Crowdfunding, crowdlending, crowdinvesting: what is the difference?

Do you have money to invest? Do you want to diversify your asset portfolio? You are probably interested in participative financing, but the jargon used is interfering with your thinking.
First element of explanation: crowdfunding is a generic term. It includes donations(crowdfunding), paid loans(crowdlending) and equity investments(crowdinvesting). These are important differences to know for any future investor.

Crowdfunding, a donation with or without consideration

Participatory financing has been democratized in the mid-2010s thanks to online investment platforms. This crowd funding (crowdfunding) has made it easier for investors to access this type of investment.

The objective is simple: a person or a company has a project. It cannot finance it by borrowing money. It therefore calls for donations from individuals. Investors have access to the project description, activated only if the desired envelope is reached. If not, the money is returned to the donor.

• Matching gifts are a way to thank contributors for their financial participation. It is essentially gifts, products and other goodies.
• The unrequited gift is an appeal to the generosity of individuals. Their symbolic donation is similar to sponsorship or charity. This is particularly the case for charities, with possible tax benefits for the donor.

Crowdlending, a loan with a guaranteed return

The loan of money from individuals or economic actors replaces bank credit. Companies do not always have access to bank credit. They must then find other sources of financing to launch their activity or to develop.

Crowdfunding is like an interest-bearing loan. The financer assumes the role of investor in the sense that he expects a return on his investment. Moreover, the project owner must clearly indicate the return on the loan as well as the duration of the loan. The investor recovers his money in the form of fixed monthly payments composed of a part of the capital to be refunded and the interests acquired.

The solutions of crowdfunding proposed by the Raizers platform use the principle of crowdlending. The borrowers (real estate developers, property dealers) use this financial windfall as "quasi-equity". The investor receives his money with interest once the real estate project is finalized or the property is sold.

Crowdinvesting: investing by taking an equity stake

Equity crowdfunding allows the investor to enter the company's capital. This solution is favored by young start-ups wishing to open their capital to develop. Very often, their weak seniority closes the doors of the bank credit.

Start-ups and SMEs are allowed to raise up to one million euros without going through the traditional financing circuit. Private investors receive shares in return. They receive dividendsif the company makes a profit. The investors also have the possibility to earn money by realizing a capital gain on the resale of these shares.

Crowdinvesting and crowdlending: which one to choose?

As far as risk is concerned, crowdinvesting does not guarantee either the capital invested or the return on investment. Everything depends on the viability and growth of the project holder. As such, crowdlending is more reassuring. As with a bank loan, the borrowers commit to repay the money advanced and the interest under conditions established by the contract. Investing your money always involves a certain amount of risk. Framed by regulations, crowdlending offers guarantees and protections.

Crowdfunding offers a wide choice of investments. It's up to you to decide which one suits you best.