5 things to do before launching crowdfunding platform

In today’s fast moving world more and more projects are being funded by crowdfunding platforms, as an alternative to traditional funding in the banks or credit unions.

Noticing the problem, that many people face exactly the same problems contacting us, crowdsofts.com team prepared a list of things that the entrepreneur should get acquainted with or things to-do before launching your own crowdfunding platform.

The things that will be discussed in the following article include the following topics:

Overall business idea;
Licensing and regulation
What people are must to have;
Cash flow, EMI, KYC matters
IT solution

01.

Think about the idea

Plan your business step by step. Think about what kind of projects you want to be funded on your platform. It can be p2p (people to people) type of loans for financing consumer credits for different kinds of properties.

On the other hand you can fund p2b projects (people to business) where other businesses approach your platform for funding. It can be simple fixed interest rate, fixed term loan or equity based business project. Each of these has different pros and cons forthe investor community.

One more type of project can be funding your own company’s projects. Just borrowing money for fixed term and interest rate to accomplish some kind of idea or just to increase your working capital. Think about this, in some jurisdictions it is possible to trade equity of the company. For example if you are a real estate developer and you buy residential or commercial properties for renting and/or speculating in price and planning to sell after two to ten years period, you can divide costs profits with your crowd of investors, which might increase your turnover, because you can increase the volumes of
trades.

Of course you are never limited to run only one type of project, you can always add up another kind of project someday later, when you have a proven successful track record and look to make your business bigger.

In addition to the idea you should think about the budget. Running any company requires investments, before it becomes profitable.

Firstly you need funds to create the company, get licensed, hire the team and build IT infrastructure, which will constantly require updates, because nothing stands still and everything is evolving. Furthermore there are costs associated with marketing expenses, because you need your idea to be seen in the media and spreaded the news through public relations. Successful crowdfunding has to have crowds of investors and project owners, who are reaching you for funding. Hence, you might be in profit deficit for the first year or two before generating profits, which is normal.

02.

Licensing and regulation

When you have a fundamentally strong idea behind building a crowdfunding platform and know what type of projects you would like to run, and planned budgets to run it, you need to contact a fintech lawyer in the area where you would like to operate and launch your business. Respected and experienced lawyer, who specializes in the crowdfunding space will consult you on legal matters associated with launching your crowdfunding platform. Moreover he will prepare you documents for licensing.

No matter where you are in the world, whether it is the European Union with its crowdfunding license, United States where each state might have its own legislation on this topic or somewhere else in the world, only the qualified lawyer can help you to consult you and prepare required documents for licensing.

Regulation and crowdfunding licensing is quite an expensive procedure and usually it takes around three to six months to get licensed. The costs associated with licensing is up to 50 000 EUR in EU and in the USA lawyers quote more than 100 000 USD for preparing documents required to get a crowdfunding
license.

So you need to plan your budget carefully too. Crowdsofts team has strong ties with the crowdfunding lawyers, from which all our customers would get reduced price quotes.

03.

Cash flow, EMI, KYC matters

After you have contacted the lawyer and got to know licensing, regulation matters in your area, you should think about cash flow in your platform. Basically this means how money should get in and out of the platform, or the way investors invest their money into the project, receiving the interest and
investment back to their accounts.

In some countries this process is strictly regulated, in others not so much. It can work in different ways. Just to name a few: you can have an agreement with a dedicated EMI (electronic money institution) like NS PAY, which opens e- wallets for investors and holds their money in a bank account or in some markets cash flow can go through your own company’s bank account.

Crowdfunding legislation most frequently does not let the company to operate investor’s funds, and they are being held in an e-wallet, that an investor can operate (transfer in/out funds, receive interest and the investment back to it).

In addition to that, you need to obey strict know your customer (KYC) rules. Most often companies like Ondato help with their integration and solve this matter for you. Regulation is different everywhere so your partners who build a platform might consult you on the possible options and solutions.

04.

Hiring the crew

Well organized team will achieve much better results. Although when you choose to rent a platform, versus building it from scratch you do not need a large team. Usually two persons are enough to run day-to-day tasks. Nice to have is that you save budget and costs on running.

In a case when you build your software from scratch, you will need somebody who would lead the IT TEAM and would think of new features and make the platform attractive and up to date with constantly evolving market requirements. This way is more expensive and time consuming.

05.

IT solution for crowdfunding platform: Building from scratch VS customized white label software rental

Last, but not least is choosing your actual IT platform provider. There are two main options that you could choose between.

You can hire a dedicated IT team. On average companies who build platforms spend at least several hundred thousand worth dollars or euros to develop modern crowdfunding platforms with features, convenient user interfaces. In addition to that, it takes at least a year or two to develop it. You need to think about all details and mechanisms on how your crowdfunding should work and operate. If you have no experience in this, you might make expensive mistakes which can lead to further delays and increased costs.

According to a recent survey more than 90 % of crowdfunding platform owners confirmed that they built their crowdfunding platform with custom software rental rather than building it from scratch. For this reason Crowdsofts is offering you a helping hand by sharing an experience with you that they had gained through years and development of platforms such as nordstreet.com or heavyfinance.eu . Crowdsofts is cost effective, while label crowdfunding software which can be customized to your business needs. Invest into sales and marketing, while we take care of your IT solution and platform
creation.

Instead of spending hundreds of thousands, spend ten times less and you will be able to launch your crowdfunding business in less than two months with us.

In addition to that you will save on hiring your IT team, because Crowdsofts team will take care of all updates and new features. You only need to tell us exactly what needs to be added and how this feature should work in your platform.

06.

Final thoughts

Hopefully this article was helpful for you if you are thinking about the crowdfunding platform set up and how to do it step by step.

Crowdsofts team
E-Mail: hi@crowdsofts.com

Get in touch

Eager to start your own crowdlending business? Let’s talk about your idea! Contact us for a personal offer on Crowdsofts that is customized to your needs.

hi@crowdsofts.com

Peer-to-peer software and outsourcing advantages

You’ve probably heard by now about crowdfunding – a financial process where investors lend money out to borrowers via an advanced crowdfunding portal. No borrowing from banks or relatives involved.

Traditionally, to start a business or to make a bigger purchase, people had two main options of how to borrow money. One was to go to their relatives, who may or may not be reasonable about lending conditions and repayment. The other option was to go to a financial institution, such as a bank or a lending company. Borrowing directly from relatives or other people may not be safe. They could always demand repayment at unreasonable time or rate. Meanwhile at a bank, the same loan securities that prevent you from taking out more than you can afford may stifle borrowing altogether, as there are too many obstacles to jump through.

This is where the process of crowdfunding really found its niche. More than that, crowdfunding software developers, such as Crowdsofts, began offering powerful tools to facilitate this process and renting them out as white label P2P lending software.

In broadest terms, peer to peer lending can be grouped into three categories: lending to consumers, lending to businesses and lending against property. Some P2P lending platforms are dedicated to just one of those types of peer to peer lending, while others offer all three. It’s important to note that the current vast majority of these businesses operate on a software solution that they haven’t built themselves. They outsourced it.

To outsource a crowdfunding platform is not necessarily a bad thing. In fact, it’s largely an efficient way to start a business without much investment. Think of it as starting a log cabin sales business without investing ludicrous sums into your own production and material sourcing lines. Instead of millions of Euros that would be required to jump-start this operation, all you need to provide is your design of choice. Then all your focus should go to marketing and sales of the service, not the development and scalability of your production line.

Instead of operating a lending business, Crowdsofts built a crowdfunding software, that is able to offer full, end-to-end intelligent automation of the entire P2P lending process. Whether it’s lending to people, businesses or against property, our software is able to handle any type of crowdfunding service. It’s flexible and adaptable to almost any business model. Right now, Crowdsofts is successfully being used as a white label real estate platform and a crowdfunding platform for heavy machinery. Any business venture that could benefit from crowdfunding technology, can benefit from Crowdsofts.

If you’re new to white label crowdfunding technology, you can learn all about how it works from this website. We also carry a lot of useful, built-in features that can all be expanded upon based on your business necessities. All you need to do to kick-start your crowdfunding business is to get in touch with Crowdsofts, pick the right operating options for you and integrate them into your own marketing site themes. Our software will do the rest for you.

Crowdsofts – your fintech partner