Crowdfunding for growth

The crowdfunding sector has experienced rapid growth in recent years as a result of two key factors - technological innovation and the financial crisis. The financial crisis, even ten years on, still is putting constraints on the amount of lending offered by traditional credit providers to businesses in need of working capital or expansion capital.

The Financial Conduct Authority defines crowdfunding as “a way in which people, organisations and businesses, including business start-ups, can raise money through online portals (crowdfunding platforms) to finance or re-finance their activities. Some crowdfunding activity is unregulated, some is regulated and some is exempt from regulation”.

In this article, we’ll look at two different crowdfunding platforms and what they expect from you if you want to borrow money from them. We’re not suggesting by their inclusion that these particular companies are necessarily better than others. There are many others out there who should also be explored before a decision is reached. Please contact us to run through the options available to you.

Funding Circle

Funding Circle is the largest business crowdfunding site in the UK.

In order to be considered for a loan, your business must have at least 2 years’ filed accounts. Their typical client has a turnover of around £420,000 pa, employs 5-10 members of staff, and has been established for 8 years. 

They do not offer any form of equity funding - equity funding is a form of investment where you invest money into a business in return for a small shareholding. You can apply directly for a loan or through a broker.

A great deal of preparation is required before an application can be made to Funding Circle including but not limited to:

• your last annual accounts (the full version, not the one filed with Companies House)

• 7 your latest set of management accounts

• VAT,

• bank statements, and so on.

An explanation may be required if there have been unusual movement of money within your business such as asset disposal or purchase.  Any significant rise or fall in turnover may also require further explanation. 

Once all of the information requested has been provided, then your loan goes for approval by the Underwriting Team. If approved, your application will go to the Funding Circle Platform where investors can subscribe to your campaign.

In order for to get your loan, the investors must be prepared to put in the exact amount you have asked for. If the amount raised is just one penny short then you won’t get your loan. However, given that the platform is so well established, if you are listed on the site, you will almost certain receive your funding in full.

To find out more visit www.fundingcircle.com/uk

Seedrs

Seedrs is an equity based platform for investors and businesses alike. They may consider applications for start-up business finance but they seem generally more inclined towards early stage businesses. 

As with Funding Circle, you must be pledged the amount you want to receive however a distinct advantage over Funding Circle is you can accept more than you originally sought if it is raised.

There are number of other companies available for crowdfunding applications, each with their own specific criteria. However, all will require in depth financial information about your company and applications can be time consuming.

If you are considering crowdfuding as a means of raising capital, then a professionally drafted business plan complete with financial forecasts and other documentation substantially increases your chance of being successful.

Business plan preparation

Panthera Accounting work with our clients to provide conservative and believable business plans together with 3-5 years’ cash flow and P&L forecasts if you’re preparing your company for expansion.

To find out more, please call 01235 768 561 or email enquiries@pantheraaccounting.com.