Why should you invest in crowdlending?
20 Jun 2020
Crowdlending or peer-to-peer lending has become a huge trend in a just a decade and a half since the world’s first such platform, Zopa, was launched in 2005.
Simply put, crowdlending means that you, as an individual, lend money directly to other individuals or companies. An online lending platform connects individuals or companies who want to borrow money, for example to buy a new car or new equipment respectively, to other individual, or even institutional, lenders.
On Fundkiss, for instance, you can extend loans to Mauritian SMEs who want to borrow money for a variety of reasons – be it for financing their day-to-day operations, or undertaking a project for their expansion. Further, our platform splits the loan, so that several lenders have the opportunity to contribute part of the total amount. This way, multiple lenders put together a larger amount of money.
WHY SHOULD YOU START LENDING ON FUNDKISS?
Lending to SMEs by leveraging the power of the crowd is gaining traction because it democratises access to finance for entrepreneurs and boasts customer-friendly features such as speed, ease, and transparency. No wonder then that SMEs are flocking to such platforms, giving lenders a diversity of projects across economic sectors to choose from. With over 70 projects financed across key sectors of the Mauritian economy, Fundkiss gives its community of lenders plenty of campaigns to review before arriving at a suitable portfolio.
On the lender’s part, an investment in these loans provides a predictable income – the company pays a fixed rate of interest on the money you lend. Companies that borrow through Fundkiss pay between 10% and 15% interest per year, depending on the credit rating of their project. Because companies repay interest and capital monthly, you create a monthly cashflow on your account, for which you only need to make a one-off investment.
Further, you can invest in projects in a few clicks from the comfort of your home, by simply creating an account with Fundkiss and choosing projects over your laptop or mobile device. Moreover, it is easy to start lending, as you can begin with just MUR 5,000 on Fundkiss. Thus, through lending platforms, extending money to SMEs becomes an experience that is both simple and smart.
HOW MUCH INCOME CAN YOU MAKE?
The returns on our platform equal the interest a company pays on your loan. The amount of your income through Fundkiss therefore depends on 3 factors:
THE INTEREST RATE
In essence, the higher the interest rate, the higher your income. At the same time, a higher interest rate often means a higher risk perceived for the project. We advise that you carefully evaluate the campaign and choose which projects you invest in, thus controlling your risk.
THE DURATION OF THE PROJECT
The duration of loans on Fundkiss varies from 3 months to 5 years. The longer the duration of a loan, the more the repayments are spread out. Since a longer duration means less capital repaid each month, we would recommend that you balance the duration of the investment against any immediate liquidity needs vs the prospect of earning a steady income and accruing savings over a longer horizon.
THE SIZE OF YOUR INVESTMENT
Needless to say, the higher your investment, the more interest you receive, since the return is calculated as a percentage of your investment. On Fundkiss, we encourage you to start with any budget, which is why our entry threshold is as low as MUR 5,000. Moreover, we recommend that you build a diversified portfolio to spread your risk across multiple investments. For example, if you wish to lend MUR 100,000 through our platform, it is better to lend MUR 5,000 to 20 projects than MUR 50,000 to 2 projects.
WHAT ARE THE RISKS?
Like any other investment, lending is not without risk. The highest risk of course is that the company you are lending to will not be able to repay your loan and you may lose your investment in such a default scenario. Though Fundkiss has a strict borrower selection criterion, your money is not insured and is not risk-free.
You can protect yourself against this risk by spreading your investment as much as possible over different projects. Of course, this does take extra time and effort, but then you also do reap the benefits of spreading the risk. If you diversify your investments well and choose projects carefully, a default has a smaller impact and any potential losses are compensated by the loans that are repaid.
Want to ensure that your income grows progressively? Reinvest your repayments to benefit from compound interest and grow your assets, and all without having to make an addition to your original investment amount!
EXPERIENCE CROWDLENDING WITH FUNDKISS
Crowdlending can be rewarding in more ways than one. Besides the potential for higher returns and engaging in an online and intuitive process, you will also enjoy intangible benefits such as the satisfaction of helping local businesses grow, contributing to the real economy, tapping into networking opportunities, and learning more about making investments.
Start your journey by registering with Fundkiss today!