As with all investments and borrowing, when using the LendingCrowd platform there are financial risks. Here we explain the risks to Investors and Borrowers. We seek to help protect investors and consider ways to help reduce risk when lending money to creditworthy businesses.

Risks for Investors

With over 100 years of combined experience, our Credit Assessment Team review 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 crowdlending platforms such as LendingCrowd your actual return may be higher or lower as your capital is at risk.

To learn more about major risks when investing, read our “What are the risks?” section


Minimise your risk.

The first step to minimise your risk is to review each business carefully.

Diversifying your portfolio you will also be able to reduce your risk even further.

Learn more about how to de risk here.

What are the risks?

LendingCrowd works hard to reduce the risks associated with investing. However, lending to businesses means that you are putting your capital at risk. Here we look at some of the key risks Investors should be aware of:

Bad Debt

It is important to remember that there is the possibility that a business may not be able to fully repay its loan. This is known as Bad Debt and while LendingCrowd has 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 are potentially committing your money for the duration of the loan. However, LendingCrowd offers Investors the opportunity to sell on their loan parts in the Loan Exchange. This gives flexibility to your investments, allowing you to get your money back when you need it.

Borrower repay early

Borrowers can pay off their loan early, without incurring any fees. If a loan is repaid early Investors will receive the outstanding capital linked to their investment and any interest that has accrued up until the point of repayment. Investors will be notified and have opportunity to reinvest their funds via the Loan Market to continue earning interest.

Idle money

It is important that Investors understand that even if funds are loaded onto the LendingCrowd platform, unless that money is invested in business loans it will not earn interest. Investors are responsible for placing their bids, buying loan parts and managing their account. Regular emails update you of any money you have not 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 is unable to repay its loan.

LendingCrowd strongly recommend investors 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, when submitting a loan application it is important to bear the following in mind:

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.

Credit checks

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 a business’s credit scores.

Have any questions?

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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.

If you invest through LendingCrowd you should understand that as a lender, your capital may be at risk.

LendingCrowd is the trading name of Edinburgh Alternative Finance Limited, Company Number SC468392, authorised and regulated by the Financial Conduct Authority (Firm reference number 670991). LendingCrowd and its products are not covered by the Financial Services Compensation Scheme.

Read more about the risk involved when investing and borrowing.
LendingCrowd is a credit broker and not a lender.

The company's registered office is 23 Manor Place, Edinburgh, EH3 7DX.

Copyright © LendingCrowd 2017. All rights reserved.

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