As lending to SMEs contracts, crowdfunding provides a significant strand of financing.
Bankers have been told by Government to lend to SMEs to create growth. There's even a new British Business Bank. Investors and businesses have been given tax breaks to encourage investment such as the Seed Enterprise Investment Scheme (SEIS) and the Patent Box. But the uptake is sticky and doesn't always fit what the business needs. SMEs either seem reluctant to borrow or just cannot as the bank net lending is not impressive. But there are new kids on the block such as crowdfunding platforms which enable private individuals ("the crowd") to invest and lend directly to SMEs. It's a growing facility and it's rather novel. Companies such as Seedrs and Crowdcube sell shares for as little as £10 per investor. On the lending side examples are Funding Circle and Thin Cats.
It's a whole new world on the web with access to unlimited numbers of potential investors around the world. A short search will reveal many options. Crowdfunding is attractive in the returns provided, especially with very low returns from traditional investments. Of course there will be some accident waiting to happen and the currently light regulations will probably catch up one day but for the time being it's a rapidly growing world. And funding can be very quick which is valuable in itself. Another web based source is Asset Finance platforms such as MarketInvoice, where individual invoices can be 'sold' rather than the traditional whole debtor book through factoring or invoice discounting. So it's worth checking all these new ways of funding and not miss an option.
Anthony Pilkington MD BookCheck Ltd