. Only individuals (natural persons) can be investors.
For more information: https://www.orias.fr/documents/10227/29315/201703-%20INTERMEDIARE%20EN%20FINANCEMENT%20PARTICIPATIF.pdf
Concerning the CIP (participatory investment adviser): this approval allows the subscription of financial securities of unlisted companies or shares. Individuals, but also legal persons (companies, etc.) can invest in projects that have a collection threshold of 2.5 million euros per year and per project. CIP approved platforms offer more possibilities. On the other hand, they must make sure to diversify their portfolio as well as possible and play an advisory role to their clients.
We often find varied and fairly detailed projects. This makes it possible to better understand the purpose of the projects. We also find the possible risks incurred, if the company goes bankrupt for example… Not to mention the duration of the loan, the interest rate, the evolution of the project…
So we choose our project, we invest on the online platform, then we can follow the history of our activities, of all our investments. After a few years, we recover our investment with interest (rates ranging from 4% to 9% depending on the project and the company).
Now that the essentials have been said about crowdlending, there are many platforms that will allow you to try the experience. So if you’re not too cautious, it’s time to test savings through crowdlending.