When lending to a business via Crowd2Fund, you become the lender, so you take on the risk for making the loan. Because you are taking on this risk, you are rewarded through potentially higher rates of returns. Furthermore, you decide who you want to lend to, rather than an institution, and you get the potential higher returns directly from that business.
All businesses on the platform undergo standard risk and due diligence checks to ascertain they can afford the loan and thus maintain a low default rate on Crowd2Fund.
The rate a business pays for a Crowd2Fund Loan is defined by the risk and due diligence team. It is generally, but not always, tied to the risk associated with the loan. We also include two risk indicators – our own risk level, shown on the summary campaign tab on the Opportunities page, and Equifax's assigned risk on the campaign page.
In general, Bonds are higher risk and both Revenue Loans and amortizing Loans are generally lower risk. The APR return for a any product is clearly indicated on the campaign page. You can read about our APR here.
Time to earn interest
You start to earn interest a month after the campaign has been successfully completed and executed. The time left to successfully fund a campaign is indicated on the campaign page: some campaigns might fund quicker due to higher demand for that business.
Please bear in mind that campaigns might sometimes take an additional week to complete and execute as we are sometimes waiting for the businesses to respond to required material prior to releasing your funds.
Amortising loan APR
It is important to understand that Loans and Revenue Loans executed through Crowd2Fund are amortised loans. This means that every repayment you receive consists of both part of the initial capital being repaid and interest earned.
Your interest earnings will decrease each month as your initial capital repaid increases. The monthly interest you receive decreases as it is the APR of the outstanding balance left that month.
It is therefore important that you reinvest your loan repayments into other campaigns if you wish to maximise the potential return on your investments. This can be done easily using our 'Smart-Invest' feature.
Please be aware that the reinvested amounts do not count towards your ISA allowance that year if they have not left your wallet. Furthermore, funds in your wallet do not earn interest. Please feel free to drop us an email or give us a call if you would like further clarification. We are here to make this as easy and transparent as possible.
Loan legal agreements
Crowd2Fund creates individual loan agreements for each loan that is completed on the platform. The loan agreement is, in theory, between yourself as the investor and the business, however, Crowd2Fund manages this process on your behalf.
The legal agreements include either the Director Guarantee(s) or Security for that particular loan. We always try to take security in the form of personal guarantees or other security however loans should be treated as unsecured as ultimately this is not a guarantee that money will be recovered. Should a business stop repaying their loan and be taken into legal proceedings Crowd2Fund will represent your interests in and out of court.
All our loans have monthly repayments, unless otherwise stated. The amount of repayments is clearly shown on the campaign page as total months of the loan. You are repaid directly by the business into your Crowd2Fund wallet. The date you receive your repayment may vary slightly, depending on whether the repayment date falls on a business day, as repayments are only processed on business working days.
With Revenue Loans, you may receive more or less repayments than the months stated. This is because the Revenue Loan is paid as a percentage of monthly turnover and is thus flexible. Months with higher turnover will mean larger amounts will be repaid and vice versa. The APR remains the same on each calculated amount of that month’s repayment. The months repaid for Revenue Loans are calculated as an average based on the turnover of their latest filed accounts.
If a repayment is going to be late, you will be informed. Wherever possible, Crowd2Fund will avoid a potential late repayment by working with the business. Crowd2Fund collects a 1% transaction fee on each repayment made to investors.
Borrowers may repay the loan early with no extra fees incurred.
Missed repayments and bad debt
Read more about bad debt here.
The above information is for informational purposes only. The individual circumstances of investors can vary, and the terms of each scheme are subject to change. For full details of any tax schemes, please refer to HMRC directly or contact your personal financial advisor or tax advisor.