Crowdfunding shows no sign of quieting down

9th February, 2016

Small businesses and inventors are no longer restricted by whether or not the bank manager says yes, now they can take it directly to a public vote of confidence and gain investment with Crowdfunding. This now very serious method of getting a project off the ground has hit new heights recently and should be utilised as they benefit everyone involved.

For those of you still in the dark, Crowdfunding is where a large number of people all offer small sums to accumulate into a large fund for an individual or project that they want to support. They can do this in return for a reward, equity or as a peer lender.

This has become the favoured way to raise funds for new ventures. In the past you would approach your bank manager with a business plan and your idea with bags full of optimism and they would, after a fair bit of waffle about unfeasible forecasts, tell you it’s a silly idea and you won’t be getting that lump sum, this was especially the case for creative projects.

Now you can cut out the middle men in the bank, get the investment directly from investors and show them the rewards they will get should you hit your capital target. This appeals to both the borrower and the investor as some Crowdfunding sites can offer dividends on investments and others offer rewards which are the more popular among the companies as they don’t have to give away any equity of the business.

Code.org raised $5 million through crowdfunding

The Bank of England have tried to get the banks to reinvigorate small business lending with the Bank’s Funding for Lending scheme which was supposed to encourage the banks. Although they actually paid down £800m of debt going in the opposite direction the Bank of England wanted. So even the Banks have opened the door for the Crowdfunding surge.

There are lots of sites that host Crowdfunding like Seedrs , Kickstarter and Crowdcube . The Financial Conduct Authority have stepped in and now all sites offering Crowdfunding must be authorised, there is a six month waiting list already. However there is a downside for the investors as they made the decision to exclude them from the Financial Services Compensation Scheme, so protection for them is limited to whatever the hosting site provides.

Crowdfunding gives anyone and everyone with an idea or a dream the chance to do it. That is why it is one of the fastest growing markets today with a compound annual growth of over 100%. Who knows what will take off next, have a look and someone might be developing something you really want!