Entrepreneurs who borrow from the “crowd” will pay much more this year. This emerges from a tour of the largest crowdfunding platforms. With such services, entrepreneurs can, for example, borrow money from private individuals instead of banks.
Crowdfunding can be an interesting option for startups or companies that view banking as high risk. Date importer Yogi&Yousef from Heemstede is one such company.
“As a young company, I had no track record. “Also, the bank doesn’t really know how to predict appointments coming from Saudi Arabia,” says founder Jochem “Yogi” Gehiau. The bank wanted his house as collateral. “I didn’t feel like doing this. That’s why I crowdfunded all my growth steps.”
date powder
For example, in 2021 it raised one million euros from more than 500 home and garden investors. Gehiau paid 5 percent interest on the euros he borrowed. This gave him the opportunity to increase date imports. “We need more supplies every year. “We now bring approximately 750 thousand kilos of dates here every year.”
Gehiau now wants to produce date powder as an alternative to sugar. And so the entrepreneur turned to the public again. Current cost: 9 percent interest.
“That’s why my efficiency is lower,” says Gehiau. “I may have to vacation in the Netherlands in the coming years.”
Competing with savings interest rates
Other entrepreneurs are also finding that raising money through crowdfunding platforms is becoming more expensive. The average interest rate on the Netherlands’ largest platform, Collin Crowdfund, increased from 6.6 percent in October 2021 to 8.6 percent in October this year. Even in its rival Sustainable Investment, the interest rate increased from 4.7 to 8.3.
“I compete with savings interest,” says Gehiau. He also notes that it takes longer to find investors. “Two years ago, this million was filled in half an hour. Now it took a few weeks to get to 1.3 million.”
This shows that retail investors have more alternatives. Savings account interest rates are also increasing due to the interest rate increases of the central bank. Today, savers can easily earn 2.5 percent interest on their savings. The era of zero interest, or even negative interest, is still fresh in our memories.
some restraint
“Interest rates have clearly increased,” says Jeroen ter Huurne, director of Collin Crowdfund. “Investors expect more interest because alternatives also give more interest.” But he sees no decline in interest in crowdfunding among investors. “We grew by 40 percent last year”
Although raising money has become increasingly expensive, Ter Huurne does not notice any caution among entrepreneurs. “Oddly enough, we often disturb entrepreneurs. They want to collect the investment so badly that they offer, for example, 9 percent interest. And we say: You can attract investors with 8 percent.”
Given tighter rules at banks, raising money through crowdfunding remains an attractive option for some entrepreneurs. “Banks do not want to finance fast-growing companies operating in other parts of the world,” says Floriaan van Bemmelen, based on his own experience. Through his company, Resonandina, he rents expensive medical equipment to hospitals in South America and the Caribbean.
In June, the company raised half a million dollars at an 8 percent interest rate, and Resonandina has already paid 10 percent to raise growth money last month. “It’s getting more expensive,” he admits, but he doesn’t plan on stopping anytime soon. “If we need to raise money in Latin America, we pay 25 percent interest. So 10 percent through crowdfunding in the Netherlands is not bad.”
Source: NOS
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
