Read about the risks associated with investing through crowdfunding before committing to a project.
The Autoriteit Financiële Markten (AFM) advises investors to only commit 10 percent of their investable assets via crowdfunding. It is also highly recommended to spread loans across different local partners.
Investing via local partners
If you choose to invest through a local partner, you are essentially limiting your risk. Local partners maintain financial reserves to cover loan defaults as well as shifts in currency exchange rates. In certain instances it is possible to claim their equity if needed. The absolute worst case scenario would be if a partner went bankrupt as a result of:
- Assumption of excessive credit risks
- Large currency rate fluctuations
- Operational Costs (Inability to generate sufficient profits to maintain operations.)
- Political and/or Regulatory Changes
- Natural disasters and/or epidemics
If a partner is for some reason unable to repay a loan, there is a chance of partial, if not full loss of your investment. In spite of all the above, investors should be assured that Lendahand has very strict criteria for financial enterprises in participating countries who wish to become local partners.
Please take the time to take a look at our overview page of local partners to see who is contracted with Lendahand.
Investments made directly with an entrepreneur come with their own set of risks. More specifically, loan defaults are not covered as they would be with an established local partner. As the risk associated with this type of investment is higher, so too is the interest return rate. As with all loans, if the counterpart is unable to repay the loan, there is a chance that you will lose part, if not all of your investment.
As always, Lendahand will exercise due diligence with regard to any party that requests a direct loan. To provide more insight into the risks associated with direct loans, Lendahand will deploy an independent party to perform a brief analysis of the loan in question. The results of this analysis can be downloaded from each project’s page on our website. Investors should view any analysis as a tool with which to draw their own conclusion about the viability of a direct investment. They should likewise understand that any analysis should not be seen as investment advice or as a recommendation.
Investing in concert with an established entity that selects and monitors the project in question still involves a level of risk. The risk depends on the type of contract that is closed with the co-financing partner.
Lendahand will always aim to prioritise our clients interests in the event of (possible) bankruptcy, however this is not always possible. With the risk/efficiency ratio being determined by the co-financing partner, if the project or company goes bankrupt, there is a chance that funders will lose part, if not all of their investment.