What Is Crowdlending And How Can It Help Freelancers
In case you did not know it yet, crowdlending is a financing method. Its name comes from the terms crowd, which translates as ” crowd ” and lending, which is ” lend .” In other words, we are talking about a collective or participatory financing mechanism, which can be very useful when access to financial resources is needed. Here’s how it works.
What is crowdlending?
It involves the granting of several loans from more than one investor. This is done through platforms, which connect people who need financing for their projects, with whom they seek profitability and want to contribute the monetary resources. Of course, it is not the same as crowdfunding, since in this case, the money is a donation or sponsorship.
There are two types of loans in crowdlending. On the one hand, we have P2B or ” person to business “, which is for businesses or freelancers, and the other is P2P, which is person to person. The latter usually has an amount that does not exceed 10,000 euros, on the other hand, P2B can reach quite high sums.
Financing carried out in a crowdlending is regulated by means of a contract in which the price, duration, loan conditions, interest rates, and guarantee are established. And all this can be done on the same platform used as an intermediary. As for the level of legal involvement, it is something that depends on the parties that are involved.
This new alternative can be interesting if you know how to take advantage of it. The process to be carried out is simpler and easier to access than requesting financing from financial institutions or banks.
When making a loan, everything is based on the individual decision of each lender rather than the complex requirements of conditions, liquidity, and risks of the applicants to the bank. That is why this is a very good alternative to get the necessary amount of money to undertake.
Of course, before launching, it is necessary to consider this option from more perspectives. To make it easier for you, we will tell you what its advantages and disadvantages are.
Advantages and disadvantages of crowdlending
Requesting a loan through crowdlending allows you to enjoy more advantages as a freelance or borrowing company. These are some:
- More attractive interests . Depending on the purpose and risk of the client, lower interest rates can be achieved, unlike with traditional loans.
- Greater financing possibilities . In the bank it is common to ask for a large number of conditions, which are difficult to meet, but with crowdlending, the loan is more accessible.
- Very flexible conditions. When it comes to repaying the loan, the time is not so strict, plus there is no charge for amortization or prepayment of the debt.
- The application is simpler. The entire process is carried out online, the procedures for the beginning of the process and the requirements are faster and easier. You will not suffer from the terrible paperwork and the money arrives in just a few days.
Of course, although the advantages are very attractive, there are also disadvantages to crowdlending, and you have to know what they are before starting any process.
- Few options . At the moment, crowdlending platforms in Spain are limited, unlike the rest of Europe, where it is a more widespread modality. Therefore, you will have to do an intensive search and research thoroughly to find the best option for you.
- Less security and backup . A point in favor of banks is that they are highly legislated, while crowdlending platforms do not have the same support. Therefore, you must ensure that the platform complies with an appropriate institutional regulation.
- Complications with taxation. Taking into account that these kinds of projects are quite new, there may be doubts regarding the declarations of the crowdlending funds to the Treasury.