Crowdfunding and peer-to-peer lending

Is crowdfunding or peer to peer lending right for my business, what is involved and how much will it cost?

Crowdfunding and peer-to-peer (P2P) lending have become increasingly popular through digital delivery channels. Crowdfunding mostly relates to equity investment or specific projects, while P2P relates to lending. As these two areas have matured, other crowdfunding sectors have emerged, including property and specialist finance.

Crowdfunding can be an effective fundraising route where your product or service is consumer-facing and benefits from raising awareness of your brand. Your investment opportunity will be showcased online through videos, pitch decks and supporting electronic information rooms that store your business plan and financial forecasts. How much time you need to commit depends on the crowdfund platform you choose (and there are now 20+ competing providers) and the need for investor road shows, which enable prospective investors to meet you and your management team in person and hear your pitch first hand. Like much in business, effort in preparation of a comprehensive pitch delivers better outcomes.

Fundraising costs can be relatively expensive at about 5% of funds raised, but these fees will normally only be paid (or the majority of them) if the fundraise is successful. Crowdfunding does have its disadvantages, not least the information you need to publish can contain private business information that you wouldn’t want to fall into the hands of your competitors, particularly on your product/service development roadmap or intellectual property.

Having a large number of smaller investors can also be an administrative burden if there’s future corporate activity expected, although much of this can often be administered by the crowdfunding platform.

Crowdfunding overview

Read this short overview of UK crowdfunding

from Crowdfunding Hub

WHAT?  A toolkit, guide and links

WHEN?  You’ve decided to crowdfund and need to understand the process and everything you’ll have to do

WHY?  Prepares you for the considerable effort (and potential benefits) of crowdfunding


>>  Independent P2P guide and what to look out for from MoneyHelper

>>  Crowdfunding for an arts or community project - campaign advice, resources, links and ideas from Rachel Dobbs

Crowdfunding search

Look through a list of potential crowdfunders

from UK Crowdfunding

WHAT?  An up-to-date list of all UK crowdfunders for given sectors

WHEN?  You need to identify crowdfunders that meet your needs

WHY?  Ensures you shop around for the best crowdfunder for your fundraising


>>  A case study on Fitch Brew Co from Virgin Startup

>>  Leading equity crowdfunders: Crowdcube and Seedrs

>>  Leading arts and creatives crowdfunders: Kickstarter and Crowdfunder

>>  P2P lender: Funding Circle

Crowdfunding pros and cons

Examine the benefits and drawbacks of crowdfunding

from Rangewell

WHAT?  A pros/cons article on crowdfunding from an alternative finance provider

WHEN?  You need a quick overview or reminder of the key aspects of crowdfunding

WHY?  Helps you to analyse your decision making on the merits of crowdfunding


>>  What is crowdfunding and how does it work from This is Money

Tax efficient investing

Learn about the Seed EIS (Enterprise Investment Scheme)

from GOV.UK

WHAT?  An article with in-depth guidance, including worked examples, for investors and businesses

WHEN?  You’re considering crowdfunding and need to understand the considerable benefits of the tax efficient Seed Enterprise Investment Scheme for investors

WHY?  This scheme enables your investors to offset the vast majority of their investment against tax, making a potential investment return much more attractive


>>  Seed EIS guide from EISA

>>  Refer to our EIS resources within the Bootstrapping section for more

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