A modern option for business finance

TRADITIONALLY funding options for new and growing businesses have been largely restricted to personal funds, banks or, in some cases, business angels.

However, we are now seeing a rapid emergence of a new and exciting option, in the form of ‘crowdfunding’.

This a method of raising money by an appeal -to a large collection of people and collecting from them small contributions, which combined meet the funding requirement of the business.

The raising of funds is normally carried out through online platforms, which bring together the contributions of the crowd. The most common models for businesses are debt and equity.

Debt is where the crowd advance a loan to the business via the platform, equity where the crowd invest in shareholdings to provide funding.

There are a good number of online platforms available. On the debt side, one of the best known is ‘Funding Circle’ which is 20 per cent government funded and at the time of writing had advanced loans totalling £165million to UK businesses.

For equity funding, options include ‘Crowdcube’ which was established three years ago. ‘Squareknot’ is newly launched, based in Scotland and provides both debt and equity funding.

For businesses requiring equity investment, crowdfunding can in certain cases be combined with an offer to investors of schemes which can offer significant tax breaks to investors.

If you are a business owner interested in crowdfunding or the tax incentives available to investors, contact 01573 224391 or email mark.thompson@renniewelch.co.uk

We are also looking to gauge interest in seminars on crowdfunding. To be updated on our plans email seminar@renniewelch.co.uk with ‘Crowdfunding’ as the subject.