Article 3 of 5
A safety net — but not a universal one
Browse any crowdlending platform and you'll likely come across the term "buyback guarantee." It sounds reassuring. But what does it actually mean, who provides it, and does it apply to every platform? The short answer to that last question is no — and understanding why matters for how you think about your investments on Afranga.
What You'll Learn
- What a buyback guarantee is and is not
- How to evaluate it
What is a buyback guarantee?
A buyback guarantee is a commitment made by a loan originator to repurchase a loan from investors if the borrower misses payments beyond a set threshold — typically 60 days overdue. When triggered, investors receive their outstanding principal and any accrued interest back, and the originator takes over recovery from the borrower.
It is not provided by the platform. It is not backed by a government scheme. It is a contractual promise from the originator — and it is only as reliable as the financial health of the company making it. If the originator runs into trouble, the guarantee can fail at exactly the moment investors need it most.
Why investors like it
The appeal is simple: instead of waiting indefinitely for a delayed borrower, the investor may receive back the initial investment plus accrued interest under the stated rules.
What it is not
A buyback guarantee is not the same as a bank deposit guarantee. It depends on the party providing the buyback, the exact terms, and the ability to perform when loans are delayed.
If the originator itself faces financial stress, the guarantee may be less useful than it appears on paper.
Why Afranga doesn't use buyback guarantees
As a fully regulated platform under the European Crowdfunding Service Providers (ECSP) licence, Afranga has built its model around stricter risk management rather than a traditional buyback promise.
Afranga uses a direct lending model — meaning you lend directly to the borrowing company, which is fully liable for repayment. There is no intermediary loan originator in the middle. This is a fundamental structural difference from platforms that rely on originators to source, underwrite, and guarantee loans.
Every borrowing company goes through thorough pre-vetting before any of their loans are listed. Instead of a standard buyback guarantee, Afranga relies on a deep due-diligence and risk-disclosure model. Before funding any project, investors receive a Key Investment Information Sheet (KIIS) - a standardised document that sets out everything material about the loan: the borrower, the purpose, the risk factors, the financials, and the terms.
This gives you the information needed to analyse and manage risk yourself, with full transparency, rather than delegating that judgement to an automatic third-party repurchase mechanism.
How to think about it
Investors should read buyback terms, understand when the obligation starts, and consider originator strength. A guarantee can be a useful feature, but it should not replace loan review or diversification.
Key Takeaways
- A buyback guarantee is a promise by a loan originator to repurchase a loan if the borrower misses payments, typically after 60 days.
- It is provided by the originator, not the platform — and its reliability depends entirely on the originator's financial health.
- Direct lending means full transparency — the risk is visible, priced into the rate, and managed through diversification and careful loan selection.
Quick Quiz
Question 1
Who provides a buyback guarantee?
A. The crowdlending platform
B. A government deposit scheme
C. The loan originator
D. The borrower directly
Question 2
What is the main risk of relying on a buyback guarantee?
A. It delays your repayment by 60 days automatically
B. If the originator becomes insolvent, the guarantee may fail
C. It reduces your interest rate
D. It only applies to real estate loans
