Apr 22, 2021

What is Crowdlending? (Process, Returns, Opportunities)

Crowdlending gives small and medium enterprises (SMEs) the ability to quickly fund themselves without approaching a bank. 

It also offers investors the opportunity to invest in businesses they care about and earn passive income in the process.  

But, what exactly is crowdlending, and what kind of returns can you expect?

In this guide, we’ll answer those questions and recommend some popular crowdlending platforms too.


This Article Contains: 

(Click on a link to jump to the specific section) 

What is crowdlending?

How crowdlending works

The pros and cons of crowdlending 


Potential returns 

The 7 best crowdlending platforms 

Let’s get started. 

What Is Crowdlending?

Crowdlending is a type of crowdfunding investment where investors agree to loan money to finance a project in exchange for financial return, such as interest payments. 

Most crowd lending investments target annual returns of 12-14%, making them an attractive option for investors. 

What about crowdinvesting?

Crowdlending differs from other crowdfunding methods, such as crowdinvesting, where investors usually receive a stake in the project or equity in the company in exchange for their money. Crowdinvesting is the same thing as crowdfunding but from an investor’s perspective.

For businesses, crowdlending can be an effective means of raising large sums of money without needing to go to a bank or giving up a stake in the company.  

How Crowdlending Works

Crowdlending, also called peer to peer lending (P2P) or marketplace lending, involves multiple lenders and a borrower. 

Lenders, which could be private individuals or companies, loan money to borrowers looking for funding. It’s an excellent way for businesses to receive funding without having to go to a traditional bank for a loan application.

This happens through a crowdlending platform, which aims to match the funding needs of borrowers with the investing needs of the investor.

A crowdlending platform is a marketplace combining consumer lending, business lending, and property lending in the form of secured or unsecured debt, which could be a loan, bond, or another type of debtor note.

Here’s how the process works:

1. Before a borrower can receive funding from the crowdlending platform, the platform reviews the borrower’s creditworthiness and borrowing capacity to determine how risky lending to them would be.

2. If everything checks out, the opportunity is listed and individual investors can invest in it (start funding the loan).

3. Then, once a project has received sufficient lenders, a loan agreement is concluded between the lender and borrower. 

4. Once the contract is established, the crowdlending platform transfers the funds to the borrower. In exchange, the borrower agrees to repay the principal amount to the lender over a predetermined period, plus interest. 

The lending platform ensures that the loan is repaid to minimize the amount of work required on the lender's (investor’s) part. The platform addresses any issues that may arise, usually in exchange for a monthly fee.

Pros and Cons of Crowdlending 

Here are the advantages and drawbacks of investing through a crowdlending platform: 


  • Investors aren’t typically required to loan large sums of money, making this an accessible investment opportunity, unlike other debt-backed investments that are reserved for institutional investors.
  • Potential investors may spread their risk by investing in multiple projects across several countries and industries.
  • There are options for short-term investments starting from as little as 10 days to 1-2 years.
  • Crowdlending can generate passive income through regular interest payments.
  • There’s potential for relatively high returns as most platforms offer average yearly returns of 11-15%.
  • Investors can choose where their money is going. This way, you can invest in a business or entrepreneur you feel strongly about.
  • Small and medium businesses can raise money without requiring a bank loan from traditional financial institutions.


  • You have little control over what the business does with your money.
  • All the interest you receive from the business loan is fully taxable.
  • Relatively illiquid in the sense that your money is usually locked in until you receive the principal amount, plus interest in full. For some investments, this could be years.

Risks of Crowdlending 

There are two key risks associated with investing through crowdlending platforms, such as: 

  • The loans may be unsecured.

In other words, there’s no collateral backing the loans, which can result in the borrower defaulting (being unable to pay back the loans). Some platforms attempt to mitigate this risk by offering to pay you if there’s a default. This is referred to as a BuyBack guarantee.

  • The crowdlending platform could go bankrupt.

There are many reasons why this may happen, such as poor risk management, too many defaulting borrowers, or larger macroeconomic conditions. Most credible platforms have contingencies in place to prepare for bankruptcy and protect the investor’s money. For example, any platform offering securities must be a member of the SIPC (Securities Investor Protection Corporation). 

Potential Returns 

Each crowdfunding platform will have its own risks and expected returns. 

However, most crowdlending platforms often offer loans with three levels of risk that play a role in determining your potential returns. Generally, the higher the risk, the higher the returns.

These risk levels are: 

  • Low risk: Provides returns of between 4 - 10% per year. These are loans that tend to be backed by collateral like real estate and are insured.
  • Medium risk: Provides returns between 10 - 14% per year. These may be unsecured loans or there may be some uncertainty regarding the company’s ability to repay its debts.
  • High risk: Provides returns of 14 - 20% per year. These borrowers often have a higher debt-to-income ratio. This is the percentage of their total income that goes into repaying debt. It’s always safer loaning to borrowers with low debt-to-income ratios as only a small portion of their capital has to go into paying back their loan.

Now that you know what crowdlending is and how it works, here are some of the best platforms you can use to take advantage of this opportunity: 

The 7 Best Crowdlending Platforms In 2021

Here are some of the most popular crowdlending platforms in 2021: 

1. Yieldstreet

Yieldstreet is a P2P platform offering an accredited investor the opportunity to take advantage of debt-backed alternative investments spanning various industries such as fine art, commercial real estate loans, marine financing, and more. Investors pay a 1-2% annual management fee and there are some annual fund expenses per investment. 

Potential returns 

Returns will vary on a case-by-case basis. However, the platform targets annual returns of between 5-15%. 

Minimum investment 

Minimums for direct investments vary, but they can start as low as $1000.


SMBX connects everyday investors with small businesses looking to raise capital. You invest in SMBX's unique Small Business Bonds that function like a term loan with a fixed interest rate. 

Potential returns

The specific loans you invest in will determine your expected annual return, but it averages around 6.5%. As an investor, you receive these payments on a monthly basis. Once the bond’s term comes to an end after 60 months, you’ll have received the principal amount plus interest. 

Minimum investment 

Minimum investments may also fluctuate, but SMBX generally sells bonds in $10 increments.

3. PeerStreet

PeerStreet is the first marketplace for investing in real estate debt. The platform loans money to borrowers and then sells stakes in the loans to investors who then share in the profits. This helps investors take advantage of the real estate market without the hassles associated with owning property. 

Potential returns

Peerstreet targets annual returns of between 7-12%. 

Minimum investment 

PeerStreet requires an initial deposit of $1,000 and $100 for reinvestments.

4. BlockFi 

If you happen to have some cryptocurrency lying around, consider investing it in BlockFi. Simply store your crypto on the platform and you’ll accrue interest and receive monthly distributions. The only fees you’ll incur with BlockFi are when you withdraw your cryptocurrency. 

Potential returns 

You can earn up to 8.6% APY depending on the cryptocurrency you’re depositing. 

Minimum investment 

There is no minimum investment, but you’ll need at least 0.003 Bitcoin or 0.056 Ethereum to withdraw.

5. Constant

Constant is a multi-market P2P lending platform that allows investors to fund people and businesses around the world. Crypto collateral or buyback guarantees back all lending on the platform and there are no investing or withdrawal fees. 

Potential returns 

Depending on your selected investment, returns can range from 4% APY to 10%.

Minimum investment

There is no minimum investment. 

6. Percent 

Percent provides investors with access to high-yield short-term debt investments supported by cash-generating assets. Investors can take advantage of opportunities typically reserved for accredited investors for no fees.

Potential returns 

Potential returns vary with each investment, but Percent states the expected annual return under each investment.

Minimum investment 


7. Groundfloor 

With Groundfloor, anyone can invest in real estate loans with as little as $10. When you invest with Groundfloor, you gain access to short-term, high-yield returns. Every offering is pre-funded by Groundfloor after a thorough vetting process. 

Potential returns 

Typically, loans return an annual average of 10%. 

Minimum investment 


Wrapping Up

With crowdlending platforms, investors can pool their money to fund businesses they believe in and earn high returns in the process. This helps businesses, too, as they don’t need to approach a bank or give up a stake in their company to secure the necessary funds.

If you’d like to learn about more such alternative investments, consider taking the MoneyMade Investor Quiz. Answer a few simple questions and MoneyMade will suggest a list of investments that suit your investing needs! 

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