Finance specialist Adrian Wenn from BSK-CiC takes a look at a new option for funding business growth that is rapidly growing in popularity: Peer-to-Peer Lending (also known as Crowdfunding).
The days are long gone when crowdfunding was dominated by young tech companies looking to fund the next big app.
Peer-to-peer lending has now become so mainstream that high street banks are even referring hopeful borrowers to some of the main crowdfunding platforms. However, understanding of how this type of lending works (and who it can work for) remains low among UK SMEs and their advisors.
David Cameron has been clear in his intentions to make sure UK businesses can efficiently access the finance they need to invest, grow and export – and all the politicians tell us how SMEs are vital to keeping strength in our economy. Yet sadly, too many businesses have poor experiences and low expectations of gaining finance from traditional sources and still feel that the external help they need is just not there.
For many smaller companies seeking the funds they require, the possibility of a loan application being declined by the bank or the prospect of endless forms to fill in and hoops to jump through can be highly discouraging.
Borrowing for growth is an important step when building a business, and retained profits alone are rarely enough to help a company really jump up to the next level. Whether it is for new premises, investment in better manufacturing equipment or acquiring specialist skills, those extra funds can often make all the difference: improved processes, new orders, faster production or more outlets all lead to more profitable businesses, which in turn lead to new jobs and a better local and national economy.
The rise of peer-to-peer lending means that many SMEs no longer need to worry about rejection because of their size, or the time it will take to be approved for a secured bank loan. Increasingly, they will have far more freedom and flexibility to access new finance as and when they need it.
Over the last five months, BSK has helped raise more than £1.25m for Kent companies through crowdfunding. These loans are usually raised within five days and have helped a number of clients to take opportunities they would otherwise have lost.
Crowdfunding is regulated, has its restrictions and is obliged to lend responsibly. So business owners still need to organise their paperwork properly, although there is usually far less of this to prepare and it is less detailed than a high street bank would demand.
The crowdfunding industry is growing up fast and it is helping to build strong, growing companies. In 2014, peer-to-peer lending surpassed £1.6 billion. And in 2015, it is expected to exceed £2.5 billion.
So as it becomes the norm to fund growth through peer-to-peer finance, you can start thinking of ways you can improve your business whenever you want.
To learn more about peer-to-peer lending and other alternative sources of business finance, please join Adrian’s free workshop at Kent 2020 Vision LIVE on 13th May at the Kent Event Centre.
Click here to reserve your place and receive the full schedule of workshops as soon as it is finalised.