The crowdfunding sector in France is doing well, according to several industry spokespersons. The beginning of the year was even prosperous, with the multiplication of solidarity donation projects. In terms of loans to businesses and real estate crowdfunding, since the end of the confinement, the number of projects proposed to individuals is logically declining. On the other hand, the few projects proposed continue to be a success with investors, attesting to the confidence placed in this economic model despite the impact of the crisis.
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A first half at the top, despite the crisis
Fundimmo has published its crowdfunding barometer for the first half of 2020 and the surprise is there. At a time when the anxiety among savers is at its peak (with a record of payments on risk-free liquid savings, such as the A/LDDS passbook), this barometer paints a picture that is reassuring, to say the least: $216 million (€184 million) collected (+43% compared to H1 2019) to finance 229 projects (+7%); $90 million (€76.6 million repaid (+82% compared to H1 2019) concerning 139 projects (+48%); 9.4% average annual return, for investments with an average duration of 21 months.
In addition, there was a high concentration of projects in the residential sector (86% of projects financed) and a regional polarization of investments. Ile-de-France accounts for nearly 50% of the total. Furthermore, a delay rate of less than 6 months of 9.48% (+3.07 points compared to 2019) and a delay rate of more than 6 months of 10.10% (+2.41 points compared to 2019). The default rate remained virtually stable at 0.74% (up 0.17 points).
Crowdfunding comes in several forms: from donations, gifts against consideration, pre-purchases of goods, and shareholdings in companies (crowd equity), to loans to individuals (crowdlending), SMEs (crowdlending) and real estate development companies (real estate crowdfunding). The latter two forms of crowdfunding attract the largest number of individual investors seeking high returns at the same time as taking the risk of capital loss.
An average investment of $1,926 (€1,640), gross yield of 9.40%
The average annual yield proposed for the operations financed in the first half of the year was 9.4%, according to the barometer. While promoters have seen some of their construction sites extended due to health measures, this will in fact lead to a longer blockage of their equity on these projects. In order to free up new equity to position themselves on other operations, they may have to offer higher returns in order to accelerate their fund-raising.
The average amount invested would be $1,926 (€1,640) and the number of investors 490 per project.
Explosion of regulatory incident rates, the reasons are obvious
Equity financing lending platforms are required to publish two incident rates, quarterly, reflecting the level of risk presented by ongoing projects. An incident is a non-repayment of a due date, or a delay of at least 60 days. Past projects are not taken into account in these rate calculations. These incident rates are not to be confused with the default rate (although confusingly indicated in this way on several platforms). This is precisely what the platforms seek to avoid, the default of a borrower, with the non-repayment of capital to lenders.
That is why some platforms willingly accept, and even propose, that borrowers constitute incidents by not repaying their maturities for a few months. Bankruptcy must be avoided first and foremost. Since 90% of companies go bankrupt due to a lack of cash, it is better to experience an explosion in incident rates than a lesser default (in the financial sense, i.e. the non-payment of the loan).
With the strong slowdown of the economy during the period of containment, a very large number of SMEs did not have the slightest activity. Difficult to advance their projects, some have therefore not repaid their installments. With the recovery in activity, which is still timid, hopes that everything will return to normal are therefore high. Moreover, since the implementation of the EMP (State-guaranteed loan), authorized platforms can now distribute it.
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First published in FranceTransactions.com, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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