Tuesday, 6 May 2014

Equity or Debt Crowdfunding: Which Is the Better Investment?

Equity or Debt Crowdfunding: Which Is the Better Investment?

Investment Safeguard

Failure in a startup after crowdfunding equals a zero-percent return.
On the other hand, many debt crowdfunding portals incorporate some form
of safety clause, covering investors in the event a borrower cannot
make payments. Some websites go as far as to obligate their borrowers
under any circumstance, only adding more interest on defaulted loans.
Such options do not exist for equity investors, making it a riskier
investment overall.


Although debt crowdfunding already includes a few safety measures,
experts suggest to spread investments across multiple portals to thin
the risk and diversify the portfolio. With set interest ratings,
investors can also bring stability to their portfolios this way; they
can anticipate steady returns, even if only 3% or 4%. Perhaps, this
consistency is why many VC firms favour debt crowdfunding.