Crowdfunding – How to invest in the future - Acorn.finance - commercial mortgages, bridging loans & property funding

Crowdfunding – How to invest in the future

Crowdfunding

Is this the new normal?

In the last few years, a new form of funding has emerged and proven popular with both companies and investors. It’s called crowdfunding.

Put simply crowdfunding is a way of being part of a much bigger product, service or start-up company without having to put too much money upfront yourself – as there is a ‘crowd’ of other similarly-minded people all helping to fund the same project.
It’s no surprise crowdfunding has caught the eye of so many investors. With the financial crash and recession in 2008, came a restriction on bank lending, so businesses needed to find alternative ways of funding new product development or new ideas to diversify. For consumers, the recession brought low bank rates, therefore, low rates on traditional savings and ISAs. All of this has coincided with the rise of the internet and trust incredible websites that offered a different way of investing with higher potential returns.

The figures are eye-watering. In 2015 the global investments in crowdfunding schemes was over $34bn and in the UK it was £3.2bn – up 84% on 2014.

There are four main types and these centre around the way your money is used and what you get in return:

  • Donation-based crowdfunding: you give money to enterprises or organisations whose activities you want to support.
  • Pre-payment or rewards-based crowdfunding: in return for your investment you get a reward, service or product.
  • Loan-based crowdfunding: also known as ‘peer-to-peer lending’, this is where you lend money in return for interest payments and a repayment of capital over time.
  • Investment-based crowdfunding: you invest directly or indirectly in new or established businesses by buying investments such as shares.

Popular Platforms

There are many platforms and some specialise in particular types of funding or types of business venture, from start-ups, to finance, to entertainment and social or environmental projects. Popular platforms you may have heard of and may be worth checking out include: Crowdfunder, Lendinvest, Funding Circle, Crowdcube and Seedrs. This is just a small snapshot of the broad range of providers out there, this is why so many clients use a broker like acorn.finance to help assess the offerings and go directly to the ideal platform.

Crowdfunding can be an exciting way to be part of something that you could never be part of on your own. You can contribute to a fledgling business venture and watch it develop, reaping the rewards as it grows and succeeds.
It’s also a useful way to invest in ventures that High Street banks or other lenders are not prepared to invest in, such as a new product or service. For some investors it’s a way of being part of a local project to make the community a better place.
There are many ventures and opportunities out there so it’s important to research the market and know what you’re getting in to. The rewards can be high, but there are risks. As the saying goes, there’s no such thing as a free lunch.

Risk and Reward

Assess the level of risk based on the size of your investment and undertake due diligence on the platform and the investment opportunity. You should also assess if the investment you make is likely to give you the short or long term returns or rewards that you are looking for. Bear in mind you won’t be part of the FCA’s Financial Compensation Scheme as you are with bank or building society savings accounts.

This form of lending is generally unsecured, so make sure there’s a way of getting your money back and the rewards match your investment. For example PayPal no longer protects crowdfunding investment payments.

In the interest of protecting consumers and promoting the growth of crowdfunding, the leading platforms feel it is important that there be a common set of standards to which everyone adheres. Crowdfunding platforms can follow a code of practice set up by the UK Crowdfunding Association – look out for their logo to ensure they follow this code.

How Does Peer-to-Peer Compare?

Crowdfunding and peer-to-peer lending are often mentioned in the same sentence, but they are quite different. With peer-to-peer lending, investors lend to businesses (or people) and receive interest on their investment over the term of the loan, and get their initial investment back. There are also some tax advantages in that investments can be made tax-free as part of an ISA. With peer-to-peer investment you can also sell your investment on to someone else during the term of the investment (but your return will be proportionately reduced), whereas most crowdfunding investments are ‘illiquid’ so can’t be sold on as such.

Funding the Future

As the crowdfunding process has been so successful, it is coming under the scrutiny of regulators and larger investors looking for evidence of returns. So as the market matures, there could be some changes in the way it is run. However, if it can overcome these challenges and provide a consistent track record and safeguard investors’ money, the future looks very bright indeed. As long as savings rates are low, consumers will look for better opportunities for their money, and businesses will be looking to raise money for development when the bank says no.

For further information give us a call to discuss your investment or business opportunity. If you’re unsure of this form of investment and want assistance with the options available to you then it’s important to use a broker who understands this sector. If you’re a business looking to raise funds for a new product or service, we can help with choosing the right platform and getting your pitch to right to generate interest in your project and attract investors.

You can also check the Crowd Funding Association’s website at www.ukcfa.org.uk

Why customers like you choose Acorn.finance

 

Our experience of 20 years making purchases happen

Our award-winning approach to business and property finance

Our 5* customer service

We understand your problem, then help the lender to understand.

Don’t just take our word for it

acorn.finance is an award winning finance broker, here are a few testimonials from our clients;

Award winning finance broker

Commercial Broker of the Year – 2017. (Corporate LiveWire)

UK Commercial Mortgage Broker of the Year – 2016, 2015 & 2014. (M&I International)

Commercial Mortgage Broker of the Year – 2013 (Business Moneyfacts)

Shortlisted – Commercial Mortgage Broker of the Year – 2014 & 2015 (Business Moneyfacts)

2016 finance broker of the year - Corporate livewire

Security

Acorn Commercial Finance (Acorn.finance) is authorised and regulated by the Financial Conduct Authority (FCA) – #660207

We are also full members of the National Association of Commercial Finance Brokers.

Although most of the commercial mortgages, business loans, buy to let mortgages, bridging finance and property development loans acorn.finance arrange are not regulated by the Financial Conduct Authority we take our responsibilities as a professional broker very seriously and apply the highest standards of customer service and advice to every case, regulated or not.

Strict code of practice

As members of the NACFB since 1997, our ethos has always been to adhere to their Code of Practice in every aspect of our business.

The NACFB has operated an industry recognised Code of Practice since 1992 which endorses best practice in the industry. All NACFB brokers agree to abide by the Code of Practice which ensures that you have the guarantee that Acorn.finance will always operate professionally and in your best interest.

About Acorn.finance

Founded in 1997 by father and son team Tom and Paul Thompson, Acorn Finance have long been one of the leading finance brokers in the small business and property sectors.
We’re a multi-award winning team with 7 “best UK broker” awards in the last 6 years and have been featured on the BBC Inside Out programme to show best practice in the commercial lending sector.

Acorn’s specialist knowledge of small businesses marked us out as the “go to” broker for any trading business but especially those in the hospitality sector which resulted in Acorn Commercial Finance becoming the only finance provider asked to join the BIIAB (British Institute of Innkeeping Advisory Board).

We work harder to find the funding you need to thrive

Acorn.Finance (Acorn Commercial Finance previously) have been funding commercial and investment property since 1997.

As a small business just like you, the  Acorn.finance team understands the needs and time pressures of the buy to let property investor, developer or business owner.

Our mission is to give every business owner, property investor or developer access to the finance they need to thrive and grow.  In a broad and fragmented market with more lending sources than ever,  it is no longer an option to rely on the products of just one lender for the life of a business, lenders are many and varied.  Our role is to help you find the very best funding package to fill your needs, and to have the funding available to you, just when you need it.  To do that we work across the whole of the finance market, from the high street banks and challenger banks through to crowdfunding providers (including our own) and sometimes private equity and businesses angel investors.

Whether you are growing your business or investment portfolio or just starting out then finance is of vital importance and getting the best deal can easily be the difference between growing or not or even failure.  Our experts take time to understand your needs and aims in both the long and short term before recommending you a product which we believe is the best one to achieve your aims. By taking that time to understand your needs we also work more closely with our lenders than most brokers, that means we have a market leading level of success with more applications going through to a successful completion and more of our clients go on to long-term success.