Crowdfinance

Crowdfinance is crowdfunding with financial return. The types of funding can be categorised in (convertible) debt crowdfunding or equity crowdfunding.^[1] Crowdfunding in the form of donations or presale, are not in scope of crowdfinance.

Debt crowdfunding

A debt-financed project offers investors a fixed repayment scheme of interest and principal (finance) repayment based on the interest rate, the loan term and the repayment type. Every period interest is calculated based on the outstanding debt (investment minus principal repayment). There are three standard types of repayment.

• Annuity debt repayment - An investor get paid a fixed amount (interest plus principal) every period. In time, the principal amount increases and the interest amount decreases because of the principal repayments.
  

  Annuity debt repayment - An investor get paid a fixed amount (interest plus principal) every period. In time, the principal amount increases and the interest amount decreases because of the principal repayments.

• Linear debt repayment - An investor get paid a fixed amount of principal every period but the interest amount decreases because of the principal repayments.
  

  Linear debt repayment - An investor get paid a fixed amount of principal every period but the interest amount decreases because of the principal repayments.

• Bond debt repayment - An investor get paid the total amount of principal at the end of the loan term. Every period before the end of the loan term an investor get paid a fixed amount of interest.
  

  Bond debt repayment - An investor get paid the total amount of principal at the end of the loan term. Every period before the end of the loan term an investor get paid a fixed amount of interest.

Equity crowdfunding

An equity-financed project does not offer a fixed interest rate or has a loan term. An entrepreneur offers a share (finance) of his company in return of a proportion of his dividends. A startup company or small business should pay dividends only if it’s making a significant profit (economics).

Convertible debt crowdfunding

A convertible debt-financed project offers investors a bond debt repayment scheme based on fixed interest rate and loan term. At the end of the loan term the investor is able to convert the loan into equity with a pre-defined discount. An investor can also choose the get the total amount of principal repaid.

Market size and regulations

Europe

CrowdfundingHub is the European Expertise Centre on Alternative Finance and Community Finance reporting on the current state of crowdfunding in Europe. The main conclusions of a recent study can be found here

The Netherlands

In 2015, a total of 42 crowdfunding platforms are registered. Together these platforms fund 730 projects with a total amount of 98 million euro in the form of (convertible) debt and equity financing. The average amount of a crowdfunding project in The Netherlands in 2015 is 134,000 euro. This data was published by Crowdfundmarkt.nl.

In The Netherlands crowdfinance platforms are regulated by The Netherlands Authority for the Financial Markets (AFM). An actual overview of all registered platforms is published on the website of AFM.

References

1. Yap, Shiwen (2016-06-09). "Singapore: MAS to regulate crowdfinance platforms & overhaul regulations". Deal Street Asia. Retrieved 2016-07-22.