Crowdfunding is a financing method that combines the concepts of "crowd" (a collective or group) and "funding" (providing financial support). It refers to the practice of collective or collaborative investment, where numerous small investors join together to fund a project. In Spanish, it is also known as participatory funding.
A mortgage guarantee grants a person or entity the right to a property when a debt or commitment is established. In case the debt remains unpaid or the committed payment is not fulfilled, the recipient of the mortgage guarantee can become the owner and sell the guaranteed property to recover the loaned funds or receive compensation.
These projects involve developers offering an asset as collateral for the loan received. A collateral agent, acting on behalf of the investors, holds the pledged asset as security. The pledged asset may or may not be the same as the project's target asset. If the developer fails to meet payment obligations to the investors, the collateral agent can foreclose on behalf of the investors, allowing them to recover part or all of their investment. The mortgage on the asset remains active as long as the project is ongoing.
A collateral agent is an independent company specialized in securing, safeguarding, and executing collateral if necessary. It always acts on behalf of and under the mandate of the investors.
Individuals of legal age, both Spanish and foreign nationals, can be investors. Additionally, legal entities (companies) with tax residence in Spain or the EU are also eligible. There are certain countries from which investors are not allowed to initiate any monetary transactions. These countries include Afghanistan, Barbados, Belarus, Burma, Bosnia-Herzegovina, Burundi, Korea, Egypt, United Arab Emirates, Ethiopia, United States, Guatemala, Guinea, Guinea-Bissau, Iran, Iraq, Lebanon, Libya, Macao, Mali, Mongolia, Namibia, Panama, Central African Republic, Congo, Russia, Samoa, Somalia, Sudan, Sri Lanka, Syria, Ukraine, Venezuela, and Yemen.
Each opportunity presented on the platform has a specified timeframe. To withdraw the invested capital, investors must wait until the developer repays the capital received from the investors in the form of a loan.
The developer is responsible for deducting and withholding any interest or dividends distributed to investors. They are also responsible for settling the corresponding tax payments with the relevant tax office in their country. Additionally, the developer must provide an annual summary of the interest or dividends paid and the withholdings made.
The total return on a fixed-rate project is calculated by dividing the total benefit obtained by the investor (interest) by the value of the borrowed capital. The result is then multiplied by 100 to obtain a percentage. For instance, if a €5,000 investment generates €1,000 of interest over 18 months, the total return on the project would be 20%.
The annual return on a fixed-rate project is obtained by annualizing the total return on the project. To achieve this, the total return is divided by the number of months the project has been active and then multiplied by 12 months in a year. For example, if a €5,000 investment generates €1,000 of interest over 18 months, the total return on the project would be 20% and the annual return would be 13.33%.
The IRR, also known as the Internal Rate of Return, represents the interest rate or profitability generated by a project and serves as a measure for evaluating investment profitability. It indicates the percentage of profit or loss expected from the investment. The IRR enables comparison of profitability across different projects.
Investments made through participative financing platforms like ours are not without risks. In the worst-case scenario, there is a possibility of total loss, partial loss, or temporary illiquidity during the loan period.
The most effective method of risk reduction in investments is diversifying your project portfolio. By spreading your investment capital across various projects, rather than contributing €10,000 to a single project, you can make smaller contributions of €1,000 to 10 different projects. This simple approach allows for risk diversification among multiple opportunities.