RisksAlways read about the risks associated with investing through crowdfunding before doing an investment.
The Autoriteit Financiële Markten (AFM) advices to invest only a maximum of 10 per cent of your investable assets via crowdfunding. It is highly recommendable to spread loans across different local partners.
Investing via local partners
If you make an investment through a local partner, the local partners primarily covers the risk of currency exchange rates and defaults of loans. Our partners have financial reserves for this purpose and it is also possible to claim their equity if needed. Funders therefore do not so much run risk on the individual loans but rather on the local partners. A local partner could, in the worst case, go bankrupt because:
- Credit risk (a local partner selects a lot of entrepreneurs with a bad credit profile)
- Currency exchange risk (large fluctuations in currency exchange rates can lead to large financial consequences for local partners)
- Fraud risk (one or more employees of a local partner can commit fraud)
- Operational risks (when management is unable to generate sufficient profit for a long time or realize at least a break-even situation)
- Political and regulatory risk (changes in political sphere or regulations can lead to an environment where foreign investors cannot retrieve their money) and natural disaster or epidemics (which could cause a lot of local entrepreneurs to be unable to repay their loans).
Lendahand has very strict rules for financial enterprises in relevant countries to become a local Lendahand partner. If the local partner is for some reason unable to repay then there is a chance of partial or full loss of your money.
Take a look at the overview page of local partners to see all partners that contracted with Lendahand.
If you invest in a company, hence not via a local partner, risks of default are not covered. As the risk that comes with direct lendings is generally higher than an investment through a local partner, the interest rate is also higher. On the project detail page of a direct investment you can find all information necessary that can be used for an estimation of the risks. If the local partner is for some reason unable to repay then there is a chance of partial or full loss of your money.
Lendahand will always conduct due diligence when a party requests for a direct loan. To provide more insights on risks, an independent parties come in to perform brief analysis on direct loans. The results can be downloaded on each projects' page on our website. However, this analysis serves primarily as a tool for your own opinion and conclusion. Pay attention to the fact this analysis is not an investing advice.
If you choose to invest together with a renowned party that performs selection and monitoring, risks depend on the type of contract that is closed with the co-financing partner. Lendahand always aims to be senior in repayments (Lenahand's investors will be repayed first in case a party could go bankrupt), however this is not always possible. The risk/ efficiency ratio is determined by the co-financing partner.
In case the project or company that has been co-financed goes bankrupt, there will be a chance that you lose (part of) the amount you lend.