CROWDESTOR : Earn Good by Doing Good

CROWDESTOR (register here) is a crowdfunding platform giving individual investors from all over Europe access to investing in promising start-ups as well as in established small and medium-sized enterprises (SMEs). Learn why investing in businesses gives not only a good return but also allows to positively impact an overall economy.

Impact Investing & CROWDESTOR

When you are choosing an alternative investment platform, what factors are important for you? The high-interest yield is for sure one of the most important factors. The experience of the management is probably also in that list as well as the risk level.

But do you, as an investor, consider the social responsibility factors when choosing crowdfunding and P2P investment platforms? There is a high probability that you do. The majority of the CROWDESTOR investors are considered “millennials”, the generational cohort that favors responsibility among other factors when making an investment decision.

But even if you are not a millennial there is still a high probability that you prefer responsible investments as this is becoming an increasingly important trend. There is evidence that responsible investing and high returns are not substitutes, as previously was thought. More and more cases show that responsible investments among other things bring a higher return eventually.

The Key Difference Between Business & Personal Loans

CROWDESTOR takes the responsibility factor very seriously and believes that every investment should make a positive impact on society, economy, or the business environment. That is why CROWDESTOR does not participate in financing personal loans but decided to focus on serious businesses. The case of investing in personal loans is not very appealing if you think about the origin of the deal. The deal is probably coming from a developing country, where average salaries are not enough to afford a decent lifestyle. People in these countries are forced to take a loan to get the utility bills paid, to buy essential medicine, or even to spend it on addictions.

With businesses, this is a completely different story. Many businesses are unjustly underserved, due to the tight restrictions set up by the traditional banks. Due to the previous financial crisis and the outdated scoring methodologies, many businesses do not have access to funding, despite their promising business plans or demanded products. CROWDESTOR changes that, as the platform connects such businesses with investors seeking higher yield.

Scoring & Investing in Businesses

In August 2020 CROWDESTOR has launched a new product- SME Automation. This is an ambitious product not only because it allows businesses to fill the application online and get the result, but also because it has launched during the challenging times for all businesses caused by the COVID-19 pandemic.

The scoring model was built with the help of one of the big rating agencies and based on methodologies of established risk analysts. The scoring model has access to 500 databases from more than 150 countries, 100 million legal entities, and 300 million natural persons.

The best part about the scoring model is that each SME that has applied for a business loan on CROWDESTOR gets a detailed credit report, regardless of the decision. The businesses never have feedback from banks when they have been rejected from a business loan. CROWDESTOR, on the other hand, produces an automatic, bespoke credit report, where the SME sees exactly why they have been rejected. Sometimes it is a minor thing that needs to be fixed, to get the business loan approved.

Therefore, even with negative loan applications CROWDESTOR indirectly helps the economy by promoting sound credit history or financials. In a positive decision, the business gets access to funding, and investors get access to diverse investment opportunities. This in turn, also contributes to economic growth, as underserved businesses get a chance to finance their expansion or to stay afloat during challenging times. Moreover, each investor gets access to credit reports before making an investment decision. In the credit report, the key financials are shown providing full transparency.

Is Yield Above 20% Too Much?

Some investors instead of being excited get concerned that projects listed on CROWDESTOR for investment are yielding 16%, 26%, or even 29%. There is nothing extraordinary here, as CROWDESTOR is an alternative funding source, so it is normal that the interest the borrower is charged is above the rate offered by banks. On average, the SME rate on CROWESTOR is 21% and up to 32%, plus the commission. So, the interest passed to the investors mathematically makes sense.

With a personal loan, where investors get a much lower returns, the borrower sometimes pays 365% APR (annual percentage rate) in Russia where the government puts a ceiling on the maximum interest rate. Sometimes the effective APR (including all penalties and delay fees) the borrower gets charged more than 1000% in some countries where regulation fails to limit micro-financial organizations from imposing additional fees.

No wonder such loans are called “Shark Loans”, as they are bringing more danger, than safety. The borrower usually takes the loan for a short time and does not realize that the interest rate on the small borrowed amount is off any limits. The investor, on the other hand, gets rewarded only a small fraction of the earnings, because personal loan investment marketplaces are taking advantage of the low-interest environment in Western Europe.  

Invest with No Guilt

When choosing to invest in crowdfunding every investor has to evaluate his or her risk tolerance. If you decided to invest in something riskier than shares or the bonds, than choosing the CROWDESTOR will be not only offering a high reward for investing but also will be guilt-free. When investing in the business, you know that your money indirectly helps businesses and the whole economy.

All information posted is merely for educational and informational purposes. It is not intended as a substitute for professional advice. Investments can contain risks.

This article is a sponsored post from CROWDESTOR OÜ, Estonia.