LAUNCHPAD: Crowdfunders unite to target small businesses

Funding Circle, CrowdCube and Seedr have got together to launch an alternative finance website, as Zopa accuses banks of having 'no appetite' to fund small firms.

by Rachel Savage
Last Updated: 20 Feb 2015

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 £1.3bn 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 alternativebusinessfunding.co.uk, 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 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,’ Giles Andrews, the founder and chief exec of peer-to-peer lender Zopa, said yesterday. He also claimed Zopa and its fellow financiers had ‘more efficient’ models for arranging smaller amounts of financing than banks.

Don’t think banks are going to disappear any time soon though: Funding Circle director Ed Wray admitted to MT 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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