Crowdfunding Tips - Use Common Sense, Do You Homework


Homework

Our latest loan offering is an A-rated loan of over £455,000. The borrower is an independent adviser looking to use the funds to expand. The loan auction closes in 15 days' time. The offering has attracted bids of over £36,000 today, at the time of writing, and is 56 per cent funded.

The way the auction process works means that cheaper bids will knock out the more expensive offers of credit once the notional 100 per cent limit has been reached.

Below we offer some of the simple tips that potential lenders should consider before committing capital. The full text can be found here – and we stress this is common-sense commentary, not investment advice. See the risk warnings on our Home page and in Frequently Asked Questions.

  • Take the trouble to understand what you're putting money into. The things that you can gain access to via a crowdfunding platform such as Money&Co. are typically different from traditional bank accounts and savings products. They are a different type of asset, an alternative way of deploying money in what is known as the alternative finance sector.
  • Avoid the common confusion between equity crowdfunding – which gets a lot of attention in the media – and debt or loan crowdfunding. Money&Co. is simply a way of bringing people and businesses together through the mechanism of our internet platform. We are a peer-to-per (P2P) business-lending platform.
  • Bear in mind that you're lending to a borrowing company. You're not lending to Money&Co. We vet the borrowing companies using a rigorous credit-analysis process. We're an intermediary, charging a fee. The P2P loan is directly between you and the company, and is facilitated by us.
  • Examine the borrowers' proposals in detail. We use our best endeavours to ensure that every representation of the borrower is true – about the market, the prospects, the company's track record, the reason for the loan, the veracity of the audited accounts, etc. But we cannot and do not warrant that this is so.
  • Don't be seduced by yield. The returns can be attractive, but a high yield can mean high risk.

M&CLogo

Our loans are only offered if our borrowers are free of all other debt, and have a track record of sustained profit. Moreover, Money&Co. takes a charge on the assets of the company, which is exercisable if a borrower defaults. The relevant assets could then be sold and used to reimburse lenders. As yet, after two years' trading, no borrowers are in default. See our recent article on Money&Co.'s conservative attitude to vetting deals.

That said, remember that when lending, capital is at risk.



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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.