We empower our investors with as much information as possible, to make measured, considered investment decisions. Even though the businesses on Crowd2Fund generally perform well, giving good returns, we will never be able to guarantee this.
Our risk and due diligence team are dedicated to assessing and hand-picking all businesses we list; however, there will always be an element of risk to any investment. IFISAs are categorised as high risk investment products by the FCA.
Different types of investment come with different levels of risk and reward. It’s important to diversify your investments and spread the risk across a range of opportunities.
With Crowd2Fund, you can build a balanced portfolio with five different ways to tailor your investments to fit your needs. The product you invest through determines the return along with the credit risk indicator which defines our baseline pricing.
Monthly-repayment loans work where an element of your investment - plus interest - is repaid every month, reducing the risk of loss to the investor with every repayment.
We take our responsibility to mitigate risk very seriously, but we cannot foresee all eventualities. Every business is subject to potential difficulties, and may not be able to repay some or all of its debt. In the event of a default, Crowd2Fund will work on behalf of the investor to recover as much of the debt as legally possible - including enforcing the director's personal guarantees. Nonetheless, all investors acknowledge upon pledging that there is a potential to lose some or all of their capital.
Some crowdfunded loans do not get repaid. In addition to potential losses, investors should consider the impact of Crowd2Fund's management fees and tax implications.
Crowd2Fund levies a management fee of 1% against all repayments to investors. This ensures that investors are only charged for investments which are successfully repaid. Any investments that are not repaid will not incur management fees.
Interest is paid back to investors pre-tax. Any interest generated from investments should be declared to HMRC by the investor. It is the sole responsibility of the investor to assess and remit their obligations to HMRC.
For more details, please see our Terms & Conditions.
Revenue Loan investments come with the risk of loss, in the event that the loan isn't repaid. Businesses who borrow using a Revenue Loan, are often at an earlier-stage of development than those borrowing with standard Loans. These businesses are given more flexibility for their repayments.
Investors can expect to receive an interest payment every month - however, the amount of capital repayment will fluctuate depending on the performance of the business. It may take longer than projected to be fully repaid. The opposite may also be true, and the loan may be repaid in a shorter period of time.
Revenue loans are only offered to businesses generating profits at the time of listing, unless being offered under Venture Debt, where the business may be loss making.
Please remember, past performance is not a guarantee of future results. Interest rates for Revenue Loans are higher than standard Loans. This reflects the flexibility of repayments and the increased risk of investing in earlier-stage businesses.
Crowd2Fund's dedicated team of credit analysts review the creditworthiness of all businesses before they are accepted onto the Crowd2Fund marketplace. Risk ratings for each business are provided by Equifax. Ultimately, it is the sole responsibility of the investor to decide which businesses they consider appropriate for investment.
Some crowdfunded loans do not get repaid. In addition to potential losses, investors should consider the impact of Crowd2Fund's management fees and tax implications.
Crowd2Fund levies a management fee of 1% against all repayments to investors. This ensures that investors are only charged for investments which are successfully repaid. Any investments that are not repaid will not incur management fees.
Interest is paid back to investors pre-tax. Any interest generated from investments should be declared to HMRC by the investor. It is the sole responsibility of the investor to assess and remit their obligations to HMRC.
The credit risk indicator determines a base price indicated in the table below. The base price may be adjusted by the underwriting team up to 2% APR due to market conditions or credit risk. If the price is adjusted then the reason for the adjustment is shown within the credit underwriting comments on the campaign page.
The table below demonstrates the relationship between the credit risk grading and also the base interest rate offered for each investment opportunity. The credit risk indicator is shown on every campaign page.
*This pricing model has been applied to any listings after the 16th September 2021 and historical pricing methods are available below.
| Credit risk indicator | |
|---|---|
| 11% to 12% | Much lower risk |
| 12% to 13% | Lower risk |
| 13% to 14% | Medium risk |
| 14% to 15% | Higher risk |
| 15+ | Much higher risk |
Interest-Only Loans are generally offered to businesses undertaking project work, including property development. The debt is repaid at the end of the term. Therefore, there is an increased risk of default without repayment compared to a standard loan. For this reason, Interest-Only Loans generally come with an increased rate of return to investors compared to Loans.
Crowd2Fund's dedicated team of credit analysts review the creditworthiness of all businesses before they are accepted onto the Crowd2Fund marketplace. Risk ratings for each business are provided by Equifax. Ultimately, it is the sole responsibility of the investor to decide which businesses they consider appropriate for investment.
Some crowdfunded loans do not get repaid. In addition to potential losses, investors should consider the impact of Crowd2Fund's management fees and tax implications.
Crowd2Fund levies a management fee of 1% against all repayments to investors. This ensures that investors are only charged for investments which are successfully repaid. Any investments that are not repaid will not incur management fees.
Interest is paid back to investors pre-tax. Any interest generated from investments should be declared to HMRC by the investor. It is the sole responsibility of the investor to assess and remit their obligations to HMRC.
If a monthly repayment is going to be late, you will be informed through Crowd2Fund. Wherever possible, Crowd2Fund will avoid a potential late repayment by working with and supporting the business.
Equity investing is the highest level of risk and can give the highest return if the company is successful. You purchase and own part of the company. Risk can be offset through generous tax incentives.
There are tax implications to making investments, it's the responsibility of the investor to declare to HMRC any profits made by investing with Crowd2Fund.
Many of our equity investments are EIS or SEIS eligible, which allows the investor to offset their investment against tax. More information on EIS/SEIS tax relief.
It is imperative to understand your voting rights as an equity investor. You will have no direct influence in the running of the business - unless you have bought upwards of 10% of the business' shares. However, Crowd2Fund makes it simple to update investors regularly on progress, and encourages businesses to do so.
Shares bought in Crowd2Fund businesses cannot normally be sold easily on external markets. They're unlikely to be listed on a secondary trading market, such as AIM, Plus or the London Stock Exchange. This means the best and most likely way to realise your investment, will be from the eventual sale of the business, or listing on the Crowd2Fund Exchange, the timescale of which is not guaranteed.
Earlier stage companies do not normally pay dividends from their profits - these companies tend to re-invest their profits to stimulate continued growth. Companies may generally start paying dividends as they mature. It is most common that investors will generate returns through a trade sale, or when the company sells on the stock market.
Equity dilution occurs when a company issues further shares. In this case, the investor will own the same number of share, but they will make up a reduced percentage of the total business. This may dilute voting rights and dividends, if any exist. In most cases, additional investment should increase the value of the overall company, and is done with the intention of increasing value to shareholders. If succussful, the investor's shares may make up a smaller percentage of the company, but may also be worth more in total.
Shares often come with different rights and levels of control. If you are at all unsure which rights are afforded by any investment, please consult the business plan or contact the business for clarification.
For more details, please see our Equity Terms & Conditions.
With donations, investors are primarily contributing to a great cause. There is no promise of any form of return, although the company may offer a tangible reward in exchange for the donation. There is of course a risk that these Rewards may not materialise, although Crowd2Fund's Terms and Conditions stipulate that campaign creators are legally obliged to distribute a promised reward. Any legal actions investors may choose to take will be at the expense of the investor, as Crowd2Fund is unable to guarantee any rewards offered by a project.
Investor top tip
Due to potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
Many peer-to-peer (P2P) loans are made to borrowers who can't borrow money from traditional lenders such as banks. These borrowers have a higher risk of not paying you back.
Advertised rates of return aren't guaranteed. If a borrower doesn't pay you back as agreed, you could earn less money than expected. A higher advertised rate of return means a higher risk of
These investments can be held in an Innovative Finance ISA (IFISA). An IFISA does not reduce the risk of the investment or protect you from losses, so you can still lose all your money. It only means that any potential gains from your investment will be tax free.
Some P2P loans last for several years. You should be prepared to wait for your money to be returned even if the borrower repays on time.
Some platforms may give you the opportunity to sell your investment early through a 'secondary market', but there is no guarantee you will be able to find someone willing to buy.
Even if your agreement is advertised as affording early access to your money, you will only get your money early if someone else wants to buy your loan(s). If no one wants to buy, it could take longer to get your money back.
Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.
A good rule of thumb is not to invest more than 10% of your money in high-risk-investments.
If the platform fails, it may be impossible for you to collect money on your loan. It could take years to get your money back, or you may not get it back at all. Even if the platform has plans in place to prevent this, they may not work in a disorderly failure.
The Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover investments in P2P loans. You may be able to claim if you received regulated advice to invest in P2P, and the adviser has since failed. Try the FSCS investment protection checker here.
Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated platform, FOS may be able to consider it. Learn more about FOS protection here.
You may lose your investment: if a business fails, neither the company nor Crowd2Fund will repay your capital. You should only make investments with money you can afford to lose. Early-stage companies and start-ups are statistically more likely to fail. Indeed, most do. If you wish to take less risk, consider investing in more mature businesses with good credit and dividend histories.
Past performance should not be seen as an indication of future performance. Likewise, any future predictions or forecasts provided by companies are not guaranteed and should not be seen as an indication of future performance.
For more details, please see our Terms & Conditions.
You will not be eligible to claim compensation under the Financial Services Compensation Scheme for losses incurred from investments of any type made through Crowd2Fund.
Call us on +44 (0) 203 735 5669 for more information.
Past performance and forecasts are not reliable indicators of future results. Your capital invested is not covered for compensation in the event of a loss by the FSCS. Tax treatment will depend on the individual circumstances and may be subject to change. Please see our Risk section before making an investment decision.