Risks for lenders
Our Credit Team reviews every borrower application made to LendingCrowd. This means only established businesses and those assessed as creditworthy are able to borrow through our platform. However, please remember that your capital is at risk when lending to businesses.
As an lender, your capital is at risk
When lending to businesses with peer-to-peer lending platforms such as LendingCrowd, your capital is at risk.
Learn more about the key risks when lending.
Minimise your risk
The first step to minimise your risk is to review each business carefully.
By diversifying your portfolio, you’ll be able to reduce your risk even further.
Learn more about how to de-risk.
What are the risks?
LendingCrowd works hard to reduce the risks associated with lending. However, lending to businesses means that you’re putting your capital at risk. Here we look at some of the key risks lenders should be aware of:
It's important to remember that a business may not be able to fully repay its loan. This is known as bad debt and while we have a recovery system in place, you may not receive all the money you lent.
Access to your money
When lending to businesses with LendingCrowd, you’re potentially committing your money for the duration of the loan. However, we offer lenders the opportunity to sell on their loan parts on our Loan Market. Please remember that the time taken to access your funds depends on how quickly your holdings are sold. The ability to sell depends on other lenders buying your loans.
Lenders are responsible for ensuring that they administer their own tax affairs and should seek independent financial advice. LendingCrowd doesn’t provide tax advice and lenders are responsible for completing their own tax return.
Tax treatment depends on the individual circumstances of each lender and may be subject to change in future.
It’s important that lenders understand that even if money is loaded to the LendingCrowd platform, it won’t earn interest unless it’s lent to businesses. Lenders with our Self Select Account are responsible for placing their bids, buying loan parts and managing their account. Our Growth Account and Income Account automatically lend to a wide range of businesses on lenders’ behalf.
How to de-risk
Review each business carefully
Before you lend to a business, LendingCrowd recommends you review the business throughly.
Understand the businesses profile, its financial needs and its management information. Ask the business questions during the loan auction to find out more.
Only lend to a business if it matches your risk appetite.
LendingCrowd’s expert Credit Team allocates each business with a Risk Band to help you make decisions about the potential risks and returns.
Diversify your funds
Having a diverse lending portfolio is the safest way to protect your capital against bad debt.
By spreading your money across a range of businesses with a range of Risk Bands, the impact on your overall return is reduced if any one business can’t repay its loan.
We strongly recommend that lenders consider spreading their money across multiple business loans.
Our Growth Account and Income Account automatically lend to a wide range of businesses on lenders’ behalf.
Risks for borrowers
While there are far fewer risks involved with borrowing from LendingCrowd, it’s important to bear the following in mind when submitting a loan application:
Failure to repay
Borrowers need to be mindful that defaulting might lead to the debt being passed to an agency for collection. LendingCrowd encourages companies struggling with loan repayments to get in touch with us as soon as possible.
As part of the borrower application process, the LendingCrowd Credit Team will perform standard checks into your business’ credit history. Please be aware that these checks, while necessary for our lending decisions, may affect the credit scores of a business.
When lending to businesses, it’s important to remember your capital is at risk. Borrowers need to be mindful that defaulting might lead to the debt being passed to an agency for collection. LendingCrowd and its products are not covered by the Financial Services Compensation Scheme.