Crowdfunding: loans guaranteed by the state do not break through

Posted on Oct 21, 2020 at 6:30 a.m.

When containment fell, the crowdfunding platforms took a cold sweat. “We had a huge halt from March to May”, recognizes Patrick de Nonneville, CEO of October, one of the leaders in the sector. The activity then resumed with difficulty: loan requests fell considerably, with companies preferring to postpone their financing projects until later in the face of economic uncertainty.

In addition, companies that could still afford to launch projects had a whole new solution: 120 billion euros of cash in the form of loans guaranteed by the State. “The EMPs have exploded the number of loans granted on the market, it was a real competition for us”, loose an actor in the crowdfunding sector.

Anxious to maintain their status as fast efficient lenders, the platforms pleaded for inclusion in the rescue system. They won their case at the end of April. Without a doubt, this enabled the two French leaders, October and Cré, to save the furniture.

Best summer

October claims to have “Does better than summer 2019”. EMPs even represented 95% of cases and 80% of amounts loaned in France, says Patrick de Nonneville. For Cré, its main competitor, “The summer was very correct, but a little worse than usual, says Thomas de Bourayne, the manager of the platform. EMPs represented 40% of the activity and 20% of the amounts ”. The difference between the two is explained, among other things, by the fact that October has particularly developed abroad in recent years, while Cré concentrates its activity on France, where it has granted 80 million euros of loans to 120 companies since its birth in 2014.

But in reality, being able to offer EMPs hasn’t really helped the rest of the industry to keep their heads above water. “Lending to SMEs has really stopped and things are only picking up slowly despite the EMPs”, confirms Florence de Maupeou, Managing Director of Financement Participatif France. Cré does not foresee a return to normal activity until the end of the month.

Competition from banks

It must be said that it is difficult for platforms to compete with banks. The rate of the EMPs offered by them was set at 0.25% for the first year, while October and Cré offer them at 2%. Another platform, PretUp, offers rates between 2.5 and 4.5% (compared to 8% usually). “With such a low rate, you need a large volume for the commissions to be attractive”, loose a professional.

The stake was mainly reputational for the platforms. “This allows us to show our customers that we have the full range of solutions and that we are not at a disadvantage compared to their banking partners”, adds Thomas de Bourayne.

In terms of business, the business is not very lucrative indeed. Just like banks, crowdfunding platforms must draw a line on their margins to be able to offer EMPs. To compensate, October therefore turned to Italy where state guarantees are not subject to the restriction on margins. The company has just raised 258 million euros for the financing of projects located on the other side of the Alps.

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