What happens to my money?
First and foremost, your money is transferred to a neutral escrow account. Once the funding goal has been reached and none of the investors have chosen to exercise their right of withdrawal, the project owner receives the collected money. The project owner then uses these funds to implement the project as specified in the contract and pays the resulting invoices with the funds he or she has received from the crowd. Note that every single crowd investor is party to a loan contract with the project owner. This contract specifically determines the intended (and only!) use of the invested sum. From this point onwards, you, the investor, receive an annual payment consisting of a predetermined interest and repayment (a so-called annuity).
At this juncture we want to remind you that we are unable to offer any warranty: in the rare event that a project owner goes bankrupt a risk of total loss remains. However, it is of course in the interest of all parties involved – the project owners, energy consultants and bettervest – that all contracts are fulfilled according to plan. For details on the precautions we take, please refer to the following page. In order to minimise your risk exposure, we advise investing smaller amounts of money in several different projects.
Why do project owners not turn to their banks for a loan?
There are various scenarios and individual reasons that call for crowdfunding. For example, many project owners, especially small to medium-sized enterprises, want to reserve equity for daily operations. Often, they also want keep their bank credit lines available for undertakings they perceive as more important. Banks value the subordinated loans that bettervest issues (also known as mezzanine capital) in terms of equity. As such, project owners can even receive larger credits from their bank after a crowd-financing.
In addition to the financial aspects, the marketing and communications effect achieved by crowdfunding play a key role. The attention generated through social media and the press can attract customers, raise awareness among existing customers about a project owner’s commitment to corporate social responsibility, create knowledge about energy efficiency and engage employees in spurring on the energy transition.
How are the interest rates calculated?
The annual savings are calculated by independent energy experts based on their expertise as well as drawing on reliable, historical figures. They devise an energy report which analyses the current energy use and forecasts the use after the implementation of the new technology. The interest rates are calculated based on this report, in order to ensure that the energy cost savings cover the annual interest and partial repayment of the investment. The savings have to generate an interest rate of at least 5% over a maximum contract period of 10 years. On average, our projects generate an annual rate of return of about 7%.
For example: let us assume the investment sum for a project is €100,000, with energy cost savings estimated at €30,000 per year, and an annual interest rate of 7% over a contract period of five years. The loan payment amount is calculated via a loan repayment factor and equals €26,828 annually. This amount includes both interest and principle reimbursement. As such, the sum total of €134,140 is paid off after five years.
How are such high interest rates even possible?
Using energy efficiently leads to tremendous savings. In recent years, innovations across various fields have demonstrated that almost all technical systems can achieve the same performance and quality using far less energy, at the expense of nothing but high energy costs. From lighting, heating and air conditioning, to compressed air or cogeneration plants, double-digit percentage savings in the upper ranges are possible.
This untapped energy potential lies at the heart of all of bettervest’s projects and forms the backbone of the energy transition. The less energy we consume, the less demand needs to covered by renewable resources. The less a project owner spends on energy costs, the higher are the returns he can promise his investors. It is not a case of successfully marketing a new product, but simply reducing the costs of existing ones.
What payment options are available?
Currently, only direct transfers to the escrow account are possible.
At what point does the investment accrue interest?
The investment will bear interest from the day the project owner receives the loan. Since investors can revoke their investment for up to two weeks after the funding limit has been reached, the initial pay-out occurs no earlier than 14 days after the funding is successfully completed.
When do the investors receive their repayments?
Contrary to other energy technologies which only yield returns up to 25 years after the initial investment, the cost savings achieved by the projects offered on our platform can cover annual repayments and returns on investment. As such, all contracts are completed within 10 years (the current average lies at 6.1 years).
You will receive your first fixed annual instalment one year after the project owner receives the loan. The annual instalments consist of a predetermined partial repayment of the loan and partial return on investment. As such the risk of the investment decreases with every passing year.
How are the repayments organised?
You will receive a fixed sum every year. This includes a partial repayment as well as the interest. At the end of the investment term, you will have been paid back in full and received the preagreed return on investment. Please read the risk disclaimer.
After logging in to your account, you will find all relevant information concerning repayment dates under the “my investments” section. The repayment will be transferred to the specified account listed here. In the event that you have not supplied your bank account details, we will contact you several weeks ahead of the first repayment to request these.
Are my investments taxable?
Currently, investors are responsible for declaring their interest income to the relevant tax authorities. The taxable portion of the repayments are shown in the “my investments” section after logging in to your account.
How are the projects monitored?
From the start we have opted for a fixed-interest model, meaning that irrespective of the actual energy cost savings achieved, project owners are obligated to pay according to the calculations presented in the energy consultant report. The risk is therefore borne by the project owner, not the investors. For this reason, we do not carry out permanent technical monitoring. Instead we assess only the implementation of the energy saving measures.
For larger projects, where the size warrants a monitoring system, or when such a system is already in place, we expect to provide regular updates on our platform by 2016. Our vision for the long-term is to provide continuous real-time monitoring, which will allow for new business models with dynamic interest rates.
How can I change my address?
To change your address, simply log in to your account and head to “my profile”. It is important to keep all contract parties updated when any contact details change.