If you’re looking to invest in a market outside of the status quo, crowdfunding sites like Crowdestor claim to offer double-digit returns. You’ll have access to a range of investment opportunities, including real estate, business loans, startup projects, and even transport.
Moreover, the platform allows you to invest just €50, which is perfect for diversification purposes. With that said, double-digit returns will, of course, come with its risks.
As such, we would suggest reading our in-depth Crowdestor review prior to parting with your money. We cover the ins and outs of how the platform works, where your money ends up, how much you can make, whether or not your investments are safe, and more.
Crowdestor at a Glance
- 1 Crowdestor at a Glance
- 2 What is Crowdestor?
- 3 Eligibility
- 4 Types of Investments at Crowdestor
- 5 Minimum Investment and Payment Methods
- 6 Is my Money Safe at Crowdestor?
- 7 Buyback Guarantee
- 8 Does Crowdestor Offer an Auto-Invest Feature?
- 9 Fees at Crowdestor
- 10 Secondary Market Place
- 11 How to Get Started at Crowdestor?
- 12 Crowdestor Review: The Verdict?
- 13 Crowdestor
- 14 Pros
- 15 Cons
|Crowdestor - Visit|
|Product Type||P2P Lending in Alternative Markets|
|Available to||European Union|
What is Crowdestor?
Crowdestor is a peer-to-peer (P2P) site that allows you to make investments into alternative marketplaces. This covers everything from business loans, warehouses, hotels, construction companies, and transportation. The vast majority of investment projects are situated in Latvia, which seems to be a common theme in the P2P space.
With that said, Crowdestor has since expanded into other marketplaces. This includes projects in Cambodia, Georgia, Russia, Belgium, and the UK. Most of the loans that you back at the platform will sit between the 9-18 month range. Some of the much larger loans do come with longer terms though, so it all depends on how long you feel comfortable locking your money away for.
The investment process works largely the same as any other crowdfunding site, insofar that you will receive monthly repayments until the loan is repaid in full. As and when repayments do arrive, you’ll have the option of re-investing them into new projects, or simply making a withdrawal.
A couple of crucial points to note about Crowdestor. Firstly, the platform allows you to get started with a minimum investment of €50 per project. So, you’ll be able to diversify your risks by injecting your cash into a number of different opportunities. Secondly, Crowdestor operates that all-important Buyback Guarantee.
However, the guarantee only covers a small fraction of the loan default – more on this later.
In terms of how much you can make, this can vary wildly depending on the type of investments you choose to back. On average, this amounts to annualized gains of 17%, which is huge.
Once again – and as we cover in more detail further down, returns of this magnitude come with significant risks – so never make the mistake of relying purely on the Buyback Guarantee.
Before reading through our review it is worth checking the platform’s eligibility requirements. Essentially, you need to be based in the European Union, hold a European bank account, and be aged at least 18 years old. To clarify, investors from the UK are not able to join Crowdestor.
Types of Investments at Crowdestor
In a nutshell, Crowestor offers one of the most diverse portfolios of investments that we have come across at a crowdfunding site. There really is no one-size-fits-all answer to types of projects that the platform hosts, as this could be anything from a business loan to an investment in natural gas prices.
The good news is that all of the investment opportunities available at the site come with an in-depth breakdown of key fundamentals. This includes the name of the company borrowing the funds, the available yield, total loan size, and repayment terms. You’ll also get to see how the loan is secured, such as against real estate or company shares.
Nevertheless, to give you an idea of some of the projects available at Crowdestor, check out the examples below.
Premium Foods Group – €180,000 – 9 Months – 18% Yield
Based in Georgia, Premium Foods Group is using the platform to raise €180,00. By backing the loan, you’ll be paid an annual interest rate of 18%, over the course of a 9-month term.
According to Crowdestor, the loan is secured with a pledge on company shares. Moreover, it notes that the loan is backed by the Crowdestor Buyback Guarantee.
Hostel in Riga – €125,000 – 16 Months – 16.5% Yield
This particular project requires €125,000 to purchase and reconstruct a hostel located in the centre of Riga. The hostel comes with 130 beds and charges guests between €13-20 per night. Other amenities, such as a bar, social area, and kitchen will also be added.
In terms of the fundamentals, Crowdestor investors will be paid 16.50% interest on the loan, which is across a 16-month term. The loan is secured by the real estate itself, which offers investors an element of protection. Once again, the loan is backed by the Crowdestor Buyback Guarantee.
Other Investment Examples Include:
- Resorts in Cambodia
- A volleyball court in Estonia
- Natural gas purchase in Latvia
- Seafood Expo in Boston, USA
- Tennis Museum in Latvia
It is important to note that the funding requirements at Crowdestor are often 6-figure sums. For example, the largest loan we came across was a leasing loan portfolio in Georgia, which required €550,000 in funding. Interestingly – and much like the majority of loans at Crowdestor, the funding target was reached in its entirety.
Minimum Investment and Payment Methods
As noted earlier, you can invest from just €50 per loan opportunity at Crowdestor. Although this does allow you to diversify, there isn’t an incredibly large number of loans hosted at the site. This is because the funding requirements are commonly for surplus of €100,000.
In terms of funding your account, you’ll need to perform a bank transfer. Alternatively, you can transfer the cash via TransferWise. Either way, debit/credit cards are not supported, and it takes between 1-3 days for the deposit to be added to your account.
Is my Money Safe at Crowdestor?
With Crowdestor offering average returns of 17% per year, you will need to make a range of considerations regarding risk. Before we get into the specifics, let’s recap on what the platform hosts on its homepage:
“Anyway…YOU WIN! Even if the project is not successfully funded, you will still be paid the interest rate for the days between your investment and the deadline of the project fundraising campaign.”
We are not overly keen on hyperbole claims like this.
Nevertheless, the biggest risk that you face at Crowdestor is that of a default. In Layman’s Terms, if one of the projects that you back runs into financial trouble and thus – they are no longer able to honour the debt, you stand the chance of losing money.
If this were to occur, the Crowdestor Buyback Guarantee would kick in.
For those unaware, a Buyback Guarantee is popular in the crowdfunding scene. It essentially results in the bad debt being purchased from you – either from the P2P site itself, or the underwriter. Ordinarily, this works fine, as the types of loans being backed by the Guarantee are small-time consumer loans worth a few hundred Euros at best.
However, the loans at Crowdestor are not for a few hundred Euros. On the contrary, they are typically well in the 6-figure range. As such, it’s crucial that you understand how the Buyback Guarantee is funded.
- The platform operates a reserve pot that is used in the event of a default.
- Crowdestor initially placed €50,000 into the pot
- 1-2% from each funded project is then added to the reserve pot
- As of February 2020, the reserve pot stood at €316,000 – which indicative of the number of projects that have been backed at Crowdestor
With that said, in a dialogue with Investing Small, Crowdestor provided further clarity on the Buyback Guarantee.
“If there is 2m EUR in outstanding loans, the project is 200k EUR and the Buyback Fund is 100k, it means that the max cap distributed to the Project is 10% from Buyback Fund.”
As such, even if there were sufficient funds in the reserve fund to cover an outright default, it’s likely that you would only receive a very smaller proportion of your money back. As such, the Buyback Guarantee is simply a partial safeguard, so do bear this in mind.
Does Crowdestor Offer an Auto-Invest Feature?
Unlike other P2P sites active in the space, there is no option to automatically make investments. As a result, you’ll need to manually choose your investments on a DIY basis. This is also the case when you receive your repayments, so there’s no way to automatically reinvest your gains.
Ultimately, this is because the platform hosts high-value, low-volume loans on its site, so there aren’t enough opportunities to make the auto-invest option worthwhile.
Fees at Crowdestor
Crowdestor does not charge investors any fees whatsoever. This includes depositing and withdrawing funds, as well as the investment process itself. Instead, the platform makes its money by charging those that seek financing.
Secondary Market Place
There is no secondary marketplace offered by Crowdestor, which is somewhat surprising. We say this, because of the sheer size of the loans facilitated at the platform.
We can understand that a secondary market wouldn’t be feasible when loans are for a couple of hundred Euros, but when you’ve got 6-figure financing agreements, it would have been nice to see an option to sell investments early.
As such, all investments at Crowdestor are illiquid, meaning you’ll need to wait until the loan is repaid to get your money back.
How to Get Started at Crowdestor?
Like the sound of what Crowdestor offers and wish to make an investment today? If so, review the step-by-step guidelines outlined below.
Step 1: Visit the Crowdestor Website
First and foremost, head over to the Crowdestor website and elect to open an account.
Step 2: Open an Account
Much like any other P2P site, you’ll need to provide some personal information.
This will include your:
- First and Last Name
- Home Address
- Date of Birth
- Tax Status
- Contact Details
Crowdestor will then send you an email, which you will need to verify by clicking the link.
Step 3: Verify Your Identity
In order to comply with all relevant regulations on AML (Anti-Money Laundering), you’ll be asked to upload some verification documents.
Although you don’t need to complete this until you make a withdrawal request, it’s best to get it out of the way now.
As such, upload a clear copy of your government-issued ID, which needs to be either a passport or driver’s license.
Step 4: Deposit Funds
You will now need to deposit some funds. You can transfer funds via SEPA or TransferWise. You’ll need to head over to the deposit page and make a note of Crowdestor’s bank account details.
Once you make a transfer, it can take between 1-3 working days before the funds are credited. Don’t worry, Crowdestor will send you an email when the money arrives.
Note: You can only withdraw funds via SEPA, and not TransferWise.
Step 5: Make an Investment
Now that your Crowdestor account has been funded, you’re ready to make an investment. Click on the ‘Invest’ button at the top of the page, followed by ‘Active’. This will show you all of the deals that are currently looking for investors. As noted, you can invest from just €50 per opportunity.
Step 6: Receive Repayments
Your Crowdestor investment is only live when the minimum threshold is reached. When it is, the borrower enters into a legal agreement with you and your fellow investors. As such, you will receive repayments every month until the loan is repaid in full.
Remember, there is no auto-invest option at Crowdestor, so you’ll need to manually re-invest your repayments if you want to benefit from compound interest. Otherwise, you can simply withdraw the cash back to your bank account.
Crowdestor Review: The Verdict?
In summary, it all seems too good to be true at Crowdestor. With average annualized returns of 17% and a Buyback Guarantee, what’s not to like? Add in the fact that you can invest from just €50 per loan, this allows you to diversify your holdings.
However, although the platform is well-received in the P2P space, you do need to ensure that you understand that Crowdestor is not risk-free. Crucially, the Buyback Guarantee itself will only cover a fraction of a bad debt, so you always stand the chance of losing out.