Crowdlending as an investment system is fashionable. Many start-up platforms go on the market offering financing and investment services, in what is called the new Fintech environment.
But among all the options available there is what we are going to comment on in this article, real estate crowdlending , trying to explain how to invest in real estate crowdlending in Spain.
Differences between Crowdlending and Crowdfunding
Before explaining the difference, we should take into account the evolution in what is now called Fintech (technology companies that offer financial services).
It all starts thanks to the Internet and its fantastic ability to put people in touch through social networks and user platforms.
The first platforms that were created offered financing services thanks to users who lent their money with an investor profile, this business model began with the so-called P2P lending .
P2P lending (peer to peer lending), is the way to define loans from private to private, or what was commonly known, loans between private individuals .
In the national market, the pioneer Comunitae has been the first to offer P2P lending services with more or less success, then other P2P platforms such as Lendico and Zank have appeared in terms of individuals.
Regarding companies, platforms have appeared that offer services or products so that they have access to participatory financing . Companies like Arborius or Circulantis have gained fame in the alternative financing sector.
All these companies that appear in the new fintech markets carry out the evolution of P2P Lending to Crowdlending, which is the same but with another name.
What used to be P2P lending companies and loans between participatory individuals are now Crowdlending companies.
Now that we more or less understand this new financial jargon 2.0, what is the difference between crowdlending and crowdfunding?
Crowdlending is intended for participatory financing of loans made to companies and individuals and crowdfunding is dedicated to the financing of projects through rewards.
Crowdfunding is a modern version of patronage. It is based on the contribution of capital in exchange for a reward, actions, invitations, copy of the product, that is to say something that is not “economic benefit”.
Real Estate Crowdlending as an investment guarantee
When we start participating as money lenders, there will always be concern both in the company that manages your investment and the destination of the money.
To solve this concern, crowdlending platforms base their strategy on showing confidence and recommending diversification on the total investments available in their marketplace, but after all, risk will always be present.
The non-payment of a loan will generally result in a long monitoring process and in many cases of difficult collection, depending on many factors so that the debtor can pay his debt.
During the banking crisis after 2008, credit financial institutions offered a 50% reduction in their debt as long as the debtor cleared some of his debt.
This reflects the difficulty and time that a debt claim can take.
If this is transferred to financial institutions with large bank deposits, it cannot be transferred to a particular lender that can participate in a crowdlending platform.
All these data do not mean that we can finally collect a failed loan, they simply indicate the difficulty of the recovery process.
Companies and companies deserve another point, which in the case of non-payment the procedure is also expensive and long, praying that said company does not enter bankruptcy proceedings because the end of the procedure is generally the ruin of the debtors.
Therefore, the business of lending money requires a guarantee and there is no greater guarantee than a real estate guarantee.
Given this argument, some expert in finance can formulate that the best guarantee is the bank, right! But with a bank guarantee we will not have problems that any financial entity offers us financing.
Not everyone has a bank guarantee that guarantees an operation, but thanks to the real estate heritage culture that exists in our country , many people have a real estate guarantee of inheritance, family or property that guarantees the requested credit.
Therefore, if we deal with the crowdlending business in terms of guarantees, the platforms that work on real estate guarantees are more likely to recover their investment than the platforms that make loans to companies, discounts on promissory notes or lend to individuals with simple personal guarantee .
When there is a real estate guarantee in the event that a loan is failed, the investment will always be protected by the guarantee. The quick sale, or the execution and auction in the case of not reaching an agreement, will allow the return of the investment.