How to legally launch your crowlending project

How to legally launch your crowlending project

Crowdlending is a collaborative financing method where multiple investors contribute capital to fund projects or meet the needs of individuals and businesses. In return, investors receive a financial return in the form of pre-agreed interest. Crowdlending platforms act as intermediaries, evaluating project feasibility, managing transactions, and ensuring compliance with established terms.

The general process typically follows these steps:

1. Loan application: the borrower submits their project or financing need on a crowdlending platform, providing detailed information about the loan’s purpose, the required amount, and the repayment plan.
2. Evaluation: the platform reviews the application, assessing the borrower’s creditworthiness and the project’s viability. This analysis determines the loan conditions, including the interest rate and repayment period.
3. Publication: once approved, the project is published on the platform, allowing investors to review it and decide whether to contribute funds.
4. Funding: interested investors contribute various amounts until the total requested amount is reached.
5. Formalization and disbursement: upon completion of funding, the loan agreement is formalized, and the money is transferred to the borrower.
6. Repayment: the borrower repays the loan under the agreed terms, and the platform distributes capital and interest payments to the investors.

Crowdlending offers an alternative way to obtain funds, particularly useful for those facing challenges in accessing traditional bank loans. It also allows investors to diversify their portfolios, accessing investment opportunities with varying levels of risk and return. Furthermore, these platforms often provide faster and more transparent processes compared to traditional financial institutions.

When establishing a crowdlending business or platform, it is crucial to consider the sectoral regulations that may apply. In the context of crowdlending, applicable regulations vary depending on the business model and the characteristics of the users and services provided. Below is a breakdown of the regulatory frameworks for different types of crowdfunding platforms.

1. Platforms targeting consumers

When the platform enables loans to individuals for non-commercial purposes (e.g., personal expenses), the following regulations apply:

• Directive (EU) 2023/2225 on consumer credit contracts, replacing Directive 2008/48/EC starting in 2026. It imposes obligations regarding credit agreements, transparency, and consumer rights.
• Law 16/2011 on consumer credit contracts (in force until the aforementioned directive is fully implemented), governing general contract conditions, advertising, withdrawal rights, and lender obligations.

Such platforms must register as credit intermediaries if they facilitate loan provision. In this case, the Bank of Spain oversees the platform’s supervision.

2. Business crowdlending platforms (B2B)

If the platform connects investors and businesses to fund business projects, the key regulatory framework includes:

• Regulation (EU) 2020/1503 on crowdfunding services for businesses, which provides harmonized rules across EU member states.
• Law 18/2022 on business creation and growth, regulating non-harmonized platforms applicable when: 
  • Services excluded from Regulation 2020/1503 are offered (e.g., consumer credit).
  • Registration under a specific regime for non-harmonized crowdfunding platforms is required with the CNMV.

These platforms must obtain a license from the CNMV and implement investor protection mechanisms, such as fund segregation and risk assessment. They can also operate at the European level with a single license under the European passport system.

3. Hybrid platforms (consumer and business loans)

Platforms operating under hybrid models must comply with both regulatory regimes:

• For consumer operations, Directive 2023/2225 and Law 22/2007 on the distance marketing of financial services apply.
• For business operations, Regulation 2020/1503 and specific anti-money laundering regulations must be followed.

Depending on the chosen model, it is essential to consider key factors such as user evaluation and the nature of the loan.

Compliance will depend on the type of operation carried out by the platform and the nature of the users involved. Platforms must carefully assess their business model to determine which laws apply and register with the appropriate authorities, such as the CNMV or the Bank of Spain, as required.

At Letslaw we can help you with your crowdlending project. Don’t hesitate to contact us if you need legal assistance to bring your idea to life.