Risks for investors
With over 100 years of combined experience, our Credit Team reviews every borrower application made to LendingCrowd. This means only established and creditworthy businesses are able to borrow through our platform. However as with all investment opportunities, there are risks involved.
As an investor, your capital is at risk
When investing with peer-to-peer lending platforms such as LendingCrowd, your actual return may be higher or lower as your capital is at risk.
Learn more about the key risks when investing.
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 investing. However, lending to businesses means that you're putting your capital at risk. Here we look at some of the key risks investors 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 invested.
Access to your money
Bear in mind that by investing in businesses with LendingCrowd, you're potentially committing your money for the duration of the loan. However, we offer investors the opportunity to sell on their loan parts on our Loan Market. This gives flexibility to your investments, allowing you to get your money back when you need it.
Investors are responsible for ensuring that they administer their own tax affairs and should seek independent financial advice. LendingCrowd doesn't provide tax advice and investors are responsible for completing their own tax return.
Tax treatment depends on the individual circumstances of each investor and may be subject to change in future.
It's important that investors understand that even if money is loaded onto the LendingCrowd platform, it won't earn interest unless it's invested in business loans. Investors with our Self Select accounts are responsible for placing their bids, buying loan parts and managing their account. Regular emails update them about any money they haven't invested on the platform.
How to de-risk
Review each business carefully
Before you invest in 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 risk experts award each business a Credit Band to help you make decisions about the potential risks and rewards of lending to a business.
Diversify your funds
Having a diverse investment 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 Credit Bands, the impact on your overall return is reduced if any one business can’t repay its loan.
We strongly recommend investors to consider spreading their money across multiple loans to avoid their overall return being dependent on the good performance of a few well-chosen loans.
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 as soon as possible.
As part of the borrower application process, the LendingCrowd Credit Team will perform standard checks into your company’s credit history. Please be aware that these checks, while necessary for safety, may affect the credit scores of a business.
As an investor it’s important to remember you’re lending to businesses so 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.