Crowd2Fund Investment Review

By Jordan Stodart | On February 15th, 2016
Updated 15th February 2017. Originally published July 2016.

Crowd2Fund facilitates investment in UK businesses. As an investor, you manually select the loan(s) you wish to invest in. You can also set up the Crowd2Fund Smart-Invest function, which allows you to automatically invest your funds into opportunities (more below) based on your risk appetite and other criteria. To-date, Crowd2Fund has had zero defaults or loss of capital* and investors have earned more than the targeted, gross APR of 8.7%.

Crowd2Fund is one of a handful of peer-to-peer lending (P2P) platforms capable of offering the tax-efficient Innovative Finance ISA (IF ISA), allowing you to hold your Crowd2Fund investments in the wrapper free from tax on returns.

*Past performance is not a reliable indicator of future performance.

Your capital is at risk with peer-to-peer lending, you are not covered by the Financial Services Compensation Scheme (FSCS).

Crowd2Fund Statistics

(Statistics are correct at time of publication 02/17)

Returns/rates

Estimated (minimum APR)

8.7% APR**

**Crowd2Fund target APR is calculated before target defaults of 0.5% and investor fees. This APR is gross and actual returns may be higher or lower depending on market conditions.

Performance

Arrears

There have been minimal late payments, resulting in a 0% 12 months’ average July 2015 to June 2016.

Historic default rate
Crowd2Fund has a 0% default rate, since the platform formed in 2014.
Estimated default rate 2017

Crowd2Fund has an estimated default rate of 0.5% for 2017.

Total lent funds to-date

£4million have been lent across Crowd2Fund since the platform formed in January 2014.

Crowd2Fund performance statistics July 2015 – June 2016

Crowd2Fund Borrowers

British businesses that pass rigorous vetting criteria are listed on the Crowd2Fund platform, seeking financing for expansion and growth, predominantly.

Crowd2Fund’s loan range is between £10,000 and £500,000.

Geographical spread

Crowd2Fund vet and list British businesses seeking financing, typically in Southern England, but with opportunities spread across Great Britain. All of the opportunities listed blow are eligible to be held in the Crowd2Fund IF ISA.

Geographical spread of current investment opportunities (correct at time of publication):

England:    6***
Scotland:   1
Wales:         1

***One of these opportunities is a Bond instrument, whereas the remainder are all Loans.

NB: These opportunities are live on Crowd2Fund as of 15/02/17, they may no longer be live when you are reading this.

Visit Crowd2Fund Website

Crowd2Fund Security

Crowd2Fund assess each and every investment opportunity on a case-by-case basis, ensuring all due diligence, underwriting processes and risk assessments are executed prior to approving and listing loan opportunities.

Due diligence

Directors related to an applicant business are vetted thoroughly by Crowd2Fund. They undergo background checks for identity, fraud, businesses bankruptcy, linked businesses, county court judgements, and credit history.

Things that will put an application into immediate decline:

  1. Any director or shareholder with over 10% shareholding in the business who is currently bankrupt or has been declared as such within the past 10 years.
  2. Any director who was also a director of a business which failed with unpaid debts, or was part of a business in the same industry which failed, in the past 5 years.
  3. The business applying for the loan has an unpaid County Court Judgement in excess of £500 or has a track record of judgements without satisfactory justification.

Financial assessment

The underwriting team at Crowd2Fund assess businesses applying for debt-based funding, (loan, revenue lending or mini-bonds) primarily assessing cashflows to understand the company’s capability in repaying the loan.

Crowd2Fund expects a minimum threshold of cash-cover for repayments, in the region 1.25:1

Length of time in business plus the strength of the directorship are also considered when reviewing loan applications.

Personal guarantee

Despite Crowd2Fund professing ‘security’ is no substitute for a business’s ability to repay debt, it should give you some comfort that security is taken, generally, on each loan.

Crowd2Fund takes security in the form of personal guarantees (accepted for loans up to £100k), floating or potentially fixed asset charges.

Chris Hancock, Founder and CEO, informed Orca that 95% of loans have been director guaranteed.

Diversification

Crowd2Fund offers you the opportunity to manually select loans, thus building your own portfolio of investments: bonds, loans, revenue lending and equity. You are responsible for bearing the risk when pricing and investing in debt-based loans. Crowd2Fund’s risk grading does not apply to debt instruments.

‘Smart-Invest’

Crowd2Fund also offers an auto-diversification function, although not in the typical fashion as seen with the likes of Zopa, RateSetter and Funding Circle. With Crowd2Fund’s Smart-Invest system, you can opt for ongoing investments to be spread amongst new opportunities, automatically.

You are required to input a number of criteria, such as risk appetite, as well as your desired APR (% return) to determine which opportunities your capital will be spread between.

Crowd2Fund Company History and Team

Crowd2Fund was established in 2014 by Chris Hancock. The platform was created to capitalise on the breakdown in bank lending and the lack of opportunity afforded to UK investors and savers to earn high-yield returns, and create smart, diversified portfolios.

Chris Hancock, Founder/CEO

Chris has a wealth of experience in delivering digital projects in various industries. He worked for HSBC delivering their digital global marketing platform prior to founding Crowd2Fund.

Navdeep Arora, Director of Risks & Operations

Navdeep worked at Merchant Money Ltd as their Chief Risk Officer prior to joining Crowd2Fund in October 2015.

As well as accomplished members leading Operations, Technical and Marketing, Crowd2Fund has a board of reputable Advisors, including Nigel Webber, Ex-Global Chief Investment Officer at HSBC Private Bank.

Crowd2Fund Products & Returns

Donation

Lowest risk & return, this product allows you to invest in great causes with possible tangible returns, but no guarantee you will receive anything (other than a good feeling!).

Lending

Crowd2Fund’s monthly repayment loans mean you will receive fixed interest and some capital each month, reducing the risk of losing significant amounts of money from your portfolio.

Bonds

Generally offered to businesses funding specific projects, these offer interest only and repayment upon term maturity. This means there’s greater risk that you lose money in a default.

Revenue

Crowd2Fund’s Revenue Loan investments are typically offered to early-stage, high growth companies, where the businesses have greater flexibility in repayments compared to standard loans as repayments are made as percentage of monthly turnover.

Equity

The riskiest asset class offered by Crowd2Fund is equity investments, where you can buy a stake in the company and earn higher returns if the company is successful. Tax incentives such as EIS/SEIS are available to offset some of the risk.

Exchange

Investors who want their investment back before the end date may sell their investment on Crowd2Fund’s Exchange platform.  You choose the amount at which you want to sell the equity or the remaining loan, letting other investors the chance to return liquidity to you and take on your earnings henceforth.

Crowd2Fund Innovative Finance ISA (IFISA)

The new Innovative Finance ISA, launched 6th April 2016, gives you the opportunity to invest in a Crowd2Fund debt-based product, shielding the interest earned from tax. It follows similar rules to traditional ISAs, but has some specific alterations due to the relative complexity of peer-to-peer lending.

Crowd2Fund is one of very few peer-to-peer platforms capable of offering the IFISA, due to being fully regulated by the FCA and being granted permissions by the HMRC. This is an excellent opportunity for savers and investors to take their first steps into P2P lending, earning a higher rates and not being taxed on the earnings.

Crowd2Fund ‘Smart-Invest’

Crowd2Fund does well to explain the risks involved when investing: ‘Investments may offer attractive returns, but there’s always a chance you could lose your capital. We recommend that you invest in a number of businesses to spread your risk.

Crowd2Fund’s Smart-Invest portfolio function helps investors achieve diversification by auto-splitting capital between multiple suitable investments, as determined by the criteria of your personal Crowd2Fund profile.

Criteria to be filled in, include:

1. Investment strategy

a) Level of investment knowledge (weighted 1 to 5 low to high).

b) Your liquid assets/worth (£).

c) Your risk appetite (weighted 1 to 5 low to high).

2. Sectors of interest

Sectors range from consumer products to food & drink to IT and telecoms and in-between.

3. Preferred investment types

Equity, Lending, Revenue Loan, Donations, Crowdbond.

4. Intended yearly investments

New investments value:             £1k to over £1m

Number of new investments:  1 to more than 10

Visit Crowd2Fund Website

Crowd2Fund Fee Structure

Crowd2Fund take a management fee of 1% from repayments to investors. This means you are only charged when you are successfully repaid.

Risks Investing in Crowd2Fund

Peer-to-peer lending is not covered by the FSCS. There’s a risk you could lose capital without the protective coverage banks and institutions are backed by. Due to Crowd2Fund’s borrower vetting processes, no investor has ever lost a penny to-date, but that is not a guarantee of future performance. Here is a couple of things you should be aware of.

Multiple product options

Crowd2Fund’s ‘Revenue’ and ‘Lending’ debt-based investments are the only products that pertain to peer-to-peer lending. Don’t be confused by the other product options, which will have very different features, benefits and risks.

Manual loan selection

With any manual loan it is your responsibility as the investor to fully assess the risk. Take comfort in the diligence and underwriting processes employed by Crowd2Fund prior to approving and listing loans. Be conscious, however, that despite there being no history of capital loss or even defaults, manual loans still bear risk: the risk that you don’t adequately assess them correctly.

Conclusion

Crowd2Fund offers a diverse product range, catering to various types of investors, from the philanthropic donator to the more experienced equity investor. They are making big steps in debt-based investments (peer-to-peer lending) by being one of few peer-to-peer lending platforms capable of offering the Innovative Finance ISA as well as including such features as Smart-Invest and their loan-selling Exchange service.

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