How conservative trends in the banking sector may benefit crowdfunding
Estateguru takes a look at the implications for the crowdfunding industry, when banks adopt a more conservative approach to lending
The war in Ukraine, rampant inflation, and the recent collapse of Silicon Valley Bank have all had an impact on the banking sector in recent times, and led to many banks adopting a more conservative approach, which reflects in several trends.
Three conservative trends in the banking sector
Stricter lending standards: Banks require borrowers to meet more stringent criteria to qualify for loans, including higher credit scores, lower loan-to-value (LTV) ratios, and more thorough assessments of potential borrowers’ capacity to repay the loan.
More red tape: More documentation and more stringent verification procedures to assess creditworthiness and repayment capacity. This can involve more detailed income and expense verification, business financial statements, and collateral assessments to mitigate risk.
Lower loan approval rates: Partly as a consequence of the requirements listed above, fewer loans are approved when banks adopt a more conservative strategy. This leaves many businesses and developers in need of alternative forms of financing. Which is where crowdfunding comes in.
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How real estate investors can benefit
Crowdfunding platforms like Estateguru offer an alternative source of funding for borrowers who may not be able to obtain financing from traditional banks. These platforms typically have less strict lending criteria and are often willing to take on more risk than traditional lenders. This can lead to an increase in demand for crowdfunding services.
Read more: Estateguru gains pan-EU crowdfunding licence
Crowdfunding platforms are often able to offer more attractive interest rates to borrowers than banks following a more conservative strategy Overall, a conservative banking environment can create a favourable market for crowdfunding platforms, providing them with opportunities for rapid growth.
What makes Estateguru different?
Estateguru offers fast and flexible financing for developers, removing strict requirements and red tapes. Unlike traditional banks, we support smaller projects, allowing entrepreneurs to grow until they are at the point where they can qualify for traditional financing.
With Estateguru, you get streamlined financing without bureaucracy or delays. No conservative loan managers, hidden fees, or surprises. We assess collateral, explore liquidation options, and if the application is accepted, the funding is fast. Plus, investor protection is paramount, with all loans secured by mortgages (the vast majority being first rank), and with LTV ratios that are set up in favour of our investors.
Read more: EstateGuru investors have earned €306k from secondary market sales
