Crowdfunding
Finance & Funding
If you’re looking for investment for your business but don’t want to go down the traditional funding routes, then crowdfunding could be the way forward. Crowdfunding is a way of raising funds by sourcing small amounts of capital from a large number of people. It is particularly beneficial to businesses that have built communities around their products and services. Here, we discuss the types of crowdfunding and how they can benefit your business.
There are many different types of crowdfunding depending on the stage of business and the kind of investment the company in question wants. The main ones are:
1
Reward-based crowdfunding platforms
- For pre-start and start-up.
Individuals donating to a project or business with the expectation of receiving a non-financial reward in return - such as goods or services - at a later stage.
2
Equity crowdfunding
- Equity funding - for businesses that are already trading.
This is when a business receives the money it needs to grow while the investor receives shares in the company.
3
Peer-to-peer funding
- Mainly loan funding - for businesses that are already trading.
These platforms bring together people looking to invest money with potential borrowers who are looking for a loan. They act as an intermediary, matching two parties and managing the transfer of money between them. Because there is no traditional financial institution involved, the lenders and borrowers can benefit from more favourable interest rates.
4
Invoice trading/selling
- For businesses that are already trading.
A business borrows money from an investor using its unpaid invoices, also known as account receivables, collateral, or guarantee of payment.
*Not all organisations are regulated by the FCA. Some are regulated by their association codes of conduct. There is an element of risk involved in dealing with any organisation that is not regulated by the FCA to offer finance products
You can search crowdfunding platforms at:
Next steps...
- To run a successful crowdfunding round, you should have an extensive network and brand presence in the marketplace.
- Search for crowdfunding platforms at UK Crowdfunding Association -and Alternative Business Funding portal
- If you want to raise funds to grow your business, seek professional advice from an accountant, corporate financier or business adviser.
- UMi runs a range of funding programmes for businesses across the UK. Find out more here.