Crowdfunding involves individual investors collectively providing finance for a business for something in return, either equity in the company or a reward.
It’s a good option for entrepreneurs with an idea they want to develop or very new businesses who want to get off the ground and ideal for businesses with a product or business model that is easy to understand or those that would benefit from generating a fan or customer base.
Investors need to see potential in the business so anyone considering crowdfunding will need to have a strong business proposition and robust financial forecasts, as with any equity fundraise.
Sometimes known as ‘democratic finance’, crowdfunding allows businesses and projects of all forms and sizes access to money while bypassing traditional banking institutions. It is an attractive route in economically difficult times when banks aren’t lending freely. But it isn’t all about the money – crowdfunding is also about building and benefiting community.
Visit the UK Crowdfunding Association for details.
The peer-to-business (or peer-to-peer) lending sector is more than doubling each year and the UK is the indisputable world leader of this form of alternative finance.
Business owners might be surprised at the substantial number of individuals and other businesses who are actively looking to lend online to other businesses.
More information can be found on the gov.uk website funding section.