All Know about the 5 Categories of Crowdfunding in France?

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Crowdfunding is an alternative financing method that can take several different forms.

In France, the regulations distinguish 5: lending between individuals or peer to peer lending, donations, loan to companies or crowdlending, capital financing and royalty financing.

Peer to peer lending which is a loan between individuals

Peer-to-peer lending (P2P) or peer-to-peer lending (PAP) is arguably the most popular category of crowdfunding. This loan model allows individuals (natural persons) to lend or borrow money from other individuals from online platforms.

It takes place without the intermediary of a traditional credit institution, the P2P platforms acting as a market intermediary. Lenders invest through loan companies who then lend the funds to borrowers. The latter undertake to repay the loan and any interest in accordance with the set deadline.

Donation platforms

Donations collected through these platforms are generally of two kinds. They can be completely disinterested, that is to say without compensation in which case we will speak of crowdgiving, or offered with a reward (material or symbolic) and qualified as “reward based crowdfunding”.

Donors can be natural or legal persons. As for the funds collected, they are generally intended for the financing of associations and other organizations pursuing lucrative goals or not.

Crowdlending which is a business loan

Only individuals acting in a professional or business capacity can claim this category of crowdfunding. On the other hand, lenders can be natural or legal persons investing within the limit of their means and regulatory thresholds.

Crowdlending is a powerful lever for entrepreneurs, startups and SMEs wishing to finance their projects or develop their activities through less restrictive channels.

Companies will send their loan request to platforms with the status of CIP or PSI. Loans can be granted to them with or without amortizing interest depending on the term and terms set by the loan contract.

Equity Crowdfunding which is a participatory capital financing

Equity crowdfuding is aimed at companies wishing to finance their projects or their development by a large audience of investors.

Companies will issue registered securities in return for an investment granting direct participation in the share capital. As you will have understood, the great peculiarity of capital financing is to confer on investors the status of full shareholder in the entities financed and to be entitled to the profits and capital gains generated by their activities.

Funding in royalties

Also known as royalty crowdfunding, it is an alternative to equity crowdfunding. It is a financing model allowing entrepreneurs or companies to finance their projects without opening their capital to investors.

They thus retain control of their social capital. In return, they must pay a percentage of their turnover to investors quarterly until full repayment. We Do Good and My Pharma are currently the only platforms to offer this category of crowdfunding in France.

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