Crowdfunding is incredibly popular. The news item was recently published that in the first half of 2015, 49 million euros in funding was raised in the Netherlands with crowdfunding. A doubling compared to the first half of 2014! This makes crowdfunding the largest form of alternative financing, according to consultancy firm. High time to take a closer look at that. http://ecoformations.net for a critique
What is crowdfunding?
In short, crowdfunding is a form of borrowing and lending money online. Around 2010 this phenomenon came to the Netherlands from the United States. It connects people or companies that want to borrow money for a project or company directly with investors. Often simply via an online platform. In total, more than 150 million euros have already been raised in our country. An amount that will probably only increase further in the coming years.
Borrow money as an entrepreneur
Originally crowdfunding was created for charities or companies. Entrepreneurs make grateful use of this form of borrowing money. Certainly now that banks have been extra critical about providing a loan since the crisis. Thanks to crowdfunding, entrepreneurs can still get started with their project. Good examples of crowdfunding successes are the Fairphone and digital news platform.
Borrow money through crowdfunding
A crowdfunding loan is not only reserved for companies. Consumers can now also borrow money via this route. It is similar to borrowing from friends and family, only you make your request for a loan through an online platform to strangers. Keep in mind that this form of borrowing costs money. You pay interest to investors and administration costs to the platform. How much this is varies per platform.
Lend money through crowdfunding
Investing through crowdfunding is not risk-free. For example, it is important that you can estimate the risk of your investment yourself. For example, when investing in a private loan, always check whether the platform does a ABC check. This gives you more insight into the creditworthiness of the person applying for the loan. Also thoroughly study the terms of the loan or investment, or a possible loan contract. What happens if the recipient cannot pay the interest? In short, by paying close attention and using common sense, you can prevent some risks.