Аrticle 2 of 6

Follow the money

You click “Invest €100” on Afranga. Three months later, a repayment lands in your account. But what actually happened in between? A loan was listed, funded, and repaid - and you were one of dozens of investors who made it possible. This article walks through every step.

What You'll Learn

  • The role a crowdfunding platform actually plays
  • How a loan listing becomes an investor position.
  • How repayments are distributed back to investors.

The platform brings the parties together

A crowdlending platform is not a bank. It doesn’t hold deposits, it doesn’t lend its own money, and it doesn’t take the credit risk on its balance sheet. Instead, it acts as a marketplace: connecting borrowers who need capital with investors who have it.

The platform's role is to make the opportunity visible, provide relevant information, support the transaction process, and help investors track what happens after the investment is made.

Afranga is a licensed European Crowdfunding Service Provider (ECSP), regulated by the Financial Supervision Commission of Bulgaria under Resolution 863/12.09.2023. That means the platform must follow strict rules on borrower vetting, investor information, fund handling, and ongoing reporting.

The borrower side

A company applies for a loan. The platform, or, on some platforms, a partner credit company, assesses the business’s financials, legal standing, management, and ability to repay. This is called due diligence. Not every applicant is approved.

If approved, the loan is published with a Key Investment Information Sheet (KIIS), required by EU regulation, that summarises the loan’s terms, the borrower, and the specific risks. The KIIS is mandatory reading before you invest.

The investor side

You browse available loans. You read each KIIS. You decide how much to invest. On Afranga, you can start from €10 per loan, small enough to spread your money across many different loans (more on that in Module 2).

When you commit funds, your money is held in a personal payment account managed by Lemonway, a licensed electronic money institution regulated in France. This is called fund segregation: your money is kept separate from Afranga’s own operating funds. If anything ever happened to the platform itself, your funds would not be mixed in.

EU regulation also gives retail investors a 4-day reflection period: after committing to an investment, you can change your mind and cancel within 4 days, without penalty.

Repayments

The borrower makes scheduled repayments. Depending on the loan, these can be:

  • Monthly or quarterly amortising payments, each instalment includes part of the interest and part of the principal. Your money flows back gradually.
  • Periodic interest payments with principal at maturity (a bullet structure), you receive interest along the way, and the full principal is returned at the end. This is how Afranga operates. 

The platform distributes these payments into your account automatically. You can then withdraw the money or reinvest it in new loans.

When the loan reaches its maturity date (the end of the agreed term), you receive your final repayment. At that point you can withdraw or reinvest.

Some platforms offer a secondary market, a place where investors can sell their position in a loan to another investor before maturity. This can give earlier access to your money, but secondary markets are not guaranteed to be liquid: a buyer has to be willing to take the position. 

What this cycle should give you is a clear mental model: you are not handing money to a black box. You are funding a specific loan, to a specific business, under a regulated framework, with documented terms.

‍

Key Takeaways

  • A crowdfunding platform is a regulated marketplace, it connects investors and borrowers; it does not lend its own money.
  • Every loan comes with a KIIS, a document summary of terms and risks required by EU regulation.
  • Investor funds on Afranga are held by Lemonway in segregated accounts, separate from the platform’s own operations.
  • EU regulation gives retail investors a 4-day reflection period to cancel an investment.
  • Repayments can be monthly, quarterly, or at maturity, depending on the loan.

Quick Quiz

Question 1

What does fund segregation mean?

A.  Each investor has their own personal bank account at Afranga

B.  Investor funds are held by a licensed payment institution, separate from Afranga’s operating money

C.  Investor funds are insured by the government

D.  Investor funds are invested in a single pool

 

Question 2

What is the KIIS?

A.  A platform marketing brochure

B.  The investor’s tax statement

C.  A document summary of a loan’s terms and risks, required by EU regulation

D.  The borrower’s business plan

 

Question 3

After committing to an investment, can a retail investor cancel?

A.  No, all investments are final

B.  Yes, within 4 days under EU regulation

C.  Yes, but only with a fee

D.  Only if the loan has not been disbursed

 

Next Article CTA

Ready to go deeper? -> Continue to the next article

‍