A crowdfunding which involves the crowd lending to businesses (people to business/ person to business- P2B) or to persons (peer to peer/ person to person – P2P) for the purpose of gaining a financial return- i.e., interest payment. The amount of loan or financing will be paid back over the term of lending. This form of crowdfunding does not entitle the crowd to participate in the business’ profits as they are not treated as shareholders. The lending crowd is only entitled to a specified amount of return as well as repayment of loan principal.
It is also known as loan-based crowdfunding.
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