Risks Associated with Crowdfunding

Lending out your money to another party as never without risk. In the case of Crowd funding through Tailwind Crowd you are able to lend out your money to a variety of businesses. This can bring you great return, but also exposes your money to risks.

 

Even though the intentions are good, the efforts of the entrepreneur might fail and there would not be enough money to pay back the loan.

 

 

  • The Entrepreneur is a poor payer

It could be that the entrepreneur to which money is lend is a slow or irregular payer. The repayment to you is fully dependent on the borrower paying the money to Tailwind Crowd. When the money is not received on time by Tailwind Crowd, the repayment will be delayed as well. Payment to you would resume as soon as the payments by the borrower are resumed.

 

  • The Entrepreneur cannot fulfill its obligations

There is a chance the party to which money is given is not able to repay a portion or all of the loan and interest agreed. In the case this happens the repayments to you will stop as well. When the entrepreneur cannot fulfill its obligations you will lose the money you have invested which is not paid back yet and the interest which is not paid yet.

Ways to reduce risks

There are a number of ways to reduce the risks you are taking, or reduce the impact of unfortunate events on your money.

 

  • Do not invest money you cannot afford to lose

Investing in a loan is not the same as saving. Do not put the important money you will need later at stake. You do not want to get into money troubles if things do not go as planned on the repayment of the loan to you.

 

 

  • Spread your risks

An important method of reducing the impact of a borrower being unable to repay the entire loan is to split your money into smaller pieces and loan them to multiple parties. If a single one of them goes into bankruptcy the amount of money lost would only be a small portion of the amount you have provided to borrowers.

This includes spreading your risks across multiple sectors. If a particular business sector goes bad, you do not want all your investments to suffer at the same time.

 

 

  • Choose an investment opportunity with a strong financial position

On the Tailwind Crowd platform you find all the available lending projects will have an associated risk score and risk profile. The risk score is provided by a 3e party specialized in estimating credit risks associated with lending out money. A counterparty with a stronger financial position has a better score. This does not mean they cannot go into default, but does reduce the chance of it occurring.

When does my risk start?

While the money is still in the Tailwind Platform, it is held safe from creditors. If the project owner happens to go in bankruptcy before the funds are transferred, the project will be cancelled and the funds returned.

 

As investor, your risk starts when the funds are transferred to the project owner. This only happens when a project is successfully funded, when 14 days have passed after the successful funding of the loan.

 

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