Crowdfunders unite to support small businesses

By on March 12, 2014

Funding Circle, CrowdCube and Seedr have got together to launch an alternative finance website, as the feeling that banks of have no appetite to fund small firms has grown.

Banks’ reluctance to lend to small businesses has been a constant theme of politics and popular chatter since the financial crisis. Bank of England figures released last week showed net lending to small companies under the Funding for Lending Scheme fell R23.6 billion from April to December last year, despite all the government cajoling and media berating.

Fertile ground you would think, then, for crowdfunding and other non-traditional financing. But the alternative sources of finance that have sprung up have suffered somewhat from looking a little too new-fangled and risque for more conservative business types.

Seven non-bank lenders, including CrowdCube, Funding Circle and Seedr, are hoping that strength in numbers is a thing and have created a free portal which they hope will help small businesses figure out the somewhat confusing array of non-traditional financing options.

However, small companies need to get to the website first and the alternative financiers are ‘intent on lobbying’ the government to twist banks’ arms, so that normal loan rejects are redirected to them. The alternative lenders reckon more than 250 000 businesses in the UK could be pointed to the new website (although they don’t say how many of those would be too rubbish to qualify for any sort of financing).

“I don’t think there’s any prospect of banks wanting to lend to small businesses,” says Giles Andrews, the founder and chief exec of peer-to-peer lender Zopa.

Don’t think banks are going to disappear any time soon though: Funding Circle director Ed Wray admitted that crowd funding and the like are a long way from funding big businesses. In the meantime, any help for small companies searching for financing is welcome.

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