Both the Crowdlending platforms and the investors do not want to hear about the delinquency of the borrowers, but we already know that any investment carries a risk of loss and in this article we are going to talk about how it can be avoided or, at least, minimize the risk of default and loss, both for platforms and investors.
For Crowdlending Platforms
To avoid or minimize delinquency in Crowdlending platforms, three basic premises must be followed:
1.- Have a good risk department . This is basic and fundamental. It should be a department composed of technical and professional staff that comes from the bank and has extensive experience in risk assessment, also must be well trained in accounting and balance analysis to understand the annual accounts of the promoters requesting financing ; they must know how to dive in public registers such as the Mercantile Registry , the CIRBE of the Bank of Spain and in registers of private defaulters such as ASNEF , BADEXCUG or the RAI and must know how to do it because knowing that the financing applicant is solvent in all those registers and has its annual accounts healthy, the Crowdlending Platform will ensure that the chances of that client falling into insolvency are minimal and so it is very likely that the investor will get the return of the capital invested in the form of a loan plus interest and that the platform copper its commissions without problems.
2.- You must control for what the promoter uses the money obtained in the form of a loan through Crowdlending and for this you must verify that the developer has used it for what he said in his application that he was going to use it , that is, the Platform of Crowdlending should request from the developer the necessary documentation that proves that the money obtained has been effectively used to finance the good or project that was specified as the reason for the loan, so that if the loan was for the purchase of a machine, it should require a posteriori to demonstrate, by means of the corresponding invoice, that said machine has been effectively purchased. Although many platforms do, unfortunately not all Crowdlending Platforms usually do this type of checks and they do badly, because if they found that the promoter has assigned it to something else that it was not, that means that it has lied and that should be make it in your file to discriminate negatively in future applications for funding, if they pay the present, of course, because if they do not pay, cross and scratch forever.
3.- Request real guarantees . Some companies of Crowdlending, when they have doubts about the solvency of a promoter requesting financing, what they do is ask for a real guarantee to the Administrator of the company or they ask it directly to the company in such a way that, if it were the case that the loan is not paid, at least, there would be a real guarantee to throw away to be able to collect what remained pending from said loan. It is prohibited by Law 5/2015 of Promotion of Business Financing to apply for mortgage guarantees for the granting of a loan through Crowdlending, but it is allowed that any other type of real guarantee admitted in law may be requested.
For the investor.
In order for the investor to minimize the risk of losing his investment due to the delinquency of the promoter, what he must do is also analyze on his own the company to which he will lend his money , especially if he is going to lend a significant amount; Of course, the investor will say that this task is already done by the Crowdlending Platform, and it is true, that’s right, but if it is your money that is at stake, it would not hurt for you to do your research and analyze yourself. a little the company to which he is going to finance his project; I would check if it is well listed on the Stock Exchange, if it is heavily indebted, if it has payment problems with suppliers or workers, if it has legal incidents or commercial problems are engulfed, what is its reputation in the market of the sector to which it belongs, in order , I would do a small study that guarantees me that the company is serious, that it has been in the market for many years and that it is dedicated to trade in a serious and responsible manner.
Another tip is to fully diversify your investments , that is, if you plan to invest € 10,000 in Crowdlending, the advisable thing to minimize the risk of losing your investment is not to invest everything to a single loan, but to cut the investment in many different loans, that is, it is better to invest € 100 in 100 different loans than € 10,000 in only one; In this way, if any of them falls into default, the profitability of the other investments will compensate for this loss of leftovers and will allow the average profitability of the investments in my portfolio to remain good.
Finally, to avoid losses, you should invest in those Crowdlending companies that offer repurchase guarantees , that is, invest preferably in those platforms that, in case the borrower does not pay, will commit to buy back your investment and return it to you. your money; and if your Crowdlending platform does not have a repurchase guarantee then, at least, notice if you have a secondary market where you can sell your debt participation to another investor, before that loan goes unpaid (I wish we had a ball crystal and we knew that loan will fall, everyone would sell before, but it is impossible, the one that stops paying does not notify, stop paying from one day to the next and period) Finally say that the secondary market is often used rather to sell and recover liquidity before the final maturity of the loan but if you believe that a loan X from your portfolio will fall, you are obviously entitled to dispose of it in the secondary market before the default occurs.