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Why invest through crowdfunding ?
Crowdfunding, or "crowdfunding" was born in the early 2000s with the rise of the internet.
It is an alternative financing tool that does not go through traditional circuits and tools, especially banking, but calls on financial resources from Internet users in order to finance a project, which can be of a very diverse nature (cultural , artistic, entrepreneurial, etc.).
This method makes it possible to raise funds from a large audience via crowdfunding platforms.
It can take the form of donations, remunerated loans or participation in the company.
There are 3 types of crowdfunding:
the donation: with or without non-financial counterparts
the loan: which makes it possible to finance projects via free or remunerated loans
the investment which makes it possible to finance an entrepreneurial project via the subscription of equity or debt securities, and the counterpart of which is the participation in the possible profits of the project.
Thanks to various so-called “crowdfunding” websites, you can take part in the realization of projects of all kinds (artistic, industrial, commercial, craft, liberal, agricultural or real estate).
Your role is to provide a sum of money to the person (s) at the initiative of the project. You can sometimes obtain certain benefits in return (tax reduction, income, company securities, benefits in kind).
If nothing is offered to you in return for your participation: you make a donation. Giving gives you a tax reduction of 66% or 75% (the rate varies depending on the project) of the amount you donated. The tax reduction is deducted from the tax you owe in the year of your donation.
Crowdfunding: Invest in defined projects
What is crowdfunding?
English term used to speak of “ crowdfunding ”, Crowdfunding has been around for many years now. Its general definition does not change: it is the financing of projects given by a large number of people (individuals, companies ...).
Participatory financing or "crowdfunding" makes it possible to finance projects of all kinds. Investors can be institutions, companies and individuals. Three forms of investment are possible: donation, loan, subscription to the capital of a company.
The funded project can be artistic, industrial, commercial, craft, liberal, agricultural or real estate.
This practice is done mainly through the Internet and has also grown thanks to social networks.
Thus, this method of financing is part of a process of disintermediation and the contribution can be made by individuals or companies, regardless of the field of activity.
As banks are no longer the sole masters of funds and capital, the project can be carried out freely.
In short, crowdfunding is a set of techniques and methods to "raise funds", in order to carry out a project.
the real estate crowdfunding allows for example to finance real estate development over periods of approximately 18 months.
Crowdfunding can also help finance the energy transition. Some platforms have therefore specialized in renewable energies: solar, wind, or even a specialization allows certain platforms to offer student loans .
To date, there are 3 types of crowdfunding :
“Capital” crowdfunding: Crowdequity
Crowdfunding "by donation": Reward Crowdfunding
Crowdfunding "by loan": crowdlending.
If these three models are based on the same operating principle, each of them has its specificities.
Note: Crowdequity allows you to obtain reductions in income tax or wealth tax.
With crowdlending, losses incurred are deductible from interest earned with other loans (see conditions under "taxation").
Investor Profile
Investors are natural or legal persons whose objective may be:
medium-term cash placement
diversification of investment solutions
sponsorship and more generally philanthropy
sponsorship of an artistic, sporting or cultural project
the benefit of a tax advantage
the acquisition of additional income
Cost of Crowdfunding
For the investor, the fees charged depend on the operations and prices of each platform. There are mainly 3 types of fees:
Contribution costs and "premium" services: These costs are collected directly from the contributor. They can be taken when registering on the platform, when subscribing to a "premium" monitoring service or more regularly when contributing to a project.
Fundraising fees: These fees are generally taken at the close of fundraising. They are between 4% and 15%, except for certain platforms of associative or charitable projects where they are zero.
Management fees: These are the costs of managing the accounts of the contributor and the project leader on the platform. It may also be management fees through an investment holding company representing investors.
The project leader
The project leader is a natural or legal person who mainly wishes to have funds to carry out a project:
because this project is difficult to finance via a credit institution;
because he wants the funding to be public, which generates low-cost publicity for the project;
because the project requires diversified funding sources
The risks of Crowdfunding
Risk of loss of capital, default of payment , default or non-realization of the project: For a donation this risk is simply manifested by the possibility of not seeing the funded project succeed. For a loan, with or without interest, or a minibon the risk is the possibility of not being paid the expected interest or even repaid the principal loaned.
For a stock or a bond, this is a fall in its value. The capital made available to the project leader may be lost.
Liquidity risk
In exchange for his participation, the investor receives more or less extensive rights depending on his investment formula (loans, securities, etc.). These rights are in principle transferable on a secondary market. However, the secondary market is not structured or organized. It is therefore difficult to recover its stake before maturity.
Operational risks
Each financed company presents specific risks specific to its market, its activity, its business model, its management, its management, etc.
In principle, the crowdfunding platform informs investors of some or all of these operational risk factors. It provides them with a Summary Regulatory Information Document (DIRS) completed in accordance with the format defined by the Autorité des Marchés Financiers. This document is mandatory for CIP approved platforms, and highly recommended for platforms with IFP status.
The different Crowdfunding
The gift
A project leader calls on the generosity of a community for its partial or total financing without compensation.
Admittedly, the donation is classic (denarius of worship, telethon, wikipedia…), but the “crowdfunding” method has made it possible to increase the fundraising capacity, even for projects with little media coverage. Consideration may be provided, but it must be of low value and of low importance. In the event of payment by small items (greeting cards, badges, etc.), this must not exceed 1/4 of the amount of the donation and a ceiling of 65 € / year. (Ex: Contribution of 300 € (1/4 x 300 = 75 €) the ceiling of 65 € / year applies).
Credit and presale
The project leader calls on the community of investors to lend him a sum of money. The counterpart of the loan can be financial (eg: interest rate) or in kind (eg: a right on future products marketed). This is a credit operation that falls under an exception to the banking monopoly provided for by article L.511-6 of the Monetary and Financial Code.
Financing through the creation of securities and minibons
The project leader offers the community the subscription to the capital of a company, a bond issue, or minibons.
These values make it possible to benefit either from a random remuneration based on the dividends distributed (but with the possibility of requesting reimbursement at any time) or from a constant remuneration defined in advance until the bearer maturity date. 'bonds or minibons. Subscription is open to natural persons as well as to legal persons.
For the record: A minibon is a registered and non-negotiable cash voucher specific to crowdfunding. Its repayment period cannot exceed five years
Tax compensation for losses between equity loans and minibons
The capital loss noted in the event of default by the issuer of an equity loan with or without interest and a minibon is deductible from the interest on equity loans and minibons received in the following year or 5 years. the loss.
This compensation is not possible for businesses and companies and is limited to € 8,000 for the same year.
Crowdfunding is direct crowd funding, without the classic intermediaries. A real lever for creation and development, it allows the general public to financially and collectively support projects that appeal to them. Individual, association, company, local authority ...
Crowdfunding (or participatory financing) is a mechanism which aims to collect the financial contributions of a large number of individuals by means of an Internet platform. The objective of this fundraising is the financing of a project.
These projects can concern real estate as well as art, or agriculture, etc.
In France, crowdfunding has been developing steadily for several years, going from 167 million euros collected in 2015 to 629 million euros in 2019.
It is aimed at everyone: companies, individuals, associations, communities, etc.
But it is particularly suitable for businesses.
Particularly for business creators and buyers, SMEs and young innovative businesses who may encounter difficulties in mobilizing the funds necessary for the implementation of their project via traditional funding methods.
Generally, crowdfunding is mobilized in the following cases:
When you do not want or cannot use a banking establishment
When looking for a complementary means of financing
When you want to test your project on the market by building a community of customers or potential users.
There are 3 main types of Crowdfunding:
Crowdfunding in the form of a donation: Reward Crowdfunding
It can be:
unrequited donations (reward): "favorite" donations,
donations with a symbolic counterpart: a postcard, a t-shirt with the image of the company, etc.,
pre-sales / pre-orders of the product or service for which the fundraising campaign was launched.
This form is ideal for testing your market and the reception of the public vis-à-vis your product or service and thus give credibility to your approach.
The donations received will strengthen equity and create a leverage effect on other financing: honor loans, bank loans, grants, etc.
The average donation observed is approximately:
69 euros for unrequited donations,
62 euros for donations with counterpart. ( source Barometer FPF-KPMG )
The observed average amount collected varies between 3,000 and 5,000 euros.
Crowdfunding in the form of a loan: Crowdlending
It can be:
interest free loans,
loans with interest, without deposit or guarantee on your part,
ready in minibons .
This type of crowdfunding generally makes it possible to finance expenses not taken into account by the banks, such as the need for liquidity for example or intangible investment projects.
The loan that will be granted to you will have a maximum duration of 7 years. It may or may not be paid.
When it is, the average rate observed is around 8%.
Its amount is capped at 2,000 euros per project if it is remunerated, or and 5,000 euros if it is not.
The average amount of contributions per observed project is:
95 euros for unpaid loans,
310 euros for interest-bearing loans,
2,368 euros for loans in minibons. ( FPF-MAZARS baromer source )
The observed average amount collected varies between 1,000 and 200,000 euros depending on the type of loan.
Crowdfunding in the form of investment: Crowdequity
The intervention takes the form of a stake in the capital of your company. The investment can be:
in capital: the financier is remunerated in the form of dividends or capital gains realized on the sale of the securities,
in bonds: his remuneration takes the form of interest,
or against royalties: its remuneration takes the form of commissions on turnover.
This form will be more particularly used for finance development a project of an innovative nature or not, or not very popular with traditional investors (real estate development, opening of branches , etc.), or to complete a fundraising round.
The acquisition of a holding gives the right in certain cases to a tax benefit for investors.
The average amount of contributions per project is:
5,896 euros for bonds,
7,745 euros for capital investments,
357 euros for investments against royalties. ( source Barometer FPF-MAZARS )
The observed average amount collected varies between 40,000 and 500,000 euros depending on the type of investment.
To operate the platforms take a commission on the amount of sums collected (5 to 12%).
Advantages & Disadvantages of Crowdfunding
Crowdfunding
Example of investment via Crowdfunding
1
Initial situation
Vladimir and Jane would like to reduce their taxation which is € 10,000 per year.
But they don't want to invest in products that risk losing money.
2
Investment via a Crowdfunding platform
Their CGP told them a Crowdfunding site where it could make a donation and support a cause that would interest them.
They then made an online donation of € 8,000 which also gives them the benefit of a tax reduction of 66% of their investment.
3
Final situation
Thanks to crowdfunding, they were able to support a cause that interested them and reduced their tax to the tune of € 5,280,
