The Difference between Peer-to-Peer Lending and Crowd Source Funding

Raising money for a real estate investment can be quite tricky, especially for startups. This difficulty stems from the fact that banks may provide loans, but with stringent terms that most individuals cannot fulfill.

However, property owners can consider alternative forms of financing such as real estate peer to peer lending and crowd funding. Although both forms of financing involve a similar principle for raising money (a number of investors pool their resources for a common goal) these two financing concepts are different and suit different properties. Because of this, it is important to understand both options to know what will be the best fit for you.

PEER TO PEER LENDING

·         The fundamental concept of Peer-to-Peer (P2P) Lending involves a group of investors who lend to a business or single person without any interference from the traditional lenders, such as banks. Usually, the investors are people who do not know, and are not related, to the borrower.

·         Peer to peer lending takes place between individuals, the investor offers financing as a loan for property development projects and will not assume partial ownership. With Blackhawk, the typical maturity period of the issued debt ranges from 6 to 18 months, however, longer maturity periods are also available. The debt sponsor usually pays the agreed interest rate over the repayment timeline of the loan, and pays the principal at its maturity. The sponsor can issue additional esoteric loan instruments such as zero-coupon bonds and floating-rate bonds.

When should you invest? Real Estate Peer to Peer lending appeals to investors who want reduced risks and fixed returns on their investments.

CROWD SOURCE FUNDING

·         Crowdfunding operates on the same principle of funding property projects by a group of investors just as P2P lending. However, crowd funding is mainly used for specific real estate ideas and projects, and not personal loans.

·         For crowd funding, the investors that contribute to a specified project have partial ownership of the real estate. Furthermore, they do not get interest on their money but may receive special perks, gifts or rewards.

When should you invest? Investors who seek equity, crowd funding generally go for higher returns notwithstanding the greater risks involved.

Peer to peer investing and crowd funding are innovative methods of getting money for your real estateproject. Peer to peer lenders, such as Blackhawk, act as intermediaries and connect borrowers with individuals who are willing to lend them money for their real estate projects. Accredited investors can purchase shares in the property or lend cash to private properties and real estate projects through peer to peer portals such as Blackhawkcorp.com.

For more information please visit real estate peer to peer