Phil MeekinView Profile
Crowd funding. Well it’s basically what it says on the tin! Funding from a crowd, usually a crowd of like-minded individuals looking to invest.
I doubt most of you have ever heard of crowdfunding. Well it’s basically what it says on the tin! Funding from a crowd.
Usually a crowd of like-minded individuals who each have money available to help a business to succeed. Some may have more money available than others but they all believe in one thing helping to fund businesses who may not be able to follow the usual trail in funding their businesses.
It is still in its infancy but has seen rapid growth in recent years. Like-minded investors are put in touch with budding entrepreneurs who usually consist of small businesses and start-ups. It is an internet-based service. The banks usually turn down their applications as they consider them to be high risk investments. Sometimes this will include entrepreneurs who have had previous corporate insolvencies or their current business may be in an insolvency procedure, such as a Company Voluntary Arrangement.
There are different types of crowdfunding. Debt or equity crowd funding.
The first sometimes is known as “peer to peer” lending when individuals lend money in return for financial reward such as interest receivable coving the period borrowed. The equity route is where one takes a percentage of the start-up equity so you own a stake in a venture which may increase in value in the future.
There is not much information available on this type of funding but there is acknowledgements of returns of up to 22%. High risk funding often ends in failures and insolvency. The FCA have recently approved a platform of crowd funders. One such operator is “Seedrs” and more recently “Crowdcube” as these are regulated under the government Financial Services Compensation Scheme. There are other non-regulated crowdfunders available however these seem to be more available in the USA.
Wilson Field Ltd’s financial arm Wilson Field Financial Solutions is able to offer this type of lending. They recently provided such an enquiry for a small clothing firm which was internet based and a good order book but with no track record.