What has happened
12th of August 2020 - CROWDESTOR has shared the results of the accomplished work in the past months and announces the plan for the next two quarters. We kicked-off our webinar by solid introduction by Janis Timma (Co-founder and CEO), followed by Artur Geisari (Head of SME), who presented results of their work. After, Artur introduced a few of the borrowers, who also were present in the CROWDESTOR’s office. Borrowers from different industries presented their businesses and during the webinar, applied for a loan, being the first ones to test the service.
Two of the borrowers received an offer, while the third one received a rejection. However, as the last borrower had several companies, one of his companies passed successfully the scoring and received an approval. After the analysis, all borrowers received a credit report of their company. Janis and Artur explained all the details of the report, outlining the most important parts, and educating them on how to read such reports. It was also stressed that the same report (with some minor changes) will be presented to investors in each of the projects.
Borrowers expressed their utmost excitement of the automation product, explaining that with such possibilities they save the time usually spent at banks or with other lenders; but most importantly, it is the first time in their life when they get an analysis report of their company from the lender, including outlined things to improve in their business.
“The global crisis’’, caused by the outbreak of the pandemic has been a major challenge for entrepreneurs everywhere. The fall in GDP figures in the major economies has shown that many businesses have not been fit to face the challenges. Crowdfunding, on the other hand, has shown it can survive during the economic downturn, due to the ongoing funding needs of SMEs which is the backbone of the economy at large. However, we understood that now investors demand more accountability and stronger procedures in place, that is why we have developed new policies, standards and introduced a new scoring model”, said Janis Timma, CEO & Co-founder of CROWDESTOR.
Artur added: “We have observed an interesting tendency. During COVID-19 few fintech lending industry players have experienced problems. Players were forced by the regulators to give interest-free holidays. Instead of openly stating such facts to their creditors, they have stated that “business is as usual”. Now we are seeing how it has played out. It’s not only about stating there is transparency, but also about showing it through your actions. Secondly, we have had an active hiring from other industry players, as we see that many colleagues were attracted by the social context of the business of crowdfunding. Finally, they had a deep meaning of their work, besides the good salaries or office perks. Bringing benefit to society by helping SMEs – this is what brings the industry talents together.”
The most important announcement CROWDESTOR has to share is the introduction of the automated scoring model and the automated credit report model for the companies seeking financing. The scoring model was designed using the world-known rating agency’s scores for determining country and stock-listed companies’ risks. The proprietary scoring model was developed from scratch in three months period. From now on, all companies based in Latvia and Estonia seeking a business loan will be able to apply and get an offer fully online.
The Scoring Model is Based on:
- More than 500 data sources
- More than 110 country company validations
- Credit agencies and several credible SME score providers to estimate the probability of a default
- Annual reports of 100+ million legal entities
- Personal accounts of 300 million people (shareholders, Ultimate Beneficial Owners (UBO), and Politically Exposed Persons (PEP))
Report for borrowers and investors
From now on, a borrower upon completion of the scoring will receive, both visually attractive and financially sound “Credit Report”. The report is 15 pages long explaining the analysis of the score, credit limit for each borrower, probability of the default, red and yellow flags, peer comparison, together with the description of the risk assessment. Besides, the score, it will be explained along with the general explanation of CROWDESTOR’s scoring model. With this report, even if rejected, borrowers will know what to improve in their business in order to get a higher chance of approval or get better terms.
The same report, with some limitations due to confidentiality, is presented to every project that will be admitted on the platform and available for investments. The report will be available for the investor.
Our new Credit report for each borrower should create a new, higher standard in industry regarding information disclosure to investors.
Improvement for investors
CROWDESTOR has made several improvements to its transparency. The purpose is for investors to have more understanding of how projects are chosen and evaluated by CROWDESTOR; on how each investor can make his or her own assessment of each borrower, before investing in the project, by looking at the brand-new borrower credit report.
Following website improvements were made:
- Scoring policy. It’s a policy that shows how CROWDESTOR makes its risk assessment of the borrower.
- Borrowers credit report. It’s a report that is automatically prepared for each borrower after the scoring (risk-assessment). The report is available for each project that is collecting the funds.
- Debt collection policy. It’s a policy that shows how CROWDESTOR performs the debt collection.
- Investors portfolio overview. Every investor in the cabinet will see the investment portfolio, split by the project invested, and showing the payment status of every project (fully available next week).
New functionality for borrowers
- Introducing borrowers onboarding process and cabinet. Where borrower can apply for a loan online, get verified, submit all the documents, connect its bank account via PSD2 to supply the bank statements, and get an offer without visiting any office.
Other noticeable events
- Since 10.04.2020, based on the published Whitepaper (a 5-years business development plan), CROWDESTOR has raised 1’000’000 EUR at 12’500’000 EUR pre-money valuation in its own equity crowdfunding campaign, thereby securing necessary growth capital for expansion.
- CROWDESTOR has started to provide SME deals to the investors and has facilitated funding of 1’200’000 EUR for 60 SMEs across the Baltic States.
- Thirteen employees have joined CROWDESTOR last quarter, bringing the total number of employees to 22.
Indicative plan for next Quarter
- Grow our team by hiring twelve additional people
- Raise money and start developing new product lines at the platform. The first one will be CROWDESTOR Pay – our own licensed payment institution
- Implement budgeting, reporting, and accounting software
- Offer payment service provider solution to investors, where they can hold their money (segregated account)
- Improvement of IT infrastructure and functionality:
- Launch of secondary market
- Launch of auto-invest
- Launch of automated debt collection
- Implementation of e-signature to borrowers
- Submit documentation for “Best Practices Estonia”
- Prepare all policies, procedures and other requirements for ECSP (European Crowdfunding Service Provider)
- We will be launching in three new countries out of the seven following: Germany, Spain, Czech Republic, Italy, Ireland, Slovenia or Slovakia.
- We will be establishing the "CROWDESTOR club" for our most loyal and exceptional investors that have been with CROWDESTOR. This will provide a closed community, personalized support, communication with the top management and our CEO, specialized cooperation offers, and other bonuses. The club will be with very limited access and number of investors, the detailed information will follow in the upcoming months.
CROWDESTOR’s mission is to connect a meaningful and sustainable business seeking a loan with investors who want to contribute to society and economic development. Each investor has the power to choose the project that appeals to them and they want to invest. Investors receive interest rate on their investment. CROWDESTOR is an intermediary that screens and services the listed investment deals and make sure our investors get the best treatment possible.
We are ambitious and open about our state of affairs, as well as our future. In the next five years, we are aiming to become one of the top three crowdfunding platforms in Europe. We are seeking great potential in the SME financing market, which has over 24 million SMEs. The five-year goal is to finance 16 billion EUR SME loans by means of CROWDESTOR. The plans are ambitious, but our team is motivated to accomplish it. We are glad to share our updates and plans with the investment community, contribute to our transparency and accountability in the alternative investment industry.