How we calculate the risk score

Crowdster’s risk classification gives investors a clear and structured overview of the risk associated with each project. Every investment opportunity is assessed based on factors such as project location, developer experience, financial structure, and market conditions.

The resulting risk rating reflects the likelihood of achieving the expected return and is directly linked to the interest offered. Higher risk typically means higher potential return.

This classification is intended to support informed decisions, but all investments carry risk, including the potential loss of capital.

Risk scale

What checks are made on the companies that market their projects on the platform?

The Executive Management and the Board of Directors approve or reject a crowdfunding project based on a detailed review of at least the following documentation and, with the final decision on approval or rejection resting with the Board of Directors:

Budget and project details
Budget and description of the budget assumptions underlying the project, including:
- construction costs
- financing costs
- equity requirements, etc.
Background information regarding the project owner
Including information on:
- the project owner is registered under insolvency legislation
- Check The Company Register in relation to project owner’s participation in other companies and the status of these companies (This can be done by reviewing financial statements)
- Project owner history, experience and reputation
- Identification and legitimisation of the project owner according to anti-money laundering legislation
- Criminal record that is maximum 3 months old (if the project owner does not have a clean criminal record, the project will be rejected for this reason alone)
- Evidence that the project owner is not established in: a non-cooperative jurisdiction as recognised in the relevant EU policyor in a high-risk third country according to Article 9(2) of Directive (EU) 2015/849
Additional due diligence (case-by-case)
‍In certain cases where it may be relevant to supplement due diligence on the project owner with due diligence on key persons associated with the project, such as a contractor:
- This will be included in due diligence, credit assessment and pricing
- Whether this is relevant is an individual assessment made on a case-by-case basis
Recommendation
Recommendation for approval based on:
- due diligen
- cecredit assessment
- pricing
Project description
Description of the intended crowdfunding project, including:
- expected timeframe for completion
- exit strategy (sale or refinancing)
Risk assessment
Risk assessment regarding the proposed crowdfunding project, prepared by the external risk management function. In this connection, reference is made to:
- the Risk Management Procedure, section 8
- “Identification and assessment of risks in the projects” (for the risk assessment to be performed and form the basis for the subsequent risk follow-up)
Pricing
Pricing according to credit score model

Risk Scale

Crowdster’s risk scale is presented as five letters, where A indicates the lowest risk and E the highest. If a project receives a risk class E in our analysis, we will reject the project and not proceed with it. Therefore, as an investor with us, you will never encounter a risk classification of E.

The risk scale is as follows:

A
B
C
D
E

A project’s placement on the risk scale is determined by a risk classification model that generates a score value, which is then converted into the corresponding risk class A–E. The risk classification model consists of eight risk factors, which are weighted according to their importance based on the structure of the model.

Property Location (15%)
The geographical location of the project is evaluated in relation to the largest cities. A project located closer to major cities is assessed more positively.
Property Type (10%)
The property type is evaluated based on its use. Residential properties, including both single-family and multi-family properties, are assessed more positively.
Coverage Ratio (20%)
Coverage refers to the assessment of the project’s expected value upon completion relative to the total financing requirement. A high coverage ratio is evaluated more positively.
Evaluation of the Project Developer (10%)
The project developer is assessed based on experience with projects and project types as well as reputation. Extensive experience and a strong reputation are weighted more positively.
Collateral / Security (20%)
The security provided for the project is assessed. There is always a mortgage on the project’s property, and the value of this is evaluated along with any supplementary collateral. Higher security is assessed positively.
External Risk Management (10%)
Construction projects are always evaluated by an external building expert. Their assessment of the project forms part of the analysis. A positive evaluation is weighted positively.
Political Stability / Country Risk (5%)
Country risk, in relation to the project’s location, is assessed based on Transparency International’s “Corruption Perceptions Index”.
Financial Key Figures (10%)
Key financial metrics of the project, including those of the project developer, are evaluated. These include the coverage ratio, the share and return on equity, debt ratio, profit margin, and the company’s liquidity.

The underlying security for the project and the coverage ratio carry the highest weight in the model. These two factors are considered to be the largest risk factors. It is also important to understand that even if the overall risk score results in a good rating, the overall analysis may still lead to a rejection of financing for a project. This can occur if individual factors in the analysis reveal something extraordinarily negative. For example, a very poor reputation of the developer or a criminal record with remarks. It could also be a property with a location that is considered highly challenging.


Crowdlending Europe AB
Skeppsbron 2
211 20 Malmö
Sweden

Phone
+46 (0) 103 00 13 33
Mon - Fri
10:00-15:00
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VAT no.: SE5595215350

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Understanding the Risks


It is important to remember, like with all investments, historical returns are no guarantee of future returns and the money you lend to projects can increase or decrease in value. As always, there can be no full-proof guarantee that you will receive a return on your investment or the invested money back.

Crowdlending Europe AB ("Crowdster.eu" or "Crowdster") markets a range of investments ("Investments") through an online platform ("The Platform"), including shares ("Shares") or syndicated loans ("Loans"). These investments share the common feature of being based on completed properties or real estate projects as the underlying asset. The Investments presented on the Platform are often various types of senior financing for private real estate companies or property developers ("Project Owner" or "Company"), with little or no collateral provided.
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Registration at Finansinspektionen: 83977
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