Heard of crowdfunding-backed loan models? Here, we decode
14 Feb 2025

Crowdfunding has emerged as a game-changing capital raising mechanism, connecting fund-seekers and investors directly, bypassing traditional financial intermediaries.

In India, this novel approach has been customized to the nation's unique financial landscape, offering a range of crowdfunded loans catering to various needs.

This article explores the top crowdfunded loan models in India, demystifying their functioning and benefits.

Peer-to-peer lending simplified
P2P lending

In India, peer-to-peer lending platforms like LenDenClub and IndiaMoneyMart are gaining popularity as they match borrowers with lenders, bypassing traditional banks.

Borrowers can get loans from ₹10,000 to a few lakhs at competitive rates determined by their creditworthiness.

Lenders benefit from returns significantly higher than regular savings accounts.

The Reserve Bank of India regulates these platforms, ensuring transparency and security for both parties.

Crowdfunding for startups and SMEs
Equity crowdfunding

Equity crowdfunding enables individuals to invest in startups and small and medium-sized enterprises (SMEs) in return for equity shares.

This model offers businesses an avenue to raise capital without resorting to traditional banking channels or venture capitalists.

Investors get the opportunity to participate in potentially high-growth companies from the ground up.

That said, it's crucial to understand that these investments carry significantly higher risks compared to conventional investment options.

Social impact loans through crowdfunding
Impact lending

Impact lending platforms specialize in loans that generate social or environmental impact in addition to financial returns for investors.

These platforms typically fund projects in renewable energy, education, healthcare, women's empowerment, and more.

Interest rates are often lower than commercial rates because the focus is on creating positive social change, not just making money.

Invoice financing via crowdfunding platforms
Invoice discounting

Invoice financing is a way for businesses to borrow against future invoices.

By providing this service, crowdfunding platforms in India are helping small businesses improve cash flow. They can get their money right away, instead of waiting 30 to 90 days.

And, for investors it is a short-term investment with fixed returns. This way, both parties are benefiting in India's financial landscape.