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Corporate Finance - Raising Finance

Adding commercial value to your transaction

Crowdfunding

This is an excellent source of finance for start-ups and businesses in the early stages of development. Crowdfunding involves pitching your idea or business to potential investors. The investors may then provide funding for the business, in return for a predetermined return – examples include a unique gift, early release on products or equity within the business

Launched in 2009, Kickstarter is the world’s largest crowdfunder and is responsible for over $1bn worth of funding. This is primarily a reward-based crowdfunder i.e. the business does not give the investor any equity; instead, the business offers rewards such as early release or a unique gift. The two leading UK crowdfunding sites are Crowdcube and Seedrs; primarily offering equity-based funding i.e. a stake in the business. In order to apply for a crowdfunding scheme, the business will have to prepare a business plan and financial forecasts. If the investors are interested in your business, then they will pledge the funds asked for.

Peer-to-peer lending

This is primarily a source of finance for more mature businesses. Peer-to-peer loans are typically funded by a group of people. The business will then have to pay back the loan, with additional interest charges over a predetermined period. The business may also have to offer security, depending on the size of the loan.

Peer-to-peer loans are typically funded by a group of people. Funding Circle has over 33,000 investors and has loaned over £380m to UK businesses since launching, Thincats offers loans between £50k and £3m and have lent over £78m to date.  In order to apply for peer-to-peer lending, the business will have to prepare a business plan and financial forecasts and a document reasoning the need for a loan.

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