About the last 3 months
Realizing that this might already sound as a cliché – but for the last 3 months, we have been experiencing an unprecedented crisis that has been affecting almost everyone to a greater or lesser extent. However, even though it has been driven by a negative occasion, our society has probably never been so united because of it. The solidarity has also been seen in the crowdfunding industry by trying to come up with solutions that would make it more cohesive. It has really shown that these times have made people re-evaluate their lifestyle and values which is clearly seen in decisions and behavior also here.
Of course, many of you have heard the saying - “never waste a good crisis”, and you have probably read various bloggers giving advice on how to invest during the crisis, providing diverse ratings, scorings, etc. To draw up an action plan during the pandemic, we at CROWDESTOR, however, chose to listen to our investors and act based on their interests in mind.
The 3-month Recovery Period has passed. During this time, businesses were given the opportunity to adapt their operations to the external situation so that at the end of the period they would be able to settle with our investors. In a way, we can say that the period of uncertainty has ended, which has taught us to adapt to a lot of new things.
What happened?
When analyzing a problem, it is critical to use the relevant data. COVID-19 has been impacting businesses very differently. Someone might call it an excuse, but it is true that many faced serious challenges, and it just needs to be acknowledged. For example, in the real estate industry, we have been witnessing various delays in administrative and operational processes with commissioning objects in city construction authority, delays in construction material supply. Tourism and hospitality have been the most affected sectors during a global pandemic. The Guardian states that the coronavirus crisis has flung Europe’s tourism sector into chaos with borders closed and airlines grounded. The European Commission estimates that the EU’s hotels and restaurants will lose around 50% of their income this year. Restrictions on social distance caused by the global pandemic have changed people shopping habits as well, moving from physical in-store shopping to online. People habits in choosing the goods and services have also changed. People prefer basic necessities and choose not to spend money on luxury goods. According to McKinsey & Company, global sales for this year’s spring season are as much as 70% lower than last year.
For three months, we have been negotiating individually with every single of our borrowers to gain the best possible outcome for our investors. Considering the legal restrictions, we do not have the right to apply to borrowers for insolvency until September. This, however, does not stop our negotiations on the best possible solution for each of the projects. Progression in most industries suggests that companies are starting to recover and are picking up their businesses. A huge role in this recovery process is determined by the governments, as many of them are financially supporting small and medium businesses, which should lower the negative economic impact and help pay back outstanding loans.
We would like to take the opportunity to thank our investors for the great support and understanding because only by doing so we have been able to move forward. This support was also perfectly reflected in our survey about the Recovery Period interest rate where 45% of investors showed their support to the business owners and either relieve them from any interest payments or wanted them to pay only 1/3 of the initial interest rate. This was a highly inspiring and forthcoming choice. And it clearly shows that despite the crisis, investors did not lose their confidence.
Impact on CROWDERSTOR
So, a few statistics about this period from our platform - out of all projects that qualified to apply for the Recovery Period, 12% chose not to use this option and were ready to repay the loan according to the initial schedule. 74% of the projects that chose to use the Recovery Period, were ready to settle interest payments for this period once the next payment date is due or at the end of the loan period, while the rest 14% needed an extension in order to be able to recover. We are willing to resolve all situations for the benefit of our investors and we continue to actively communicate with all the borrowers, even if that will mean that some projects will have to be defaulted. This is just a part of the business we are in.
Of course, lifting restrictions does not mean that all effects of the pandemic are over. But when will it finally end? New York Times writes that “one possibility, historians say, is that the coronavirus pandemic could end socially before it ends medically. People may grow so tired of the restrictions that they declare the pandemic over, even as the virus continues to smolder in the population and before a vaccine or effective treatment is found.’’ This might mean that people are just ready to live up with it and adapt their daily routine to the new normal.
Going strong forward
“I think there is this sort of social-psychological issue of exhaustion and frustration,” the Yale historian Naomi Rogers said. “We may be in a moment when people are just saying: ‘That’s enough. I deserve to be able to return to my life....’” And indeed, it is happening already – governments are lifting restrictions, allowing shops, beauty salons, and gyms to reopen. We see the people driving the recovery faster forward and they are ready to say “enough.” It shows that the crisis makes us stronger and the desire for quality of life is greater than the fear of survival.
“When the storm is raging, some are building fences, some are building windmills’’ – we love the way how one of our loyal investors described the fact that CROWDESTOR is strengthening the team while other industry players have been forced to lay-off their employees. Indeed, thanks to the significant support of investors in our Equity campaign, we have had the opportunity to grow and work hard to develop product automation and improve the processes in order to offer you even more diverse and profitable opportunities, optimized investment solutions, and more personalized assistance. 8 European P2P platforms have been shut down during 2020. Meanwhile, during the declared emergency state in Latvia caused by the pandemic, CROWDESTOR has hired 9 new employees which now accounts for a team of 15 professionals. Even more, additional employees are planned to be hired within the nearest future.
In conclusion, we would like to thank all our investors for the patience and understanding in this period. We believe that there are better times ahead, and together we will continue to take crowdfunding to a whole another level. What we are going through has proved that persistence will prevail, and crisis is just like the wind for fire - extinguishes the weak but ignites the strong.