Crowdfunding or crowdfunding is a mode of financing allowing individuals, entrepreneurs or companies to have projects financed by a community of investors via dematerialized platforms.
It comes in six distinct forms including: loan to individuals, donation platforms, crowdlending, equity crowdfunding and royalty financing.
Focus on these 5 categories of regulated crowdfunding in France.
Loan to individuals, or peer to peer lending
P2P / PAP or peer-to-peer lending is a peer-to-peer lending system with a commitment to repay, without the intermediation of a banking institution.
People wishing to lend entrust their money to P2P platforms which then make them available to borrowers who need credit to finance their projects. This loan model constitutes an alternative solution for borrowers wishing to overcome the costs and constraints generally encountered with traditional credit organizations.
This crowdfunding model allows donors (natural or legal persons) to finance projects through cash donations. The funds raised are generally intended to support entities such as associations, carrying out non-profit projects.
Donations can be selfless or in return for a reward. The funds collected are deposited in a specific account dedicated to the project opened with an account keeper. The collection of donations is assimilated to a payment service activity that only platforms approved by the ACPR can exercise.
Business loan, or Crowdlending
It is a finely participatory method allowing companies (SMEs, Start-ups, etc.) to obtain the financial support they need from individuals (lenders). The loan request is made to web platforms specializing in business loans (Crowdlending).
Interested lenders grant their loan, within the limits of the ceilings authorized by law for participating loans. The borrower, for his part, undertakes to repay the funds received as well as any interest on an amortization period which generally does not exceed 7 years.
Equity crowdfunding is a comparable method of crowdfunding built on the same principle as crowdlending with a few differences. Investor-lenders who participate in fundraising subscribe to shares in the capital of the company.
They therefore become shareholders. As such, they have the right to monitor and receive dividends on the company’s future profits. Equity crowdfunding can be an ideal financing solution for new ones. An interesting tax aspect for the lender is to be able to deduct the amount loaned from his taxes.
Funding in royalties
The financing in royalties or royalty crowdfunding is a mode of participatory financing intended for companies / entrepreneurs anxious to have their project financed without losing control. Indeed, the project leader obtains the necessary funds without opening his capital to investors.
On the other hand, the entrepreneur undertakes to gradually pay them percentages of his turnover according to a quarterly amortization deadline. This crowdfunding model, still underdeveloped in France, is supported by two platforms: My Pharma Compagny and We Do Good.