In order to maximize the financial security for the Investors in case a project default, CROWDESTOR is offering a Provision Fund. The aim of the Fund is to safeguard the Investor’s proper return in case of the Borrower is subject to default.
The Provision Fund operates as follows:
CROWDESTOR has implemented a 10% ratio in the calculation of the amount to be reimbursed by the Provision Fund. So, starting from now on, in case of a default, the amount of the funded/defaulted loan will be divided by 10% of the outstanding loans. The same ratio is taken then from the Provision Fund and split between the investors of this project accordingly. See the example below:
A funded loan amounting – 100’000 EUR
The total amount of all outstanding loans – 20’000’000 EUR
Provision Fund Status: 360’000 EUR
So, in this case, the total amount of 18’000 EUR will be distributed to the investors in proportion to the amounts invested by them.
Since the aim of the Fund is to safeguard Investor’s return in case the Borrower’s project being subject to a default, we want to let the Fund fulfill its very essence and be a proper buffer in case of such an outcome. However, it is important, to understand that the existence of the Fund does not guarantee the full or partial repayment of lost investments and investors must still consider all the risks involved with their investments.