Crowdfunding platform best practices

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Reading time: 30 min. 

The number of new crowdfunding and P2P platforms is constantly growing and in parallel the number of investors entering this new market. However, not all investors have full knowledge of how the instrument works. 

Given the difficult times we are going through and the concerns that are spreading among investors, we think that is the right time to share this best practices guide that a crowdfunding or P2P lending platform should adopt. 

In order to ensure that investing does not turn into gambling, these are the main categories and aspects to be carefully considered:

    a. Company structure, financial capability, and reporting
    b. Management and key people
    a. Due-diligence, transparency, and complete information
    b. Deposits and withdrawals
    a. Contract
    b. Collaterals
    c. Buyback-Guarantee


a. Company structure, financial capability, and reporting

The crowdfunding sector is relatively new and its EU-wide regulation is currently in preparation. Until the implementation of EU crowdfunding regulation (which we believe will become in force in late 2020 or early 2021), the platform operators fall under the jurisdiction of local, country-based regulations. As of today, some EU countries have implemented local crowdfunding regulations and others have not. 

The lack of regulation has attracted the attention of fraudsters, who have set up bogus crowdfunding sites with non-existing projects. Thousands of investors have already felt the pain caused by the disappearance of fake crowdfunding platforms Kuetzal and Envestio.

In order to safeguard investors’ funds, it is important for the platform operator to be registered in a stable country, preferably within the European Union, and to rely on well-known banks for the funds management.

Main things to keep in mind when vetting the platform operator:

  • Check, if the management company is regulated by the Financial Supervisory Authority or in case of self-regulatory regimes, has the management company subjected themselves to the self-regulatory regime. Licensed platform operators are probably the safest ones as they have been vetted before issuing the license and are subject to further monitoring and supervision. The second-best alternative is the platform being subject to a self-regulatory regime in the countries where the legislation does not require a crowdfunding license. 

    As Estonia does not have local crowdfunding regulations, Crowdestate is a subject to a self-regulatory regime under the auspices of The certification process is annual and when meeting the criteria of Estonian Crowdfunding Best Practice, the platform operator is awarded with a compliance certificate. For more information, please visit Finance Estonia webpage.
  • Check, when the company has been registered and when they started a business. A fresh startup is always riskier than the platform operator, who has been in business for years.

    Crowdestate was founded on January 9, 2014 in Tallinn, Estonia.
  • Check where the company’s registered office is located and that it is their real business address. Having their office in the nondescript apartment building in the suburbian sleeping district, out-of-town warehouse, or at an address with hundreds of other companies should ring the first warning bells. Use Google Maps and StreetView to find out where the company has its offices.

    Crowdestate’s head office is located in the Old Town of Tallinn, at Müürivahe 17-2.
  • Check that the headquarters are not located in countries where the company has no business. For example, if the platform operator is active in Italy, France, and Germany, what would be the point of having its registered office in Cyprus and its bank account in Luxembourg? In both Kuetzal’s and Envestio’s case, Latvian fraudsters used Estonian companies with Estonian addresses, while having no business relationship with Estonia. This is a huge red flag!
  • Check the amount of platform operator’s paid in / registered share capital. The amount of paid in / registered share capital is directly related to platform shareholders’ commitment to doing the business. The larger the registered share capital, the larger is the platform operator’s commitment. Avoid investing with a platform with no or minimum registered share capital.

    Crowdestate’s current registered share capital is EUR 125 000 and the shareholder’s have already made the decision to increase it to EUR 250 000.
  • Check that there are no frequent changes of registered offices or clearing banks. Frequent change of clearing banks is probably a sign that the platform operator’s business is not transparent enough, and that their KYC/AML rules are not adequate or in place at all, and therefore the banks do not want to do business with the specific platform operator.

    Since the early days of its business, Crowdestate has been banking with LHV Bank AS, Tallinn (, Estonia. Both its business and client accounts are held by LHV Bank AS.
  • Check that investors’ funds are held separately from the platform operator’s own funds. A quick look at the platform operator’s balance sheet will reveal the structure of its obligations. Make sure that investors’ funds are not in the company’s balance sheet. The segregation of investors’ and platform operator’s funds ensures that the company’s financial activities  (marketing, salaries, IT, etc.) will not be mixed up with investors’ funds. 

    Crowdestate has always adhered to the segregation principle and keeps its corporate accounts strictly separated from its investors’ funds. Automatic checks, online controls, and transaction monitoring solutions ensure that the total sum of investors’ cash on Crowdestate’s investors’ investment accounts is always equal to Crowldestate’s client account balance at LHV Bank AS, thus ensuring Crowdestate’s capability to execute all cash withdrawal orders immediately. 
  • Check the platform operator’s financial and annual reports.  As an investor, you would like to see your platform operator being able to earn money and being profitable. Take a look at their income statement so see the sales revenue (topline) and net profit (bottomline). Then, take a look at the platform operator’s balance sheet to see the size of their liquid assets (cash and receivables) as well as the size of equity (registered capital, retained earnings, net profit). Absolutely avoid investing on platforms that do not publish their annual reports – usually, the latest date to file and publish its annual report is the end of June.

    Crowdestate has been publishing its annual reports on its website since the inception of the company. The annual reports are available both in English as well as Estonian.
  • Check if the platform operator’s annual reports have been audited. Audited financial statements give assurance that the disclosed numbers are correct and correctly reflect the essence of the business. As the crowdfunding industry is relatively young and the operators still small, they might not be subject to mandatory auditing, therefore a lack of auditing might not be a sign of any threat.

    While Crowdestate’s historic annual reports have not been audited as not being subject to mandatory auditing, we have selected Grant Thornton to be our financial auditor and from 2020, all our annual reports will bear an auditor’s stamp of approval.
  • Google the company’s public background information to identify inconsistencies between published and real information. There is a lot of free and public information available on the companies, including their corporate information (address, registration numbers, contact data, names of the management board, number of officially employed people, financial and tax information, etc). If you contemplate investing larger than average amounts, consider buying a credit report. The following indicators could be interpreted as the signs of suspicious platform: lack of EU VAT registration number, incomplete contact, and registration data, including the lack of landline phone or e-mail address, lack of or a smaller than assumed number of official employees, minimum or below-average salaries, limited or no VAT payments to registration country, evidence of tax debt, etc.

b. Management and key people

It is often said that the companies are the reflection of their owners and their management. Crowdfunding platform operators are no exception.

As crowdfunding platform’s main role is the sourcing, evaluating and selecting the best Sponsors and their investment opportunities, the operating company has a fiduciary duty towards the investors, and the company’s management is responsible for the execution of this duty.

The crowdfunding platform also manages the community of tens of thousands of investors, sometimes from more than 100 different countries, keeps up the communication between Sponsors and investors, and takes care of complex legal contracts to protect all parties involved.

In order to manage such complexity, the operating company should be managed transparently by a highly skilled and experienced team.

While evaluating the team and its professional and managerial competence is probably the most complicated part of platform’s due diligence, the following guidelines might help you in tilting your investment decision towards one or another crowdfunding platform.

Main things to keep in mind when looking at the company’s management and key members of the team:

  • Does the platform operator publish the names, photos and other relevant information on their management and key team members? You would like to know, who are the persons you are trusting your hard-earned euros and dollars. There is no real excuse to avoid introducing the management and key members of the team to the investors. Avoid investing with crowdfunding platforms which do not disclose the identities of their management and key team members.

    Crowdestate is proud of its team and all relevant information is published on our website. You can also hook up with our key team members on LinkedIn.
  • Take a look at key persons’ Linkedin profiles to verify the information that is published on the platform. Be suspicious of the Linkedin profiles that have been created recently, have just a few connections and do not provide detailed information about the person’s professional experience. Other indicators of the suspicious profile include somebody else being on the profile photo or complete lack of portrait photo, incomplete profile, doubtful work history or even poor grammar and unprofessional use of language.

    You can hook up with our key team members on LinkedIn.
  • Google persons’ names to see what they have said in the past and what others have said about them. Avoid investing in platforms where the key team members have been involved in questionable situations. Lack of information is also a negative sign.

    PS. A piece of interesting information should you miss it! Crowdestate’s CEO Mr Loit Linnupõld has been managing regulated fund management companies and a commercial bank from 1996 to 2013 (until the establishment of Crowdestate) and serves currently as the Chairman of the Supervisory Board of Tuleva Funds AS (since 2016), and such, has been and is currently the subject to Financial Supervision Authority’s “fit and proper” requirements.
  • Who are the members of the company’s supervisory board? Having an operational supervisory board is a sign of a platform operator growing up and recognizing the need for independent supervision, guidance and control. Search LinkedIn and google the names and track record of the members of the supervisory board to understand their background and potential contribution to the company.

    Since becoming a joint stock company last year, Crowdestate has an independent supervisory board consisting of 3 professionals. The chairman of the supervisory board is Mr Aavo Kokk, currently serving as the partner at Catella Corporate Finance, the largest Baltic real estate advisory company. Mr Rait Ojasaar has an extensive IT and VC background, and as a CEO of NodeSWAT, he is ensuring our IT strategy and developments are going in the right direction. Mr Hannes Küün is an attorney-at-law and the partner at Tark Legal, a full-service law firm headquartered in Tallinn.
  • Who are the beneficial owners of the platform operator? All companies have ultimate beneficial owners, reaping the potential rewards of investing in that business. Disclosing the direct corporate shareholders of the platform does not provide adequate transparency when the true beneficial owners remain hidden behind several layers of corporate shareholders. Do not invest on the crowdfunding platforms where the ultimate beneficial ownership is not disclosed to the investors.

    The major (97,88%) beneficial shareholder of Crowdestate is its founder and current CEO, Mr Loit Linnupõld. The beneficial owner of a minority stake (2,12%) is Mr Indrek Stahl, a retired businessman currently residing in Spain.
  • Is the management team located and working at the company’s registered address? It might need some skill to identify the nationality of a team member by his name, but the research might pay off, if you find the person being a foreign national, having no visible ties to the company’s registered address. Do not hesitate to reach out to the platform operator to understand the reasons for the management team not working at the registered address.

    Crowdestate has always been and is currently operating at its official addresses in all of its business locations.
  • Is the management team fully committed to operating the company or is this just one of their nice-to-have side businesses? In order to ensure the proper management of the company, the members of the management team should allocate adequate time for the management activities. Visit LinkedIn and Google search the members of the management board to identify their involvement in other projects or endeavours. Avoid investing on the crowdfunding platforms where the members of the management team are “jacks of all trades, master of none”, actively running several parallel projects in different business areas. 

    Crowdestate’s management and key team members are devoting 100% of their time to Crowdestate and taking care of its investors’ investments. Mr Loit Linnupold, CEO of Crowdestate, is also serving as the Chairman of the Supervisory Board of Tuleva Funds AS, a crowdfunded pension fund management company.
  • Does the management or key team members have potential conflicts of interest with the crowdfunding platform itself or with the investment opportunities published there? Disclosing actual or potential conflicts of interest is an essential part of ensuring transparency and platforms avoid ending up in business situations where the key member of the team could have an incentive to prefer his own interest to the investors’ interests. A typical conflict of interest might arise when the owners or key members of the management team are running a real estate crowdfunding platform while simultaneously being beneficial owners in real estate development projects, and are using the platform to fund their own projects.

    Crowdestate is strictly avoiding any potential conflicts of interests and is operating as an independent crowdfunding platform matching international investors with professional real estate companies. The situations where the conflicts of interest might arise are regulated by Crowdestate’s internal document “Conflicts of interest policy”.
  • Are the members of the management team enough experienced to operate a crowdfunding platform? Again, do a Linkedin search or google them to understand their skills and previous professional experience. Would you trust someone with no financial or industry experience to provide you qualified investment ideas? Avoid investing on the crowdfunding platforms where the management team has too short or no relevant experience.

While we believe we have the adequate professional and managerial experience to successfully run a real estate crowdfunding platform, the true assessment can and would be carried out by our investors. You are welcome to take a look at our LinkedIn profiles and decide yourself.


a. Due-diligence, transparency and information completeness

As any other investment activity, investing through crowdfunding platforms should be rational, informed and focused choice. All investment opportunities are different both qualitatively and quantitatively and the list of differences is almost unlimited for instance duration, risk, repayment schedule and interest rate.

The decision of whether or not to invest is in the hands of each individual investor. It is therefore essential to know investment opportunities’ all relevant details and have access to as much information as possible to make an informed choice.

Keep in mind that the loan will be repaid by the Sponsor of the investment opportunity, not by the crowdfunding platform (which has only a “showcase” or “intermediary” role). 

Main things to keep in mind:

The reliability of the project and of the Sponsor company could be verified when the platform publishes a complete analysis of the project, with enough detailed information about expected costs, projected revenues along with the market and competitive analysis (the so-called “comparables”, for the real estate market). 

As an example, at least the following information should be made available for a real estate project:

  1. Sponsor analysis to ensure the Sponsor has an adequate track record and competent management team in place. It is essential that they present themselves and put their face on it.
  2. Clear project description to give the investor an overall understanding of the project.
  3. Detailed business plan, including estimated costs and revenues, to validate the project cost base and revenue projections, and as a result of that, the Sponsor’s capability to return the raised capital and its interest.
  4. Market and comparables analysis to validate the demand for a specific property at the specific location at the estimated price point.
  5. Cash flow analysis to demonstrate that the company will at any time point have all the necessary liquidity to meet its expenses.
  6. Capital structure analysis to ensure the Sponsor has enough “skin in the game” by having its real equity in the project and that the project’s capital structure would be aligned with the development state and specifics of the project.

While there are dozens of crowdfunding platforms out there, doing no due diligence at all or just focusing just on the loan collateral values, Crowdestate has believed that good investment opportunities can be identified only via comprehensive due diligence and analysis process.

Our thinking and opportunity selection process is outlined below:

  • Our starting point is always focused on the Sponsor of the investment opportunity to verify his clean background, track record and the project team. However good the investment opportunity itself might be, an untrustworthy Sponsor, the lack of a competent team or track record could totally ruin it. Weak result of Sponsor’s qualitative analysis is always resulting in rejection of the investment opportunity without proceeding into other areas of due diligence.
  • If the investment opportunity passes the Sponsor analysis phase, our next focus area is the investment opportunity’s product and location analysis. The aim of this analysis stage is to understand the project and its key selling arguments, as well as evaluate the investment opportunity’s location and its fit with the planned product. The key items covered in the product analysis would be the gross buildable and net sellable area, number and sizes of the future units, parking facilities, key pricing indicators (average prices, unit prices, key pricing ratios) and key sales arguments. The location analysis provides answers to questions related to the property itself and the attractiveness of its location. We start from a high-level view, looking at the whole region, then zooming in to the city and then on a district level, paying attention to the current and future infrastructure and then forming a subjective conclusion on the attractiveness of the location. 
  • The third focus area is the market fit, which focuses on the product and its current and future-fit to the market. Competitive analysis monitors the current and future known competitors in the specific segment. The aim of our market and competitive analysis is to determine if there is and/or could be adequate demand for the project at the projected price level. This stage takes a look at different market statistics and trends, including macroeconomic indicators and population change trends, ending up with the identification and analysis of different direct competition.
  • The fourth analysis area is the investment opportunities’ financial and cash flow analysis, which allows us to understand the investment’s capital structure and its financial feasibility. One of Crowdestate’s core beliefs is that all projects should be capable of generating enough cash to repay the attracted capital and investors returns without the need to rely on the forced liquidation of the collateral. Financial and cash flow analysis results in a comprehensive cash flow plan complemented by a set of business and risk ratios.
  • We believe a proper capital structure is the foundation of any real estate project, and that the Sponsor should have significant skin in the game. Inability to demonstrate the required level of Sponsor’s own equity results in immediate disqualification.
  • The last step in the process is to determine the availability of collaterals that would secure Crowdestate’s investors’ investments. Typical collateral is a 1st or 2nd lien mortgage established on the property, but we all other collaterals (such as personal guarantees, mortgages on other properties, share pledges etc) are welcome.

After completing our due diligence, we are able to evaluate the overall risk/return profile of the project and establish the justified expected rate of return that the investors would expect from investing into this investment opportunity.

The summary of our due diligence results, detailed cash flow projections, property evaluation documents etc are published next to the investment opportunity so any investors looking to dig into details, is able to do that.

b.  Deposits and withdrawals

In the age of digitalisation, anything less than 24/7 access and instant payment execution capability is a sign of something not designed or executed right. As an investor, you would like to see your payment is credited to your investment account as soon as it arrives at the crowdfunding platform operator’s client account, and you would expect that you can withdraw your investment account’s cash balance any time and without any delays.

We can not hide our daze hearing stories about investors, who are struggling with some P2P platforms to withdraw their cash balances and where the payment execution takes days or weeks. The lack of immediate withdrawal execution is a major red flag, indicating one of the following problems:

  • In the best case, the P2P platform’s technical capability is so undeveloped that the execution of payments need “human interface” manually sending the withdrawal orders to their clearing bank;
  • In the worst case, the P2P platform has no segregation of their own and investors funds, and have been using investors’ funds to finance platform operators business expenses, meaning there is not enough cash on the platform to fully execute all withdrawal orders as they are submitted. The withdrawal orders could be then executed only when new investors are adding funds to the P2P platform or some investments are paying interest or repaying principal.

As an investor, you should avoid investing on platforms that can not clearly demonstrate the segregation of their own and client funds and that can not promptly execute your withdrawal orders.

Crowdestate has been applying the strict cash account segregation policy since the foundation of the company. Our deposits and withdrawals features are available 24/7 and our technological design includes several audit and control layers to ensure that the client account cash balance at our clearing bank is always equal to the total sum of cash balances on all investment accounts. This means that Crowdestate is capable of executing each and every cash withdrawal order even in the case where all investors would decide to withdraw all their cash at the same time.

Our platform technology has an online link to our clearing bank, and all incoming payments are credited to investors’ investment accounts automatically as soon as they arrive at our client account. The only exception here is the case when the payment arrives to us without important details (for example, an individual reference number), causing the payment to be directed to the manual verification stage to ensure the funds are credited to the correct investment account. 

The cash withdrawal orders are accepted at the moment they are submitted to our and sent to the outgoing payment queue. Due to both our and our clearing bank’s security policy, the outgoing payments need additional digital approval by one of our members of the management board. We do it several times a day, from the start and until the end of the working day. According to our Terms and Conditions, we have established the outgoing payments to have a cut off time of 15:00 EEST and we guarantee that all withdrawal orders submitted to us before that time are executed the same day. This means the investors’ withdrawal order ends up in SEPA clearing the same banking day, and there are 2 clearing times remaining for the day. This ensures the investor’s funds should arrive at the investor’s EU bank account the same day. While the withdrawal orders submitted to us after 15:00 EEST are still approved the same business day, they might miss the last SEPA clearing cycle and therefore would arrive at the investor’s EU bank account probably before noon next banking day.

Some countries, like Estonia, have implemented 24/7 flash SEPA payments, which means that the funds sent to investor’s investment account with Crowdestate would arrive there in less than 10 minutes, and they would be back on investor’s EU bank account within few minutes after the outgoing payments have been approved by Crowdestate.

We encourage you to test out payment processing capability by sending a small payment (for instance, EUR 1) to your Crowdestate investment account. Depending on your bank’s payment processing capability, it might take from a few minutes to a few banking days for the funds to arrive. As soon as the funds arrive to your investment account, we will email you a credit notice (unless you have switched the feature off). This will allow you to establish a normal timeline for the payment to arrive. Reverse the process by submitting the funds’ withdrawal order to see how quickly the funds leave your investment account and when they arrive to your EU bank account.


a. Contracts

There are secured or unsecured loans and even equity investments on the market. So, here is a short recap of what each of these means for the investor:

Secured loans (also known as “senior loans”) are usually the safest and thus the least profitable type of capital. The loan is secured against the collateral, which is usually a mortgage on the property, pledge on the assets of the company or some other type of collateral. With this type of loan investor is the first in line to receive their payout, and in case of any problems the collateral can be liquidated to minimize losses. However, the existence of collateral means that the risk (and therefore the yield) is lower and one should definitely investigate the asset that is offered as collateral. At the same time, investors should acknowledge that the collateral is the last resort for repayments and good projects should generate enough cash flow to repay the attracted capital without a need to liquidate the collateral. Here is an example of a secured loan.

An unsecured loan is a layer of capital between equity and secured loans. They are riskier than secured loans, but also more profitable. While mortgage holders are usually first in line to receive repayments, an unsecured lender will receive repayments only when all secured lenders are fully paid off. To offset the fact of “being the second in line” means that unsecured debt should have a higher interest rate than the secured debt. While the unsecured loan is still more secure than the preferred or common equity, the project’s large scale failure could result in a situation where there would be no funds to repay unsecured creditors after the secured creditors have been paid off. In the case of unsecured loans, one should pay attention to the Sponsor they are trusting their funds and the platform’s problematic loan collection process. Here is an example of an unsecured loan

Mezzanine investment is a hybrid capital (either subordinated loan or preferred equity) that lies between equity and loans. It has still lower risk than equity – mezzanine financing is repaid before equity, but after all more senior obligations have been fulfilled. Additionally to the usual interest, bonuses that depend on the profitability of the project may be added to the mezzanine capital. Here is a mezzanine loan example.

Equity is the capital placed in the company by its owners. Equity investments have both the highest risk as well as the potentially highest return. With this type of investment one should note the structure of a company’s liabilities – the company will pay debts to employees and creditors first and only then the equity investors may receive their payments from the remaining assets of the company. In case of failure, there is a real possibility that the earnings of the investor are reduced to zero, and in worst cases, the equity holders may lose all of their investment. When the project succeeds, however, employees and creditors usually receive a fixed interest rate while the equity investor takes all the remaining profit. So, in this case, one should make sure that they assess the probability of failure. Is the project understandable? Are the numbers presented in the project realistic? Here is an equity project example.

As a rule of thumb, it is good for an investor to remember – the lower the risk of the project, the lower the expected yield.

The main thing to keep in mind: Take time to read loan contracts beforehand and make sure you understand the legal structure of an investment opportunity. 

 b. Guarantees

While the guarantee or the collateral should not be the primary source of repayment, the availability of collateral or guarantee would reduce the investment’s risk level (and expected return as well). At the same time, the availability of collateral or guarantee does not ensure that the project will be successful. The aim of the collateral or guarantee is to ensure the Sponsor is properly motivated to make the interest and loan repayments as agreed in the contract.

Let’s take an example:

Lender issues a loan of EUR 100 to finance the construction of an apartment. The loan will be secured by the first lien mortgage set on the property. Borrower’s goal is to sell the apartment at EUR 150, once completed.  

The mortgage does not guarantee that the Borrower will be able to sell the apartment for EUR 150 as planned. If the Borrower’s market analysis was wrong, the real estate market goes down or the Borrower can not complete the construction (for whatever reason), the property could be worth much less than EUR 100, in the most extreme case it could be worth almost nothing and consequently, the value of the mortgage will be less than 100 EUR or close to nothing.

The mortgage, therefore, guarantees me that the debtor will have the highest interest in repaying the loan as agreed because otherwise the guarantee will not be released. Thanks to the guarantees, the lender will have stronger means of recourse against the borrower and will be able to repay the loan more quickly. 

Main things to keep in mind:

  1. Always check which collaterals and guarantees are given by the Sponsor before making an investment. 
  2. The collaterals and guarantees must be specified and clearly identifiable in the investment description. 
  3. While unsecured projects would have higher expected returns, they are also riskier.

Guarantees will be essential in case of delayed payments or unexpected events, and unexpected events in real estate are quite common. 

Crowdestate approach:

Crowdestate is a full capital stack provider, meaning that we aim to provide the real estate companies with different types of capital, including secured mortgage loans, mezzanine or equity capital. The need for the specific type of the capital will arise from the project itself and it will depend on the Sponsor’s equity and target leverage. From an investor’s perspective, a properly structured capital stack would mean that there is enough equity in the project and that all capital layers are priced properly.

From the practical point of view, Crowdestate is always aiming to secure the investments with collaterals or guarantees, if they are available. Most of our investment opportunities offer guarantees to investors,  and they are stated in a clear and visible section. Collaterals and guarantees are usually are represented by:

  • Mortgages;
  • Pledges on company shares;
  • Personal guarantees;
  • Credit assignments. 

c.  “Buyback guarantee”

The “buyback guarantee” is a marketing trick used by several crowdfunding platforms, especially in the P2P unsecured consumer lending market. It promises the investor an automatic repayment of his loans in case the loan interest or repayments are delayed.

The promise of the “guarantee” sounds so sweet that lots of investors will not pay attention to the fact that the “buyback guarantee” is granted by the borrower to himself (and not by a fund or a third party institution).

When the loan originator is no longer able to service their contractual obligations to investors, they cease doing interest and principal repayments, and no “buyback guarantee” can force them to make payments.

P2P investors already having experiences of “buyback guarantees” being completely worthless. The first (and maybe already forgotten) lesson comes from the Polish consumer lending company Eurocent in 2017 (please see the detailed article here), which became insolvent and ceased making payments to its lenders in spite of promising the “buyback guarantee”. More recent examples are the scam crowdfunding platforms Envestio and Kuetzal, where nonexistent projects were guaranteeing their own repayments.

In the current economic turmoil, there is a high chance that some borrowers’ or loan originators’ repayment capability will be adversely affected, and their “buyback guarantees” will turn out to be worthless, just like in the case of Eurocent.

Our recommendation is to be very sceptical about “buyback guarantees” unless the guarantees are offered by the capable third party, for instance, a bank or an insurance company. We also recommend being sceptical about the social media influencers using the availability of “buyback guarantee” as one of the “signs of quality” when evaluating crowdfunding platforms.


Following the advice in this article will not guarantee the success of your investments, but it will probably help you to keep away from shady, untransparent platforms and unsuitable investment opportunities.

The above listed most important factors to consider when selecting the crowdfunding platform is subjective and definitely not comprehensive. Did we miss something important? Let us know by sending us your thoughts to Thank you!

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