Crowdinvesting: high return, high risk

Berlin – New companies are increasingly using crowdinvesting to finance their business ideas. Investors have high return opportunities, but also risks. Film projects, windmills or eco-friendly bamboo straws – the range of crowdinvesting projects is huge. In contrast to crowdfunding, this is more than a good idea. The money lenders can not only support young companies, they also hope for a high return.

 

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“In the meantime, the largest share is equity interests in the form of a so-called shareholder subordinated loan,” says Volker Schmidtke of the Verbraucherzentrale Berlin. “The investor gives money to a company, so grants him a loan and in return receives a share in the profits or value of the company.”

Websites such as bankless24, Bergfürst, Companisto or Seedmatch present companies that want to raise money for their business idea. “The exact return opportunities will be seen only from 2016, when the first projects have reached their minimum term,” says Ralf Beck, a professor at the University of Applied Sciences Dortmund. Nevertheless, he is convinced that this form of investment opportunity is attractive because you can participate in the growth of new companies at a very early stage. As a result, the return opportunities are high, but also the risk.

Whether an idea prevails is not guaranteed. “Especially newly founded companies hope to have a chance on the market with their products and to establish themselves, which can, but does not have to, work,” says Thomas Pfister from the Verbraucherzentrale NRW. “In case of insolvency of the company or failure of the project there is a risk of total loss.”

Not all startups establish themselves. “Experience has shown that about 50 percent of startups fail to survive the market in the long term,” says Beck. Most platforms, however, would pre-select the projects carefully. “More than 90 percent of startup applicants drop out at this point,” says Beck, who relies on discussions with platform operators.

This form of investment is suitable for people who have money left over. “Anyone who believes in an idea and is willing to take risks, who has already secured solid retirement provision, a liquidity reserve and important risks, such as liability, can think about whether he or she wants to venture such a risky investment,” says Pfister. Since an early exit is usually difficult, investors should set aside at least three net monthly salaries before they even invest money. “Then there are enough reserves to pay for unexpected expenses.”

Consumer advocate Schmidtke advises: “Before you decide on an investment, you have to check the whole thing on two levels: Is the platform serious and is the project promising?” The business plan and financing concept should be clear and convincing. For a better risk assessment, he recommends asking the vendor about the dialog function that exists on many platforms. That may be instructive.

Consumer advocate Pfister warns: “Even reviews in forums do not protect against a possible total loss, for example, if the project fails.” Therefore, he advises consumers to pay attention to whether on the platforms cost, participation and return opportunities are presented, and if there is information about what happens if the project fails, the company goes bankrupt or does not get the necessary start-up sum ,

The risks of the investment should be clearly stated. According to findings of the consumer center Berlin, there were shortcomings in the past. Therefore, the consumer advocates warned five platforms. They had not sufficiently pointed out the risk of total loss, or the information was only hidden on the page. In some cases, according to Schmidkte, it has not been pointed out that the company valuations given are notionally calculated values ​​that have nothing to do with balance sheet values. A platform had also specified maximum values ​​for the acquisition of funds, which then increased again and again.

In the meantime, the platforms bankless24, Bergfürst, Companisto, Crowdrange and Seedmatch have responded: “They have partly quite satisfactorily changed the pages, but only two of them have warranted by cease and desist that they will not go back to their old state,” says Schmidtke. Beck also recommends that interested investors invest in different platforms and projects and not just put everything on one project. “Scattering greatly reduces the likelihood of losing the entire stake,” explains Beck.

 
 

With microcredit in the self-employment

 

With microcredit in the self-employment

Berlin / Hamburg – Starting a business often fails because of the first hurdle – the credit. Microcredit could be the solution for entrepreneurs. Microcredits are used to lend small amounts of money; the range extends from a few hundred euros to a maximum of 25,000 euros.

News / Finance

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Anyone who wants to have access to capital in Germany as an entrepreneur or as an existing company has difficulty with small amounts. “The effort is simply too big for classic banks,” explains Max Herbst from the independent FMH financial advisory service in Frankfurt am Main. “The lending of a small sum has no relation to the management of the loan.”

For example, a graduate who wants to start his own start-up has bad cards with traditional banks. “The chance of getting a loan from a bank or savings bank without the customer being able to contribute or vouch for equity is around ten percent,” says Herbst. “The risk is too big for the banks.”

State-assured microcredits

The Federal Government has therefore created state-guaranteed microcredits. A microcredit is, as the name suggests, a micro-loan. Only a few hundred but only a maximum of 25,000 euros will be lent. With this the government wants to build up a nationwide supply with appropriate financings. The small loans are secured with a fund of 100 million euros – the micro-credit fund Germany. The donors are the European Social Fund and the Federal Ministry of Labor and Social Affairs.

Since its launch in 2010, over 6,000 loans have already been issued. Entrepreneurs or young companies borrow an average of 6000 euros for a duration of mostly 25 months. There is no lower credit limit. The term is up to three years. So-called microfinance institutions, such as management consultancy, take over the administration and consulting. Then they transfer the borrowers to the GLS bank. She is the real financier.

According to information from the Federal Ministry of Labor, lending works quickly and unbureaucratically. “From the loan application at the bank to the payout usually take five to ten days,” says a spokeswoman. “For normal business loans, the processing time at the banks is usually a multiple.” Promoted sectors are above all services, followed by gastronomy and retail. “These industries in particular have particularly difficult access to capital.”

8.9 percent annual percentage rate

The founders and entrepreneurs do not receive a lower interest than usual in the market. You currently have to factor in 8.9 percent APR. The microcredit of the federal government should make existing offers in the market no competition, the Ministry emphasizes: “It is aimed exclusively at small businesses and start-ups, which receive no loans from banks.”

However, Prof. Udo Reifner from the Institute for Financial Services (IFF) in Hamburg considers the program to be unsuitable for founders and small entrepreneurs. “The fund reduces the diligence of the credit intermediaries and the bank, because the risk is borne by the state,” says Reifner.

In addition, the banking sector will leave with the microfinance institutions active here. “The program is an invitation to dubious and inexperienced business consultants to act as a credit intermediary and to advertise with the state seal customers.The quality of the advice is not checked,” the financial expert to consider. Professional advice is only given to banks or savings banks that have a business start-up center and corresponding specialists, adds Reifner. The term of the microcredit secured by the EU and the federal government is also too short, with a maximum of three years.
“A company usually only reaches the break-even point after more than three years, ie the point at which it is able to survive.”

Consumer loans for young entrepreneurs

The way out of a credit crunch is for young entrepreneurs in the opinion of Reifner therefore the Dispo credit. “Banks are already lending small loans to a large extent, but these are not given as start-up loans, but as consumer credit, such as overdrafts, because there are much lower hurdles.” Because the cost of consumer loans are well below those for commercial loans. However, the customer has to do without an examination of the business idea and expert advice.

Young entrepreneurs without equity financial expert advises fall to turn with their corporate concept to the development banks of the individual states. “These institutions can examine the business model for start-ups and bear part of the risk, and they take over the guarantee to another bank that eventually lends the loan.” Also, the savings banks offer small commercial loans, where the interest is subsidized by the state and therefore cheap.

Entrepreneurs can also contact the Chambers of Commerce and Industry, Chambers of Crafts and various start-up initiatives. As a rule, the advisers also know the credit offer of the local institutes and the state funding opportunities. The advice of the chambers is usually free. If those who are willing to start up have a solid business concept in their hands, the chances of getting a loan are already significantly higher.

The microcredit and the alternatives

A total of 45 microfinance institutions (MFIs) look after start-up companies and companies for receiving the microcredit funded by the Federal Government, from the initial interview to repayment. Customers can contact the individual institutions via the website www.mein-mikrokredit.de.

 

 

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