How does a new project come on the platform?

One of the most frequently asked questions is how Lendahand selects new projects for our platform. What happens behind the scenes before a project is available for you to invest in? What does the due diligence process look like?

As a crowdfunding platform for entrepreneurs in developing countries, we work to offer a diverse portfolio of companies and financial institutions to our crowd of investors. Through Lendahand, these impactful businesses and organizations can access financing at a lower interest rate than typically available.

Our Investments Team is responsible for monitoring existing investment opportunities and for finding, screening, and monitoring new offers for you as an investor.

How does Lendahand go about it? 

A thorough investigation precedes the admission of a financial institution or business on the Lendahand platform. As a social enterprise, we place quality over quantity. As a result, it sometimes takes months (up to a year) before a new company or organization appears on our platform. In doing so, we want to guarantee as much as possible that our crowdfunding activities actually reach those entrepreneurs who need it most and that the financing affects them positively.

Due Diligence and Approval Process

Lending to companies is done only and exclusively after extensive due diligence and both internal and external approval processes. This process consists of 8 steps, written out in detail on the page ‘How does Lendahand select new projects for the platform?’.

Broadly speaking, the process of selection and launch has five phases: 

1. Introduction: The process begins with a screening memo. The Investment Committee — consisting of one external and two internal members — reviews the memo and decides whether the proposal follows a fast track or a standard track.
2. Negotiation: Once both parties decide to proceed, they agree on the terms in a term sheet. This document outlines the initial terms and is finalized before the due diligence process begins.
3. Know Your Customer: While negotiations are ongoing, the Know Your Customer (KYC) process starts simultaneously.
4. Due Diligence: Next comes the Investment Memo (IM). The depth of due diligence depends on the track: fast-track opportunities go through a lighter review, while standard-track opportunities undergo full due diligence. The impact assessment is also carried out during this stage.
5. Final approval and onboarding The Investment Committee reviews the Investment Memo and gives final approval. Once approved, the opportunity moves into onboarding.

Once a new borrower is approved, our team periodically re-evaluates the borrowers’ operations. The questions for these checks are also written on the extensive page about the selection of projects. 

Unfortunately, it’s impossible to prevent a potentially negative effect from slipping through the analysis, but generally, we base our opinion on company policies, trust in management with whom we have extensive personal contact, and talking to customers when we visit. 

The Lendahand Commitment

Lendahand is fully committed to minimizing the risk of overburdening the end customers of financial institutions in our portfolio by following the roadmap described above. We believe in the concepts of crowdfunding and microfinancing - if done fairly and affordably - to create a prosperous and equal world.