Access to Finance: Crowdfunding on the rise

CROWDFUNDING is increasingly being turned to as an avenue of funding for start-up and young growing companies.

Peer-to-peer lending, including crowdfunding, is growing in popularity as individuals, often disenfranchised by the economic landscape, look to support a variety of activities including political campaigns and scientific research. Click here to download our free 16-page Access to Finance Supplement, sponsored by Santander and The North West Fund.

It involves a number of people each investing, lending or contributing smaller amounts of money to a business, which is then pooled to reach a funding target.

An increasing number of entrepreneurs are turning to this platform for lending as an alternative to funding from conventional means, such as a bank loan.

Many are attracted by the ability to raise finance quickly with no upfront fees. A crowdfunding site can also help raise awareness of a business but there is also the potential for ideas that have not been patented to be stolen.

Upstart Scottish brewer and beer brand Brewdog has used crowdfunding to not only raise finance, but as part of its sales  and marketing efforts and to engender brand loyalty among its customers.

Nick Montague, founder and chief executive of FundingStore.com, the Knutsford online portal which matches funders to businesses looking for finance, describes crowdfunding as a “double edged sword”.

He explains: “I think you can get funding for a proposition and not provide a lot of information, which is a bit scary, but on the other hand it is a massive opportunity.”

Warrington entrepreneur Adam Soliman, founder of Charbrew, is in the midst of a process to raise £150,000 through the sale of an 11.69% stake in his business through the Seedrs crowdfunding platform.

He says: “Crowdfunding is an exciting way to involve customers and fans who believe in our products and brand to join our journey. We are giving fans the opportunity to have their own shareholding in a young and fast growing company.

“This investment will mean we can accelerate our growth. The company is also EIS and SEIS approved meaning investors are eligible for income tax savings, which makes it attractive to them.”