Did you know there were different types of participative finance? You can now not only invest without the banks, but also chose an investment that will help you get involved in a whole different way.
Social lending or the philanthropy 2.0
The donation-based crowdfunding is the 1st type that emerged on the Internet, through websites such as JustGiving, where people support financially projects and causes that they care about, without any other retribution than personal satisfaction.
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Through micro credit or social lending, people from disadvantaged backgrounds or countries are given an opportunity to raise funds for business ventures or to better their lives and communities. Companies such as Kiva have allowed individuals to grow their businesses, fund their medical expenses or better their living conditions through micro loans and microfinance. Zidisha is another micro credit peer to peer lending company which has assisted in boosting communities and entrepreneurs. To date they have raised $4.7m and funded 21,190 projects.
Crowdfunding, the reward-based funding
Crowdfunding sites such as Kickstarter and Indiegogo rely on donation-based funding to start your own campaign to raise funds. In return investors gain tangible rewards or one of a kind experiences or products. Indiegogo offers various projects and entrepreneurial ideas for investment and loan transactions from medical to film to music to environment. To date it has raised $800m from nine million backers over 600k projects. Kickstarter supports creative minds such as artists, film producers, designers and musicians. It has raised $2.2bn for near to 100,000 projects to date.
Crowdlending has seen massive global growth
Peer to peer lending is often also referred to as crowdlending. Through crowdlending, individuals or businesses choose to invest through online P2P sites to other individuals or small businesses. This is done to gain better interest rates than offered by traditional banks and for small businesses or individuals to obtain loans when banks are reluctant to grant them. Prosper, LendingClub and Zopa were the first P2P platforms to start up. To date crowdlending in the USA has seen incredible growth and increased from $3.5bn in 2013 to $64bn in 2015.
Equity-based lending boosting small business and startups
Through equity-based lending, groups of investors invest in startup businesses or SMEs (Small to Medium Enterprises) through peer to peer lending. They benefit from this type of investment through gaining an equity stake or part ownership in the company. To date the highest amount raised in such a transaction was though Companisto for Weissenhaus, a real estate business where €7.5m was raised by almost 1,700 investors. Other collateral based lenders having raised large amounts have included Net Zero Aqualife, which raised more than $4.5m through Crowdfunder and Chapel Down Group PLC which raised almost £4m through Seedrs.
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